ch1 vocab

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Author:
teresalovesyu
ID:
97821
Filename:
ch1 vocab
Updated:
2011-08-21 18:49:13
Tags:
acctg vocab
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Description:
201a ch 1 vocab
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  1. Monetary Unit
    accounts measure in untis of nominal dollars without accounting for inflation
  2. Going Concern
    We assume the business will continue indefinitely unless evidence shows.
  3. Periodicity
    AKA Accounting Period. Results of operations (income statement) and financial position (balance sheet) should be reported periodically (EX: every quarter, year, etc.)
  4. Economic Activity
    Financial affairs of a business entitty & its owners should be separated
  5. Matching
    Record items as expense in the period they benefit. EX: COGS when they are sold; prior to that time they are recorded as assets.
  6. Consistency
    Entities can't arbitrarily change acctg principles once adopted. EX: LIFO, FIFO, Straight Line, Double Declining, Average Cost. We don't want companies changing accounting principles whenever they want.
  7. Disclosure
    Requires all information useful to reasonable informed investor/ creditor be disclosed in the notes in the fin. statements.
  8. Materiality
    • Don't worry about the small dollar items. EX:
    • Record Trash can as expense. Nobody cares about the small stuff.
  9. Conservatism
    When faced w/ alternative acctg choices, choose the solution least that favorably affects net income.
  10. Substance Over Form
    Emphasize the economic rather than the legal form of transaction. EX: Recording equipment leased as an asset.
  11. Historical Cost
    Actual cost. You record what you paid for. Used to record purchases of PPE, most inventories.
  12. Net Realizable Value
    Used for valuing A/R. EX: A/R company on books they will have bad debt so you make a contra acct for doubtful accts.
  13. Present Value of Expected Cash Flows
    Used for non-interest bearing note recievables and leases.
  14. Current replacement Cost
    Used to value some inventories that have declined in value since purchase. EX: only for inventory damaged acctg goods.
  15. Current Market Value
    Used to value certain investments. EX: Corp. buys stocks and bonds we adjust it to market value when selling it.

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