Accounting Notes- Day 5

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

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Unformatted text preview: 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 -periodicity=life of business can be divided into artificial time periods Going Concern- the business will remain in operation for the foreseeable future Accrual Basis- transactions are recorded in the periods in which events occur Measurement Principles 1. Cost- historical cost principle, dictates that companies record assets at their cost 2. Fair value- indicates that assets and liabilities should be reported at fair value (price received to sell an asset or settle a liability) 3. Full disclosure- requires that companies disclose all circumstances and events that would make a difference Constraints in Financial Reporting 1. Materiality constraint 2. Cost constraint International Financing Reporting Standards (IFRS) 1. Noncurrent assets 2. Current assets 3. Equity 4. Noncurrent liabilities 5. Current liabilities CLICKER QUESTION: which provides that the record keeping of a business entity should be kept separate from owners? -economic entity assumption CLICKER QUESTION: current assets under IFRS are listed… -reverse order of their expected conversion to cash ...
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This note was uploaded on 01/19/2012 for the course ACCT 2000 taught by Professor Holmes during the Fall '08 term at LSU.

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

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