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Accounting Notes- Day 5

Accounting Notes- Day 5 - ACCOUNING 2000 9/2 Review from...

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ACCOUNING 2000 9/2 Review from last class: Ratios-analyze trends in the business Profitability ratio- Are we profitable? Look at the income statement to answer this question Liquidity- ability to pay short-term debt: current assets and current liability used Solvency- over long period of time New Material; Standard Setting Environment -generally accepted accounting principles -set of rules and practices as a general guide for financial reporting purposes Standard Setting Bodies: -securities and exchange commission (SEC) -financial accounting standards board (primary group) -international accounting standards board -public company accounting oversight board According to FASB, useful info should have relevance and faithful representation Enhancing Qualities -Comparability: results when different companies use the same accounting principles -info is verifiable -info has quality of understandability -consistency=same accounting principles and methods -should be timely Assumptions in Financial Reporting -monetary unit=things expressed in money are included in accounting records -economic entity
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