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10 Cards in this Set
- Front
- Back
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Revenue Recognition Principle |
Revenue is recognized when it is earned and realized. Revenue is usually recognized at the point if sale, but can be recognized during production, end of production; when cash is received |
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Full Disclosure Principle |
Financial reporting should disclose all necessary information for making decisions in the main financial statements, in the footnotes or on the supplemental schedules |
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Historical Cost Principle |
In most cases, assets are recorded at their historical cost(what was paid for them) |
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Fair Value Principle |
Price to sell an asset or settle liability at the measurement date. Three levels: level 1 has an observable market with quoted prices; level 2 has observable external data; level 3 company's own data or assumptions |
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Matching Principle |
The cost of earning revenue should be presented on the same income statement as the revenue they generate |
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Materiality Constraint |
If an amount is too small to impact a decision, strict accounting principles can be ignored. |
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Conservatism Constraint |
When faced with choices about financial reporting, make the choice that is least likely to overstate assets and income |
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Cost/Benefit constraint |
The cost of obtaining information should always be less than the benefit of having it |
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Industry practices constraint |
The nature of some industries sometimes requires a departure from general rules of financial reporting |
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Accounting formula |
Assets = liabilities + common stock+ retained earnings - dividends+ revenues - expenses |
