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Acc201TermsExam1 - Reliable Information-information that is...

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Accounting Terms/ Principles Matching Principle- requires that costs incurred to generate revenues be recognized in the same period- a matching of costs with benefits. Ex. When papa john’s restaurants provide food service to customers, revenue is earned. The costs of generating the revenue include expenses incurred such as these o Wages to employees who worked during the period (wages expense) o Utilities for the electricity used during the period (utilities expense) o Food and paper products used during the period (cost of sales) o Facilities rental during the period (Rent expense) o The use of ovens and other equipment during the period (depreciation expense) Cost-Benefit Constraint - suggests that the benefits of accounting for and reporting information outweighs the costs Relevant Information- information that is timely and has predictive and/or feedback value (is the information useful?)
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Unformatted text preview: Reliable Information-information that is accurate, unbiased, and verifiable Consistent Information-can be compared over time because similar accounting methods have been applied (how does it compare to the company’s records from previous accounting periods) Comparable Information- allows comparisons across businesses because similar accounting methods have been applied. (how does it compare to other businesses?) Material Amounts-amounts that are large enough to influence a users decision • If a company makes hundreds of millions of dollars a year and leaves out a measly hundred of dollars it is not material because it is not a large enough sum of money to influence an investors opinion Conservatism-suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses....
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