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23 Cards in this Set
- Front
- Back
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Management of a company prepared financial statements that are audited by an independent accounting firm. In the opinion of the auditors, the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP |
Verifiability |
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A corporation has a policy to present quarterly financial statements to its shareholders 30 days after quarter-end, and year-end financial statements within 60 days after year-end |
Timeliness |
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A start-up company chose to value inventory using the average cost method after research indicated that the average cost method was the most typical method used by its competitors |
Comparability |
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A company’s note regarding its income tax accrual is complex, requiring a reasonable understanding of income tax accounting |
Understandability |
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A company has continued to use the same inventory costing method since it inception |
Comparability |
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Recognition of revenue when performance obligation is met |
Revenue recognition principle |
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Common denominator - the U.S. dollar |
Monetary Unit Assumption |
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Expenses recorded as revenue is incurred, as expense is incurred, or systematically over time |
Expense Recognition Principle |
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Preparation cost versus value of benefit to the user |
Cost Effectiveness Constraint |
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Separate and apart from its owners and other entities |
Economic Entity Assumption |
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Report all relevant information |
Full Disclosure Principle |
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Reporting periods-such as monthly, quarterly, or yearly |
Periodicity Assumption |
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Historical cost and fair value measurements |
Measurement Principle |
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Business continuity for the foreseeable futurew |
Going concern assumption |
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Accounting Assumptions and principles examples |
Go to next card |
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Thrive Inc. adjusted amounts in its financial statements for the effect of inflation over the past five years |
Monetary Unit |
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Soni Corp. recorded a sale at the time of the customer order, even though the item was shipped several days later |
Revenue Recognition |
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Harper Inc. adopted the new revenue recognition accounting standard in the current year but failed to disclose the impact on financial statements, which is material |
Full disclosure |
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The expense for a one-year maintenance contract for Lazer Inc. was recorded in January of the year of the contract |
Expense recognition |
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A personal loan of the president of Lee Corp. was included in the liabilities on the balance sheet of Lee Corp. |
Economic Entity |
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Equipment recorded in the accounting records of Atlanta Inc. appreciated $100,000 from 2019 to 2020. Atlanta Inc. recorded this unrealized gain in the income statement as it increased the asset value |
Measurement |
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Bell Tech Inc., a private corporation, provides financial statements to its shareholders every two years |
Periodicity |
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Wilderness Inc. depreciated fixed assets (over 5 years) in its current financial statements even though liquidation of the company was imminent |
Going concern |
