Chapter 2 Accounting Standards. New words and terms Accounting practice guideline Accounting theory...
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Transcript of Chapter 2 Accounting Standards. New words and terms Accounting practice guideline Accounting theory...
![Page 1: Chapter 2 Accounting Standards. New words and terms Accounting practice guideline Accounting theory Accounting principle directive GAAP Generally Accepted.](https://reader036.fdocuments.us/reader036/viewer/2022082517/56649f1e5503460f94c36603/html5/thumbnails/1.jpg)
Chapter 2Accounting Standards
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New words and terms Accounting practice guideline Accounting theory Accounting principle directive GAAP
Generally Accepted Accounting Principles
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2.1 Accounting Assumption
I. Accounting Entity Assumption
II. Going Concern Assumption
III. The Stable Monetary Unit Assumption
IV. Accounting Period Assumption
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New words and terms
accountability foreseeable future supplies market value historical cost reliable accounting measure interested party
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New words and terms
quantitative data inflation add subtract measure eventual liquidation
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2.2 Accounting Basis
I. Cash-basis
II. Accrual- basis
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2.2 Accounting Basis
Cash- basis Accrual- basis
Cash receipt
Cash payment
Revenue earned
Expenses incured
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Exercise for 2.2 Accounting Basis In the first year of operations, A co. ear
ned 39,000 in revenues and received 33,000 cash from customers. The company incured expenses of 22,500, but had not paid for 2,250 of them at year-end. In addition, A co. prepaid 3,750 for expense that would be incurred the next year. Calculate the first year’s net income under Cash-basis and Accrual-basis.
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New words and terms
Cash receipt Cash payment expenses receivables payables depreciation incure (expense)
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New words and terms
journal earn revenue recognition concept on account prepaid
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2.3 Accounting Principle
I. The cost principleII. The realization principleIII. The matching principleIV. The objective principleV. The full disclosur principleVI. The materiablity principleVII. The consistency principleVIII. Conservatism principle
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New words and terms
acquisition cost actual cost historical cost ship goods render service realized revenue reliable data accurat
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New words and terms
outsider----insider knowledgeable decision= informed decisi
on significant consistent valuation alternative overstate