Merry ChristmS
...or serves as an independent intermediary to help ensure that management has appropriately applied GAAP in preparing the company’s financial statement. 10. Adverse economic consequences are an unfavorable outcome that has resulted because of a new accounting standard or changes in standards. 11. FASB undertakes a serious of elaborate information gathering steps before issuing a substantive accounting standard because they want to avoid adverse economic consequences. 12. The purpose of FASB conceptual framework project was to provide an underlying foundation for accounting standards 13. Relevance is to make a difference in the decisions process, information must possess predictive value and/or feedback and reliability is the extent to which information is verifiable, representational faithful and neutral. 14. The components of relevance are predictive value, feedback value and timeliness and the components of reliability are verifiability, neutrality, and representational faithfulness. 15. The benefits of accounting must exceed the costs means that information is cost effective ones if the perceived benefit of increased decision usefulness exceeds the anticipated costs of providing that information. 16. Materiality is a pervasive constraint whenever information is material if it can have an effect on a decision made by users. 17. Assets is anything that is owned, liability are things that are owed, equity is what is left after deducting liabilities, investment is the money that people give to a company in exchange for ownership (stock), distribution is the money given to owners by company (dividend), revenue is money earned by providing goods and services, expenses outflow of incurred charges (rent, wages), gains increase in equity from transactions of an entity, losses decrease in equity, comprehensive income is change in equity of a business during a period from transaction to non-owner resources. 18. The four basic assumptions underlying GAAP are economic entity, going concern, periodicity, and monetary unit. 19. The going concern assumption is a necessary assumption that it is anticipated that a business will continue to operate indefinitely. 20. The periodicity assumption allows the life of a company to be divided into artificial time periods to provide timely information. 21. The four broad accounting principles are the historical cost principle, the realization principle, the matching principle, and the full-disclosure principle. 22. The two important reasons to base the valuation of assets and liabilities on their historical cost if for assets is the fair value of what is given in exchange (usually cash) for the asset at its initial acquisition and liabilities is the current cash equivalent received in exchange for assuming the liability. 23. The two criteria that need to be satisfied before revenue can be recognized is the earnings process is judged to be completely or virtually complete and they is reasonable certainty as to the collectibility of the asset to be received (usually cash). 24. The four different approaches to implementing the matching principle is based on an exact cause-and-effect relationship between revenue and expense event (cost of goods sold), by associating an expense with the revenues recognized in a specifi...