The Conceptual Framework

The Conceptual Framework - Working Ratio: Current assets /...

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The Conceptual Framework Qualitative characteristics of accounting information Relevant – Capable of making a difference in decisions Reliability – Can be relied upon Comparable – similar techniques across different firms Consistent – same techniques used over time for the same firm 16 Elements of F/S Current assets: assets that will be turned into cash or used up within one year. Noncurrent assets: assets that cannot be turned into cash within one year. Current liabilities: probable debts or obligations that will be paid with assets or services within one year. Long-term liabilities: probable debts or obligations that will become due more than one year. Working capital: Current assets – Current liabilities
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Unformatted text preview: Working Ratio: Current assets / Current liabilities Underlying assumptions of accounting Separate entity – activities (transactions) of the business are separate from activities (transactions) of the owners Going concern (continuity) – a business will operate into the future, or assumed to have an indefinite life. Time period (periodicity) – the indefinite life of a business must be reported over a series of shorter time periods, like a year. 17 Unit of measure – each business will account for its transactions and report its activities using the currency unit of the firm’s primary place of business. CAN THESE ASSUMPTIONS BE VIOLATED?...
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This note was uploaded on 01/31/2011 for the course ACCOUNTING 301 taught by Professor Chen during the Spring '10 term at George Mason.

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The Conceptual Framework - Working Ratio: Current assets /...

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