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Lecture 1

COMMERCE 1AA3 Lecture Notes - Lecture 1: Financial Statement, Income Statement, Retained Earnings


Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Emad Mohammad
Lecture
1

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September 13, 2018
COMMERCE 1AA3- Week 2
Chapter 2
Recording Business Transitions
GAAP id the rule book for accountants, and GAAP is guided by the conceptual Framework of
Accounting.
The Objective of Financial Reporting
The objective of financial reporting is to provide useful economic information to external users
for decision making and for assessing future cash flows.

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September 13, 2018
Qualitative Characteristics of Accounting Information
Fundamental Qualitative Characteristics
Relevance
Faithful Representation
Enhancing Qualitative Characteristics
Comparability
Verifiability
Timeliness
Understandability
Fundamental Qualitative Characteristics
Relevance- Can make a difference
Predictive Value
Confirmatory Value
Materiality
Faithful Representation- Reliability
Complete
Neutral
Free from Error
Recognition and Measurement Criteria- Assumptions
Separate Entity assumption
A business is a separate economic unit
Continuity (going- concern) assumption
Entity will continue to exist indefinitely
Historical cost assumption
Assets recorded at purchase price
Stable monetary unit assumption
Dollar’s purchasing power is stable over time
Historical cost is verifiable; there is evidence, whereas market value is not.

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September 13, 2018
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