ACC 201-Chapter 2 - Chapter 2: investing and financing...

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Chapter 2: investing and financing decisions and the balance sheet Primary objective of external financial reporting is to provide useful economic information about a business to help external parties make sound financial decisions 4 different assumption o Separate entity assumption: business transactions are separate from the transactions of the owners o Unit of measure assumption: accounting information should be measured and reported in the national monetary unit o Continuity (going concern) assumption: businesses are assumed to continue to operate into the foreseeable future Basic accounting principal- Historical cost principal: requires assets to be recorded at the historical cash equivalent coast, which on the date of the transaction is cash paid plus the current dollar value of all noncash considerations also given in the exchange. o Stockholder’s equity o Contributed capital : owners providing cash to the business o Retained earnings: the cumulative earnings of a company that are not distributed
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ACC 201-Chapter 2 - Chapter 2: investing and financing...

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