ACT CH 2 HW Matching (characteristics, assumptions, principles, and constraint guide the FASB when it creates accounting standards)
Periodicity assumption
Separates financial information into time periods for reporting purposes.
Cost constraint
The cost to provide information should be weighed against the benefit that users will gain from having the information available.
Materiality
The judgement concerning whether an item's size makes it likely to influence a decision-maker.
Periodicity assumption
The life of a business can be divided into artificial segments of time.
Full disclosure principle
The reporting of all information that would make a difference to financial statement users.
Consistency
A company's use of the same accounting principles from year to year.
Faithful representation
Accounting information must be complete, neutral, and free from error.
Relevance
Accounting information should help users predict future events, and should confirm or correct prior expectations.
Historical cost principle
Assets are recorded and reported at original purchase price.
Going concern assumption
Assumes a business will remain in operation for the foreseeable future.
Monetary unit assumption
Assumes that the dollar is the "measuring stick" used to report on financial performance.
Full disclosure principle
Dictates that companies should disclose all circumstances and events that make a difference to financial statement users.
Comparability
Different companies use the same accounting principles.
Economic entity assumption
Indicated that personal and business record-keeping should be separately maintained.
Going concern assumption
Is the rationale for why plant assets are not reported at liquidation value.
Monetary unit assumption
Items not easily quantified in dollar terms are not reported in the financial statements.
Historical cost principle
Measurement basis used when a reliable estimate of fair value is not available.
Economic entity assumption
Personal transactions are not mixed with the company's transactions.