COMMERCE 1AA3 Chapter Notes - Chapter 2-3: Conceptual Framework, Accounting Equation, Historical Cost

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Emad Mohammad

Document Summary

These dealings give the rise to events that are measurable in dollars and cents. The cost principle is applied to business transactions, in order to record the event > use the actual cost. Summary: we use historical cost in reporting our assets. The purpose of recording business transactions is to capture the nancial impact of events on the entity in order to generate. Nancial statements at the end of each period. The set of nancial statements are used to evaluate the performance and nancial positions as a tool for making business decisions. The explicit underlaying assumption that an entity will continue operating normally for the foreseeable future. A company that is not a going concern is at risk of going bankrupt or closing down, so it may need to signi cantly scale down its operations or sell some of its assets at a heavily discounted rates.