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20 Cards in this Set
- Front
- Back
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Refers to whether information is capable of making a difference in the decision-making process
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Relevance
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Refers to whether information faithfully represents the economic event that it is intending to portray
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Faithful representation
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Allows external users to identify similarities and differences between two or more items
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Comparability
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Results when independent parties can reach a consensus on the measurement of an activity
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Verifiability
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Available to users before the information loses its ability to influence decisions
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Timeliness
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Able to be comprehended (with reasonable effort) by users who have a reasonable knowledge of accounting and business
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Understandability
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Each company is accounted for separately from its owners
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Economic entity
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Assumption that a company will continue to operate long enough to carry out its commitments
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Continuity (going-concern)
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Allows the life of a company to be divided into artificial time periods
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Time-period
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Relevance
Faithful representation Comparability Verifiability Timeliness Understandability |
Qualitative characteristics of accounting information
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Economic entity
Continuity Time-Period Monetary unit |
Assumptions of accounting information
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Requires financial information to be reported in monetary terms
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Monetary unit
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Historical cost
Revenue recognition Matching principle Conservatism |
Principles of accounting information
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Requires a business activity to be recorded at the exchange price at the time the activity occurs
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Historical cost
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Requires revenue to be recognized when it is earned and cash collection is reasonably assured
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Revenue recognition
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Requires that expenses be recognized in the same period as the revenue that it helped generate
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Matching principle
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Requires care to be taken to avoid overstating assets or income
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Conservatism
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A record of increases and decreases in each of the basic elements of the financial statements
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Account
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Left side of an account
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Debit
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Right side of an account
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Credit
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