Quiz definitions Flashcards
information is useful in predicting the future
predictive value
- relevant to the decision at hand
- capable of making a difference in a user’s decision
relevance
information is available prior to the decision
timeliness
decreases in equity resulting from transfers to owners
distribution to owners
information confirms expectations
confirmatory value
- users understand the information in the context of the decision being made
- information can be understood when diligently reviewed by reasonably informed users
understandability
increases in equity from peripheral or incident transactions of an entity
gain
agreement between a measure and the phenomenon it claims to represent
- represents an economic phenomenon in words + numbers
faithful representation
the change in equity from nonowner transactions
comprehensive income
concerns the relative size of an item and its effect on decisions
materiality
important for making interfirm comparisons
comparability
the absense of bias
neutrality
the process of admitting information into financial statements
recognition
applying the same accounting practices over time
consistency
requirese consideration of the costs and value of information
cost effectiveness
- implies an agreement among different measures
- information is comparable if it helps evaluate information across firms or over time
verifiability
principle that seperates a businesses transactions from its owners transactions
economic entity assumption
states that a business financial activities can be divided into regular time periods
the periodicity assumption
requires businesses to record expense in the same period as the revenue they generate
expense recognition
requires a company to record assets at their original purchase price
the historical cost principle
the process of accounting for revenue at the time a business earns it
revenue recognition
the entity will continue to remian in business for hte foreseeable future
the going concern assumption
requires companies to include all relevant information in their financial statements
the full disclosure principle
the primary objective of financial reporting is to provide information
useful to capital providers
statements of financial accounting concpets issued by the FASB
identify the conceptual framework within which accounting standards are developed
in genera, revenue is recognized when
a good or service has been delivered to a customer
in depreciation the cost of an asset, accountants are most concerned with
recognizing expense in the appropriate period
the primary objective of expense recognition is to
record expenses in the period that related revenues are recognized
the economic entity assumption states that, in the absence of contrary evidence, all entities will survive indefinitely
true or false
false
