Intro to Business FINAL EXAM Ch.16-20 & Ch. C

Terms in this set (1042)

1. The Business Entity (assumes that the business is separate from its owners or other businesses. Revenue and expense should be kept separate from personal expenses) 2. The Business Transaction (more than one principle about how to record a transaction accrual vs. cash etc)
3. Going Concern (assumes that the business will be in operation indefinitely. This validates the methods of asset capitalization, depreciation, and amortization. Only when liquidation is certain this assumption is not applicable.)
4. Periodicity (implies that the economic activities of an enterprise can be divided into artificial time periods.)
5. Money Basis for Reporting (assumes a stable currency is going to be the unit of record. The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation.)
6. Objectively Verifiable Evidence (the company financial statements provided by the accountants should be based on objective evidence.)
7. Adequate Disclosure (Amount and kinds of information disclosed should be decided based on trade-off analysis as a larger amount of information costs more to prepare and use. Information disclosed should be enough to make a judgment while keeping costs reasonable. Information is presented in the main body of financial statements, in the notes or as supplementary information)
8. Conservatism (when choosing between two solutions, the one that will be least likely to overstate assets and income should be picked)
9. Materiality (the significance of an item should be considered when it is reported. An item is considered significant when it would affect the decision of a reasonable individual.)
10. Consistency (It means that the company uses the same accounting principles and methods from year to year.)