MGCR 211 Chapter Notes - Chapter 2: Financial Statement, Cash Flow, Accounts Payable
15 Jan 2013
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Historical cost principle: costs of assets should be recorded at the original price you paid to acquire it (not current market value) Revenue recognition: record revenue when service is performed or product is delivered (not when payment is received) Full disclosure: company provides all information that is relevant for investors to make decisions. Financial statements should have the following qualitative characteristics: relevance. Information disclosed may influence user"s decision: reliability. All numbers can be proven (variability), is representative of actual company situation (representational), can be trusted accurate (faithfulness), and made in an objective manner (neutrality: comparability. Can be used to compare to other companies: consistency. Transactions are events that must be recorded in the financial statement. 2 types: external: between company and outside party. Involves any exchange of assets, liabilities or equity. (majority of transactions are external: internal (adjusting entries): within the company if event results in a financial impact that you can measure with reasonable accuracy.
