ACG 2021 Chapter 1
3 Accounting Activities
1. Identifying business activities 2. Recording business activities 3. Communicating business activities
Measurement Principle
Also called cost principles, means that accounting information is based on actual cost
Matching Principle
Also called expense recognition, prescribes that a company must record its expenses incurred to generate the revenue
Internal Users
Directly involved in managing and operating an organization. Ex: Managers, officers, sales staff, budget officers
Sarbanes-Oxley Act
In response to a number of publicized accounting scandals (Enron, WorldCom, Tyco, ImClone), Congress passed the Sarbanes-Oxley Act (also called SOX) in 2002 to help curb financial abuses at companies that issue their stock to the public. The act requires that public companies apply both accounting oversight and stringent internal controls. The desired results include more transparency, accountability, and truthfulness in reporting transactions.
External Users
Not directly involved in running the organization. Ex: shareholders, lenders, customers, suppliers, lawyers, brokers
Business Entity Forms
Sole proprietorship, partnership, corporation
Generally Accepted Accounting Principles
The concepts and rules that govern financial accounting Relevant, reliable, and comparable information
Business Entity Assumption
a business is accounted for separately from its owner or other business entities
Going-concern Assumption
accounting information reflects a presumption the business will continue operating
Securities and Exchange Commission
an independent agency of the government that regulates financial markets and investment companies
Time Period Assumption
presumes that the life of a company can be divided into time periods, such as months and years.
Revenue Recognition Principle
provides guidance on when a company must recognize revenue
Full Disclosure Principle
requires a company to report the details behind financial statements that would impact users' decisions
Monetary Unit Assumption
we can express transactions in money