PRINCIPLES & CHARACTERISTICS Flashcards
What does CHER @ MCG stand for?
Consistency Historical cost Entity Reporting period Monetary unit Conservatism Going concern
What does RRUC stand for?
Relevance
Reliability
Understandability
Comparability
What is entity?
Personal transactions of the owner should be kept seperate from those of the business.
What is monetary unit?
Transactions must be recorded using the currency of the country it was written up in.
What is historical cost?
All transactions should be recorded at their original value as this value can be verified by documentation and keeps the report free form bias.
What is going concern?
The life of a business is assumed t be continuous and its records should be kept on that basis.
What is reporting period?
The life of the business is dived into periods of time. Records should reflect the period of time the occurred in.
What are assets?
Assets are resources controlled by the entity that owns them (as a result of past events), from which future economic benefits are expected.
What is conservatism?
All losses should be recorded when likely and all gains should only be recorded when certain.
What is consistency?
The same accounting methods should be used from one period to the next.
What is relevance?
Reports should include all information that is useful for decision-making as this info may be likely to influence a financial decision.
What is reliability?
Reports should contain information verified by source document evidence so that it is kept from bias.
What is understandability?
Reports should be prepared in such a way that makes them easy and comprehendible for the user.
What is comparability?
Reports should be able to be matched up together so accounting methods should be consistent in each report.
What is the accounting equation?
Assets = Liabilities + Owners equity
