Applying Accounting Concepts And Principles

Front 1

What are the accounting concepts and principles that govern accounting?

Back 1

GAAP (Generally Accepted Accounting Principles).

Front 2

What is the primary objective of financial reporting?

Back 2

To provide information useful for making investment and lending decisions.

Front 3

What are the 3 characteristics of useful investment and lending information?

Back 3

1.) relevant.
2.) reliable.
3.) comparable.

Front 4

Name 5 fundamental accounting concepts/principles.

Back 4

1.) entity concept.
2.) reliability (objectivity) principle.
3.) cost principle.
4.) going-concern concept.
5.) stable-monetary-unit concept.

Front 5

This concept states that each entity is an economic unit and is kept separate from other entities so as not to confuse the affairs of various entities.

Back 5

The entity concept.

Front 6

This principle states that accounting records should be based on the most verifiable data. The historical cost of an item is considered reliable.

Back 6

The reliability (objectivity) principle.

Front 7

This principle states that assets and services should be recorded at actual (historical) cost.

Back 7

The cost principle.

Front 8

This concept assumes that the entity will remain in operation for the foreseeable future. The market value of a business’s assets is only relevant if that business is going out of business.

Back 8

The going-concern concept.

Front 9

1.This concept allows accountants to add and subtract dollar amounts as though each dollar has the same purchasing power as any other dollar at any other time.

Back 9

The stable-monetary-unit concept.