Ch02+-+Balance+Sheet - 2-1Chapter 2 The Balance SheetThe...

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Unformatted text preview: 2-1Chapter 2 The Balance SheetThe FASBs Conceptual FrameworkThe Balance Sheet and business transactionsProcess for tracking account balances (debits and credits)2-2FASBs Conceptual FrameworkThe conceptual frameworkdeveloped by the FASB provides a foundation to be used for financial accounting and reporting:( ) Denotes chapter.OBJECTIVEOBJECTIVEQUALITATIVE QUALITATIVE CHARACTERISTICSCHARACTERISTICSELEMENTSELEMENTSASSUMPTIONSASSUMPTIONSPRINCIPLESPRINCIPLESEXCEPTIONSEXCEPTIONS(5)(5)(5)(5)(2,3)(2,3)(2,3,5)(2,3,5)(2)(2)(2)(2)2-3Objectives of Financial ReportingWhat is the primary objective of financial reporting?a.To provide information that is useful to those making investment and credit decisionsb.To forecast future earnings per share.c.To establish the financial accounting standards board.d.To fund the golden parachutes of financial service company executives.2-4ElementsRevenueExpensesGains:Non operating activities (e.g. sale of a building).Losses:Non operating activities (e.g. sale of building).AssetsLiabilitiesStockholders EquityBalance SheetIncome Statement(Covered in Chapter 3)2-5Assumption: Unit-of-Measure1. Accounting measures are in the national monetary unit.2. Only transaction data expressed in terms of money is included in the accounting records. For example:Customer Satisfaction Percentage of International Employees Salaries paidIncluded in accounting records2-6Assumption: Separate EntityThe business entity is separate from its owners.Bill Gates purchases a private island. How does this get recorded?BusinessBooks &RecordsOwnersBooks &Records2-7Assumption: Time Period1. Assumes it is possible to break up an entitys earnings in discrete time periods (month, quarter, year).2. The time period is presented at the top of each financial statement.2-8Assumption: Going Concern1. Assumes business will continue indefinitely into the future....
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This note was uploaded on 05/04/2011 for the course BUS 103 taught by Professor Opp during the Fall '10 term at University of California, Berkeley.

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Ch02+-+Balance+Sheet - 2-1Chapter 2 The Balance SheetThe...

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