ACCT 001 Lecture Notes - Lecture 13: Financial Statement, Accrual, Historical Cost
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10 Jul 2020
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The t-diagram, which is separated in debt and credit. A= l+e and total dt = total ct. Accountants have developed principles that describe when and how the elements of financial statements should be: Historical cost: assets and liabilities should be recorded at their cost when acquired. Not only at time of purchase, but throughout the life of each asset and liability. Fair value: certain assets and liabilities should be recorded and reported at fair value. In choosing between these two, apply the concepts of relevance and representational faithfulness. Companies need immediate feedback on how well they are doing. Accounting divides the economic life of a business into artificial time periods. Many transactions affect more than one time period. Sales or performance effort is substantially complete. When merchandise is sold (point of sale) Due to ordinary activity, a decrease in future economic benefits occurs. Related to a decrease in an asset or an increase in a liability.
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