Accounting Principles & Assumptions Flashcards

1
Q

Economic Entity Assumption

A

Requires business owners to keep their transactions separate from the activities of their business

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2
Q

Going Concern Assumption

A

The idea that a business will continue to operate for the foreseeable future

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3
Q

Monetary Unit Assumption

A

The idea that businesses record their financial activities using a stable currency (i.e. $)

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4
Q

Historical Cost Principle (Cost)

A

States that assets should be recorded and reported at their original purchase price

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5
Q

Revenue Recognition Principle

A

States that a company should recognize income when it has delivered a product or performed a service, regardless of when the customer actually pays

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6
Q

Matching Principle (Expense Recognition)

A

Requires companies to record expenses and revenues in the same accounting period when they are related to each other

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7
Q

Fair Value Principle

A

States assets and liabilities should be reported at their current market value, rather than their original purchase price

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8
Q

Periodicity Assumption

A

the accounting concept that a business’s financial activities can be divided into distinct time periods (months, qtrs, years)

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