• Cost: Information is based on actual costs incurred in transactions
• Revenue recognition.
• Business Entity: Every business is accounted for separately from its owner or owners.
• Revenue recognition: Revenue is recorded only when the earnings process is complete.
• Matching: A company records the expenses incurred to generate the revenue reported.
DEFERRED- items paid for in advance of receiving their benefits
costs that are incurred in a period but are both unpaid and unrecorded
• Going Concern
a temporary account(only used for the closing process) that contains a credit for the sum of all revenues (and gains) and a debit for the sum of all expenses and loses.
its balance equals net income/loss and is transferred to retained earnings
net income/net sales
• Cost principle
revs earned in a period that are both unrecorded and not yet received in cash or other assets
a business owned by one person. has unlimited liability. no income tax for the business
• Specific Acc: Usually created by a pronouncement from an authoritative body
managerial and financial
• Going Concern: Financial statements reflect the assumption that the business continues operating
international acc standards board
hopes to create more harmony among acc practices of different countries
Income statement: Revenues- expenses = net income
current assets/current liabilties
Assets = Liability + Equity
• Specific Acc
Contra account: An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account
business owned by 2 or more people. this is NOT legally separate from its owners.
2 most common firls of acc in practice
External Transactions: Occur b/w 2 different entities and are easy to record because there are always source documents evidencing the transaction.
• Business Entity:
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