Chapter 1 Flashcards
2 main uses of accounting
External users (financial accounting)
Internal users (managerial accounting)
Fraud triangle (ethics)
Pressure, opportunity, rationalisation
Conceptional framework
Info for investors, creditors, and others
4 accounting principles
Cost, matching, revenue recognition, full disclosure
Cost principle
When you buy it it costs…
Matching principle
Journalizing
Revenue recognition
Notices value of goods and services
Full disclosure
Reports details behind financial reports, impacts decisions
4 key accounting assumptions
Going concern
Monetary assumption
Business entity ass.
Time period of company
Going concern
Its a growing business
Monetary assumption
Financial transactions in units ($)
Business entity assumption
Entities(other businesses) are separated
Time period of company
Life of company divides in years or quarters
Cost benefit analysis
Info disclosed by the entity must have benefits to the user that are greater than the cost of providing it.
Equity equation
= common stock - dividends + revenue - expense
