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q goal of financial reportingthe second goal of financial reporting is to provide information to help present and potential investors and creditors
q objectives of financial reportingfinancial reporting objectives are the broad overriding objectives sought by accountants engaging in financial
q financial accounting standards boards conceptual frameworkexperts have discussed the exact nature of the basic concepts and related principles
q misstatement of accounting informationthe fasb describes materiality as the magnitude of an omission or misstatement of accounting information that
q modifying conventions on materialitythe materiality is a modifying convention that permits accountants to deal with immaterial unimportant items in
q what is cost-benefitcost-benefit the cost-benefit consideration engrosses deciding whether the benefits of including optional information in
q explain about modifying conventionsin certain examples companies dont strictly apply accounting principles because of modifying conventions or
q explain about full disclosure principlethe full disclosure principle states that information significant enough to influence the decisions of an
q gain and loss recognition principlethe gain and loss recognition principle states that we record gains merely when realized but losses when they
q explain about period costsperiod costs are costs not noticeable to specific products and expensed in the period incurred administrative and selling
q define the product costsproduct costs are costs earns in the acquisition or manufacture of goods since you will see in the next section included as
q show timing of expense recognitionthe timing of expense recognition the matching principle entail that a relationship exists between expenses and
the measurement of expense accountants measure largely assets used in operating a business by their historical costs consequently they measure a
q what is matching principleexpense recognition is closely related to as well as sometimes discussed as part of the revenue recognition principle the
q cash collection as point of revenue recognitionseveral small companies record revenues and expenses at the time of cash collection and payment
q describe exceptions to the realization principleexceptions to the realization principle the following illustrations are instances when practical
q high-fiber diet for diverticular diseasefor mild symptoms a clear liquid diet is recommended more serious cases may require hospitalization
q explain about realization principlerealization of revenue under the realization principle the accountant doesnt recognize record revenue until the
q explain about revenue recognition principleunder the revenue recognition principle revenues must be earned and realized before they are recognized
q financial statements in european countriesin a few european countries the financial statements contain secret reserves these secret reserves occur
q share-based payment transactionsthe fair value accounting standard sfas 157 applies to monetary assets of all publicly-traded companies in the us
q explain about cost principleas applied to largely assets this principle is often called the cost principle it utter that purchased or
q explain about exchange-price or cost principlewhen resources are transferred between two parties such like buying merchandise on account the
q general principles of accountingorganizations that have contributed towards the development of the principles are the 1american institute of
q general accepted accounting principlesin general accepted accounting principles gaap set forth standards or methods for presenting financial