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Ch02+-+Balance+Sheet

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

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2-1 Chapter 2 – The Balance Sheet The FASB’s Conceptual Framework The Balance Sheet and business transactions Process for tracking account balances (debits and credits)
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2-2 FASB’s Conceptual Framework The conceptual framework developed by the FASB provides a foundation to be used for financial accounting and reporting: ( ) Denotes chapter. OBJECTIVE OBJECTIVE QUALITATIVE QUALITATIVE CHARACTERISTICS CHARACTERISTICS ELEMENTS ELEMENTS ASSUMPTIONS ASSUMPTIONS PRINCIPLES EXCEPTIONS (5) (5) (5) (2,3) (2,3,5) (2,3,5) (2) (2) (2)
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2-3 Objectives of Financial Reporting What is the primary objective of financial reporting ? a. To provide information that is useful to those making investment and credit decisions b. 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.
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2-4 Elements Revenue Expenses Gains: Non operating activities (e.g. sale of a building). Losses: Non operating activities (e.g. sale of building). Assets Liabilities Stockholder’s Equity Balance Sheet Income Statement (Covered in Chapter 3)
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2-5 Assumption: Unit-of-Measure 1. 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 paid Included in accounting records
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2-6 Assumption: Separate Entity The business entity is separate from its owners. Bill Gates purchases a private island. How does this get recorded? Business Books & Records Owners’ Books & Records
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2-7 Assumption: Time Period 1. Assumes it is possible to break up an entity’s earnings in discrete time periods (month, quarter, year). 2. The time period is presented at the top of each financial statement.
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2-8 Assumption: Going Concern 1. Assumes business will continue indefinitely into the future.
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