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26 Cards in this Set
- Front
- Back
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Four basic assumptions of financial accounting are
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Economic Entity
Fiscal Period Going Concern Stable Dollar |
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Individual companies must be separate and distinct from both their owners and all other entities
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Economic Entity Assumption
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Time period in which a companies performance and financial position can be measured.
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Fiscal Period Assumption
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The assumption that the life of the company will extend beyond the FY. Allows accountant to adhere to accrual acct. and record assets and liablities
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Going Concern Assumption
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Entity is measured in monitary untis, which is assumed to remain constant purchasing power. Inconsistent with the reality of inflation (dollar decreases).
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Stable Dollar Assumption
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The amount of goods and services a dollar can buy at a given point in time
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Purchasing Power
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Uses valuation basis to measure an entity's performance and financial position.
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Principles of Accounting
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What are six potential valuation bases
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Face Value, Present Value, Fair Market Value, Replacement Cost, Original Cost, Lower of cost or market
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The discounted cash flows associated with a particular financial statement item
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Present value
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A sales price. Represents the value of the item in the output market
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Fair Market Value
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Current Cost. Current price paid for an item in the input market
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Replacement Cost
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The input price paid when the item was originally purchased. Historical Cost
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Original Cost
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The cash expected to be recieved or paid in the near future. Cash
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Face Value
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Amount of cash expected to be collected from the oustanding account. Accounts Receivable
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Net Realizable Value
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Specific forms of Fair Market Value are
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Face Value = Cash
FMV = S.T. Investments Net Realizable Value = Accounts Receivable LCM = Inventories |
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Ensures the dollar value of this account is not overstated. Illustrates that under some circumstances replacement costs are found on the BS
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Lower of Cost or Market Rule
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Land, Securities, and property are all valued at ______ unajusted for amortization or depreciation
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Original Cost
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Prepaid Expenses, plant and equipment, and all intangible assets are carried on the BS at _____ and are reduced by accumulated amortization or depreciation
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Original Cost
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The dollar amount that is determined once the adjustment for amortization or depreciation has been factored
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Net Book Value
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Long-term notes receivable and long term liabilites are valued at ____
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Present Value
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What are the four basic principles of Financial Accounting Measurement
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Objectivity, Matching, Revenue Recognition, and Consistency
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Principal that states financial accounting information must be verifiable and reliable.
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Ojectivity
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Lump Sum Payment Today
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Present Value = the amount
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Lump Sum Payment of one amount any number of year out from now.
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Present value of a single sum
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Make payments at the beginning of each year for however many years
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Present value of annuity due
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Payments made at the end of each year for however many years
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Present value of ordinary annuity
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