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26 Cards in this Set

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