Fra 1 Assumptions, Principles, And Constraints Ch 2

Front 1

Economic Entity Assumption

Back 1

Means that economic activity can be identified with a particular unit of accountability.

A business enterprise can be kept separate and distinct from its owners and any other business unit.

Front 2

Going Concern Assumption

Back 2

That the business will have a long life.

Front 3

Monetary Unit Assumption

Back 3

Money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.

Front 4

Periodicity Assumption

Back 4

Economic activities of an enterprise can be divided into artificial time periods.

Front 5

Historical Cost Principle

Back 5

GAAP requires that most assets and liabilities be accounted for and reported on th ebasis of acquisition price.

Front 6

Revenue Recognition Principle

Back 6

Revenue is generally recognizred when realized or realizable and when earned.

Front 7

Matching Principle

Back 7

Efforts (expenses) be matched with accomplishment (revenues) whenever it is reasonable and practicable to do so.

Front 8

Full Disclosure Principle

Back 8

General Practice of providing information that is of sufficient importance to influence the judgment and decisions of an informed user is followed.

Front 9

Cost-Benefit Relationship

Back 9

The costs of providing the information must be weighed against the benefits that can be derived from using the information.

Front 10

Materiality

Back 10

Relates to an item's impact on a firm's overall financial operations. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.

Front 11

Industry Practices

Back 11

The peculiar nature of some industries nad business concerns sometimes requires departure from basic theory.

Front 12

Conservatism

Back 12

When in doubt choose the solution that will least likely overstate assets and income.