Help Me Flashcards
Benefit versus cost
Companies must weigh the cost of providing the information with the benefits derived from using it.
Understandability
Quality of information that lets reasonably informed users see its significance
Decision usefulness
Useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity
Relevance
Accounting information must be capable of making a difference in a decision
Predictive Value
Has value as an input to predictive processes used by investors to form their own expectations about the future.
Confirmatory Value
Helps users confirm or correct prior decisions expectations
Materiality
Omitting it or misstating it could influence decisions decisions that users make on the basis of the reported financial information
Faithful representation
That the numbers and descriptions match what really existed or happened
Completeness
Means that all information that is necessary for faithful representation is provided
Neutrality
A company cannot select information to favor on set of interested parties over another
Free from error
More accurate (faithful) representation of a financial item
Comparability
Enables users to identify the real similarities and differences in economic events between companies
Verifiability
When independent measures, using the same methods, obtain similar results
Timeliness
Having information available to decision-makers before it loses its capacity to influence decisions
Understandability
Qualify of information that lets reasonably informed users see its significance
Economic entity
Company keeps its activity separate from its owners and other businesses
Going concern
Company to last long enough to fulfill objectives and commitments.
Arm’s length transactions
Condition or the fact that the parties to a transaction are independent and on an equal footing
Monetary Unit
Money is the common denominator
Periodicity
Company can divide its economic activities into time periods
Historical cost
Provides a reliable benchmark for measuring historical trends
Revenue recognition
Requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied
Expense recognition
Let the expenses follow the revenues
Matching
Match the revenues and expenses in the periods that they are earned and incurred
Conservatism
When in doubt choose the solution that will be least likely to overstate assets or income and / or liabilities or expenses
Product cost
Materials, labor, and overhead, attached to the product
Period cost
Officer’s salaries and other administrative expenses attached to the period.
