Accounting info based on actual cost. -if cash is given for a service, cost is measured by cash paid -if other is exchanged (car traded for truck), cost is measured as cash value of what is given up or received

Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash value of what is given up or received

This ensure reliability, verifiability

Revenue Recognition Principle

Recognition = recording
-happens when goods or services are provided to customers
-is recorded at the amount received

Expense Recognition Principle

A company records the expenses it incurred to generate revenue reported

Full disclosure principle

A company must report the details behind financial statements that would impact users’ decision. Often found in footnotes

Going Concern Assumption

Accounting info reflects a presumption that the business will continue operation instead of being closed or sold.
-implies business/property is reported at cost instead of, say, liquidation value that insists closure

Monetary Unit Assumption

We can express transactions & events in monetary units. Money being the common denominator in business

Time Period Assumption

Presumes that the life of a company can be divided into time periods, months/years, & useful reports can be prepared for those periods

Business entity assumption

a business is accounted for separately from other business entities, including its owner.

Materiality constraint

Only information that influences decisions (through importance/dollar amt) need be disclosed

Cost-benefit constraint

Only info with benefits of disclosure greater than costs of providing need be disclosed

external accounting users

lenders
shareholders
governments
consumer groups
external auditors
customers

internal accounting users

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