BU121 Lecture Notes - Lecture 3: Deferred Income, Current Liability, Faithful Representation
Document Summary
Chapter 2: investing and financing decisions in the statement of financial position. The primary objective of external financial reporting is to provide financial information about a business to help external parties weeks sound financial decisions. Relevance: material amounts big enough to influence (subjective ) Faithful representation: must reflect the substance of underlying transactions. Comparability: enhanced if the same methods are used. Verifiability: if independent accountant can agree on the amount and nature. Timeliness: given in time to enhance the information"s ability to predict the future. Unit of measure: measured in the national monetary unit. Continuity assumption: assumed to continue to operate in the future. Historical cost principle: based on factual transaction requires assets to be recorded at the. Historical cash equivalent cost + monetary value of all non-cash considerations also given on the day of the exchange. Assets (in order of liquidity, i. e. how soon it can be transferred into cash) Non current: cash, short term investments, receivables.
