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Lecture 2

COMMERCE 1AA3 Lecture Notes - Lecture 2: The Ledger, Accounting Equation, Gross Profit


Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Aadil Merali Juma
Lecture
2

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Accounting Chapter 2
The Conceptual Framework
The Objective of Financial Reporting
The objective of financial reporting to provide useful economic information to external
users for decision making and for assessing future cash flow
Qualitative Characteristics of Accounting Information
Fundamental Qualitative Characteristics
o Relevance
o Faithful Representation
Enhancing Qualitative Characteristics
o Comparability
o Verifiability
o Timeliness
o Understandability
Fundamental Qualitative Characteristics
Relevance
o Predictive Value
o Confirmatory Value
Faithful Representation
o Complete
o Neutral
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o Free from Error
Recognition and Measurement Criteria
Assumptions
o Unit of measurement
o Separate Entity
o Periodicity
o Going Concern
Principles
o Historical Cost
o Full disclosure
o Revenue recognition
o Matching
Constraints
o Cost benefits
o Materiality
Accounting Information System
The Accounting Cycle-Daily Activities
1. Business Activities (Buying, Selling, Hiring, Firing, et…)
2. Transaction Analysis
3. Journalizing: Record the transaction in journal entries
The Accounting Cycle
1. Journalizing
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