ACC100 - Topic 4
Card Set Information
ACC100 - Topic 4
ACC100 - Topic 4 (3)
Decide on the purpose the summary is to serve.
Select the aspects of each event which are related to that purpose.
Prepare a summary.
Systematic technique used to classify, analyse and summarise a large number of transactions, presented in the form of the basic financial statements.
Elements of Financial Statement
Resources owned or controlled by the entity for the purpose of providing economic benefits to that entity in the future.
Amounts that are owed by the business.
Represent future obligations or sacrifices and are usually settled using cash (to parties outside the business).
Represents the owner/s claim or net worth in the assets of the entity.
Assets = Liabilities + Owner's Equity
Value In Use
The value an item has for being used to generate other resources which have either some value in exchange or some value in use.
Value In Exchange
The value an item has in exchange for cash, another resource or for the cancellation of a debt.
The ability of an entity to convert assets into cash.
Accounting Entity Aspect
For accounting purposes, the viewpoint taken is always that of the entity being accounted for.
Matching Process (Principle)
The method of allocating a long-term expense over the period of its life.
The systematic allocation of the depreciable amount of an asset over its useful life.
The information should faithfully represent, without bias or undue error, the transactions and events of the business.
Helps the users to form opinions about past, present or future events, and/or it confirms or corrects their previous judgements about their decisions.
Economic Resources Assumption
Accountants are concerned with placing an economic value on the resources controlled by the entity.
Money Measurement Assumption
Suggests that accounting transactions will be expressed in monetary terms, in the unit of monetary measurement for the country in which the business is located.
Accounting Period Assumption
The life of an entity can be broken into periods for the purpose of providing timely information on the entity's performance and financial position.
Continuity Assumption (Going-Concern)
In the absence of evidence to the contrary, the entity is assumed to continue to operate for the foreseeable future.
Capital Maintenance Assumption
Profit can be recognised only after the value of the owner's equity at the beginning of the period has been maintained.
Faithful Representation Assumption
A strength of the historical cost accounting system.
Essentially similar measure's or conclusions would be reached if two or more qualified persons examined the same data.
Implies that when faced with uncertainty in dealing with transactions, accountants will generally take the more cautious approach.