Module 1 - Principles and Assumptions
What is Accounting?
Accounting is an information system that provides identity to transactions, Allows you to Classify and Summarize your expenses. And Analyze and Interpret your findings.
GAAP Stands for what?
Generally Accepted Accounting Principles.
What does the Accrual Basis Accounting do?
The Accrual Basis Accounting uses an adjusting process to recognize revenue when earned and expenses when incurred. Combining the Revenue Recognition and Matching Principles.
What does the Business Entity Principle mean?
The Business Entity Principle means you must keep the records of the owner separate from the records of the company. The activities of different economic entities must be kepy separate.
What does the Conservative Principle mean?
The Conservative Principle means you record the Items as the lowest value.
What does Cost Principle mean?
The Cost Principle requires that assets be recorded at the cash amount at the time that the asset is acquired.
What does the Expense Recognition (Matching) Principle mean?
The Expense Recognition Principle means that Expenses are recognized when they happen. Not when cash is paid.
What does the Full Disclosure Principle mean?
The Full Disclosure Principle means that A company is required to report details behind regarding a financial statement that would impact an users decisions.
What does the Going Concern Principle mean?
The Going Concern Principle assumes that a business will continue to operate rather than being sold or closed.
Expense Recognition Principle is also commonly called...
The Matching Principle.
What does the Monetary Unit Principle mean?
The Monetary Unit Principle means that the financial statements are presented in its residing nations currency. (IE US financial reports are in US dollars)
What does the Objectivity Principle mean?
The Objectivity Principle means that anyone valuing a transaction would make the same entry as you. This principle means that the source document must be easy to read and clear for the user to determine the price
What does the Revenue Recognition Principle mean?
The Revenue Recognition Principle means that Revenue is recognized when it is earned. This may not be the same as when cash is received.