Chapter 2 Investing and financing decisions and the balance sheet_Notes

Chapter 2 Investing and financing decisions and the balance sheet_Notes

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Chapter 2 – investing and financing decisions and the balance sheet Primary objective of external financial reporting – is to provide usefully economic information about absiness to help external parties make sound financial decisions Separate entity assumption – states that business transactions are separart from the trasnsactions of the owners Unit-of-measure assumption – accounting info shouldbe measured and reported in the national monetary unit Continuity assmption (going-conern) – businesses are assumed to continue to operate intot he foreseeable future\ Elements of Balance Sheet Assets – resources with probablye future economic beneftits owned by the entity as a result of past transactions List in order of liquidity Current assets – assest that will be used or turned into cash within one year. Inventory is always considred a current asset regardless of time needed to produce and sell it. Include cash, accts receivable, supplies, prepaid expenses and other CA Long term assets are turned or used into cash beyone coming year Historical cost principle –assets are required to be recoreded at the historical case
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Chapter 2 Investing and financing decisions and the balance sheet_Notes

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