Conceptual Framework - part 2

Conceptual Framework - part 2 - Business is separate from...

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Understanding Accounting Principles
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Usefulness Relevance Reliability Verifiability Neutrality Understandability Timeliness Comparability Completeness
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Usefulness useful to decision makers Relevance Appropriate, have bearing on decisions to be made. Reliability Dependable, free from error Verifiability Implies that supporting documents are available External analysis of FS should arrive at same conclusion as  preparers Neutrality Should not favor one group of users over another group (mgt, owners, creditors, employees, etc)
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Understandability Presented in a clear and understandable manner. Timeliness Prompt reporting for use in decision making. Old information can be irrelevant Comparability compare FS with other businesses Compare FS with firm’s other periods Completeness Present all items that have a material  impact on  decisions of users.
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Separate Entity Assumption
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Unformatted text preview: Business is separate from its owners Transactions recorded are business related only Going Concern Assumption firm will continue to operate indefinitely Stable Monetary Unit Assumption Records kept in terms of money Objectivity Unbiased and fair Periodicity Enterprise broken down into artificial time periods Business activity is fluid. Revenue and expense generating activities are in constant motion. Just because it is time to turn a page on a calendar does not mean that all business activity ceases. Historical Cost Assets carried at cost when acquired or liability incurred Revenue Recognition The period revenue is recorded Realization Occurs when new assets are created Matching Principle Matching revenues with expired costs incurred in earning the revenue...
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This note was uploaded on 05/15/2011 for the course BUAD 2040 taught by Professor Amy during the Spring '11 term at Ohio State.

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Conceptual Framework - part 2 - Business is separate from...

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