Unit 4 Flashcards
What are the principles related to the Entire Model?
Accounting Entity:
Every economic entity can be separately identified and accounted for
Accounting Equation
A=L+SE
Going Concern Concept
The presumption that the entity will continue to operate in the future - it’s not being liquidated
What are the principles related to transactions?
Unit of Measurement
Only transactions denominated in dollars (currency) are recorded in the accounting records.
Cost principle
Transactions are recorded at their original cost to the entity as measured in dollars
Objectivity
The accountants’ desire to to have a given transaction recorded in the same way in all situations
What are to the principles related to Bookkeeping Procedures and the Accounting Process?
Accounting Period
The period of time selected for reporting results of operations and changes in the financial position.
Matching Concept
All expenses incurred to generate that period’ revenues be deducted from revenues earned.
Revenue recognized at the time of sale
Which is when the title to the product being sold passes from the seller to the buyer, or when the services involved in the transaction have been performed
Accrual Accounting
Recognizing revenue at the point of sale and recognize expenses when incurred, even though the cash receipt or payment may occur at a different time.
What are the principles related to the Financial Statements?
Consistency
Provides meaningful trend comparisons over several years.
Materiality
The benefit of increased accuracy should outweigh the cost of achieving increased accuracy.
Full Disclosure
Circumstances and events that make a difference to financial statement users should be disclosed.
Conservatism
When in doubt, make judgments and estimates that result in lower profits and asset valuatations.
What is the Corporation’s Annual Report?
The annual report is distributed to shareholders (and others).
It contains the financial statements, together with the report of the external auditor’s examination of the financial statements.
It also contains the Management’s Discussion and Analysis (MD&A).
What are the limitations of Financial Statements?
Why it is issued the Corporation’s Annual Report?
Explain the meaning of matching revenue and expense and make an example
Explain the meaning of the ‘accrual concept’ and make an example.
What are the financial statement relationships?
