ch07 WebCT - Chapter 7 Chapter Accounting Principles...

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Chapter 7-1 Accounting Principles Chapter Chapter 7 7 ACCT 2111– Introductory Financial Accounting
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Chapter 7-2 Conceptual Framework  - “…a constitution, a coherent system of  interrelated objectives and fundamentals.” FASB’s conceptual framework  consists of the following: 1. Objectives  of financial reporting. 2. Qualitative characteristics  of accounting information. 3. Elements  of financial statements. 1. Operating  guidelines  ( assumptions, principles, and  constraints ). The Conceptual Framework of Accounting The Conceptual Framework of Accounting
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Chapter 7-3 a) a) To provide information that is useful to those making investment and credit  To provide information that is useful to those making investment and credit  decisions. decisions. a) a) Helpful in assessing future cash flows. Helpful in assessing future cash flows. a) a) Identify the economic resources (assets), the claims to those resources  Identify the economic resources (assets), the claims to those resources  (liabilities), and the changes in those resources and claims. (liabilities), and the changes in those resources and claims. Conceptual Framework Conceptual Framework (1) Objectives of Financial Reporting
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Chapter 7-4 Relevance   – making a difference in a decision. Predictive value Feedback value Timeliness Reliability Verifiable Representational faithfulness Neutral - free of error and bias (2) Qualitative Characteristics Conceptual Framework Conceptual Framework
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Chapter 7-5 Comparability   – Information that is measured and reported in a  similar manner for different companies is considered comparable.  Consistency - When a company applies the same accounting  treatment to similar events from period to period. (2) continued: Qualitative Characteristics Conceptual Framework Conceptual Framework
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Chapter 7-6 Revenue Revenue Expenses Expenses Gains Gains Losses Losses Assets Assets Liabilities Liabilities Equity Equity Moment in Time” Period of Time” (3) Elements of Financial Statements Conceptual Framework Conceptual Framework
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Chapter 7-7 (4) Operating Guidelines Conceptual Framework Conceptual Framework
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7-8 Assumptions provide a foundation for the
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ch07 WebCT - Chapter 7 Chapter Accounting Principles...

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