assumptions/acct principles

Question 1

acronym for assuptions

Answer 1

Entirely from your GUT

1. • entity
2. • going concern ( also know as the continuity assump, (hC)
3. • Unit of measurement
4. • Time Period

Question 2

Entity assumption

Answer 2

There is a separate acct entity for each businss org separate and distinct from its owners

Question 3

Going concern

Answer 3

a bussiness is assumed to have an idefinite life that extends beyound the life of the owners

Question 4

Unit of measure

Answer 4

everything is measuerd in terms of a monetary unit of measure.
values are not adjusted for inflation

Question 5

Time period

Answer 5

Indefinite life is broken in periods year, quarter, month

for valuation adn reporting purposes

Question 6

Principles REMF

Answer 6

1. • Revenue recognition
2. • Expense Recognition (matching Principle
3. • Measurement
4. • Full disclosure

Question 7

Revenue recognition

Answer 7

Realized and earned-measured at the $ equivalent amt of the good or svc

a. - Recognized(acct concept in FS)= Recorded in Financial Stmt
b. - Realized(economic concept rcv $)= Cash or near cash (AR)received
c. - Earned= Goods or svc has been delivered

Question 8

Expense Recognition

Answer 8

Often refered as the matching principle
recognized only when
Rev match exp in the same time period
COGS &sls comm are match w/rev

Question 9

measurement

Answer 9

Assets and liab are recorded at time of origin

a. Historical cost: Land
b. amortz cost: P Eq HC less accm amtz or dep
c. NRV; A/R used for liquidation value or sell price(cost of sale -MV)
d. Replacement cost: Inventory (how much to replace an Asst)
e. NPV: bonds determined from discounting eht expected future cash flows (budgeting decisions)
f: . FV or current MkV: Investment price received to sell an asst or settle a liab

Question 10

Full Disclosure principle

Answer 10

Not all info can be capture in the FS, therefore we need footnotes

Question 11

Revenues

Answer 11

Are increases in assets or extinguishment of Liab