Accounting for decisions makers chapter 1.docx

This is a lawsuit for example it can lead to

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income statement. This is a lawsuit for example. It can lead to substantial losses, but this could take a long time for the event to payout, however it is a threat to the firm. Even though it hasn’t accrued a liability, it must be disclosed Relevance – qualitative characteristic, is associated with information that is timely, useful has predictive value and is going to make a difference Reliability – a qualitative characteristic, is achieved when information is verifiable Comparability – information that becomes much more useful when it can be related to benchmark or standard. Firms own history. Consistency - The consistency principle states that, once you adopt an accounting principle or method, you should continue to follow it consistently in future accounting periods. Conservatism - A pervasive factor in accounting that can be summarized as follows: when doubt exists concerning two or more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities. Used to ensure management isn’t making themselves look better than they are. Materiality - The question of whether an item is large enough to make any difference to anyone. Assets = liabilities + stockholder equity On a balance sheet, list assets first in order if liquidity, followed by liabilities and stockholders equity Liquidity = cash A balance sheet must be prepared as of a specific date
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  • Spring '16
  • Kenneth Cassell
  • Generally Accepted Accounting Principles

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