prelim 1 notes - Chapter 2 Separate- entity assumption:...

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Chapter 2 Separate- entity assumption: states that business transactions are accounted for separately from the transactions of owners. Unit-of-measure assumption: states that accounting information should be measured and reported in the national monetary unit. Continuity (or going-concern) assumption: states that businesses are assumed to continue to oprate into the foreseeable future. Historical cost principle (cost principle): requires assets to be recorded at historical cost that, on the date of the transaction, is cash paid plus the current dollar value of all noncash considerations also given in the exchange. Financial leverage ratio = Average Total Assets/ Average Stockholders’ Equity. How the management is using debt to increase the amount of assets the company employs to earn income for stockholders. Chapter 3 Cash basis accounting: records revenues when cash is received and expenses when cash is paid. Accrual basis accounting: records revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments Revenue principle: states that revenues are recognized when (1) goods or services are delivered, (2) there is persuasive evidence of an arrangement for customer payment, (3) the price is fixed or determinable,
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This note was uploaded on 10/21/2009 for the course H ADM 223 taught by Professor Pstrebel during the Spring '07 term at Cornell University (Engineering School).

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prelim 1 notes - Chapter 2 Separate- entity assumption:...

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