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Public Administration - Municipal ACC106 Chapter Notes - Chapter 1.4: Accounting Equation, Financial Statement, Office Supplies

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greenmuskrat329
25 Dec 2016
School
Seneca College
Department
Public Administration - Municipal
Course
Public Administration - Municipal ACC106
Professor
Riggs

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Document Summary

Economic-entity assumption: assumption that an organization or a section of an organization that, for accounting purposes, stands apart from other organizations and individuals as separate economic unit, this is the most basis concept in accounting. Going-concern assumption: going to be in business for the future. Inflation: value of a dollar over time, pu(cid:396)(cid:272)hase less of . Stable monetary unit assumption: accountant ignore the effects of inflation. Measurement: process of determining the amount at which an item is recognized in financial statement. Price paid for item: not expected price. The accounting equation: assets = liabilities + o(cid:449)ne(cid:396)s" e(cid:395)uit(cid:455) Assets: expect to be beneficial to the company. Liabilities: debt to -> (cid:862)c(cid:396)edito(cid:396)s(cid:863, payable. O(cid:449)ne(cid:396)s" e(cid:395)uit(cid:455) = capital: amount like assets after liabilities is subtracted, net assets, assets lia(cid:271)ilities = o(cid:449)ne(cid:396)s" e(cid:395)uit(cid:455) Pu(cid:396)pose of (cid:271)usiness = in(cid:272)(cid:396)ease o(cid:449)ne(cid:396)s" e(cid:395)uit(cid:455) th(cid:396)ough (cid:396)e(cid:448)enues = amount earned. Owner withdrawals: amounts or resources removed from the business by the owner, o(cid:449)ne(cid:396)"s (cid:449)ithd(cid:396)a(cid:449)als and e(cid:454)penses de(cid:272)(cid:396)ease o(cid:449)ne(cid:396)s" e(cid:395)uit(cid:455)

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Related Questions

Listed below are several terms and phrases associated with basic assumptions, broad accounting principles, and constraints. Pair each item from List A with the item from List B that is most appropriately associated with it.

List A =

1. Expense recognition

2. Periodictiy

3. Historical cost principle

4. Materiality

5. Revenue recognition

6. Going concern assumption

7. Monetary unit assumption

8. Economic entity assumption

9. Full-disclosure principle

List B =

1. A common denominator is the dollar

2. All information that could affect decisions should be reported

3. Concerns the relative size of an item and its effect on decisions

4. Criteria usually satisfied for products at point of sale

5. Record expenses in the preiod the related revenue is recognized

6. The enterprise is separate from its owners and other entities.

7. The entity will continue indefinitely

8. The life of an enterprise can be divided into artificial time periods.

9. Thje original transaction value upon acquistion.

Listed below are several information, characteristics, andaccounting principles and assumptions. Match the term with theappropriate phrase that states its application.
(Points : 30)

Potential Matches:
1 : Application of the same accounting principles as in thepreceding year
2 : Earning process completed and realized or realizable
3 : Notes as part of necessary information to a fairpresentation
4 : Valuing assets at amounts originally paid for them
5 : Yearly financial reports
6 : Stable dollar assumption
7 : Affairs of the business distinguished from those of itsowners
8 : Presentation of error-free information withrepresentational faithfulness
9 : Business enterprise assumed to have a long life
10 : Accruals and deferrals in adjusting and closingprocess
Answer
: Monetary unit assumption
: Revenue recognition principle
: Reliability characteristic
: Periodicity assumption
: Matching principle
: Full disclosure principle
: Economic entity assumption
: Going concern assumption
: Historical cost principle
: Consistency characteristic
Unit 6 GAAP Application-Conceptual Framework of Accounting TheConceptual Framework allows for the systematic adaptation ofaccounting standards to a changing business environment. The FASBuses the conceptual framework to aid in an organized and consistentdevelopment of new accounting standards. The conceptual frameworkoutlines the objectives of financial reporting and the qualities ofgood accounting information, precisely defines commonly used termssuch as asset and revenue, and provides guidance about appropriaterecognition, measurement, and reporting. Understanding theterminology associated with the framework is imperative. Match thenumbered statements below with the lettered terms. An answer(letter) may used more than once, and some terms require more thanone answer (letter). 1. Key ingredients in quality of relevance. 2.Traditional assumptions that influence the FASB's conceptualframework. 3. The idea that information should represent what itpurports to represent. 4. An important constraint relating to costsand benefits. 5. An example of conservatism 6. The availability ofinformation when it is needed. 7. Recording an item in theaccounting records. 8. Determines the threshold for recognition. 9.Implies consensus. 10. Transactions between independent parties. a)Cost-effectiveness b) Representational faithfulness c) Recognitiond) Verifiability e) Time periods f) Unrealized g) Completeness h)Timeliness i) Materiality j) Predictive value k) Economic entity l)Lower-of-cost-or-market rule m) Phrenology n) Arm's-lengthtransactions Now that you have reviewed the terminology, for eachsituation listed below, indicate by letter the appropriatequalitative characteristic(s) or accounting concept(s) applied. Aletter may be used more than once, and more than one characteristicor concept may apply to a particular situation. Explain why youchose your answer.

1. Goodwill is recorded in the accounts only when it arises fromthe purchase of another entity at a price higher than the fairmarket value of the purchased entity's identifiable assets. 2. Landis valued at cost. 3. All payments out of petty cash are debited toMiscellaneous Expense. 4. Plant assets are classified separately asland or buildings, with an accumulated depre-ciation account forbuildings. 5. Periodic payments of $1,500 per month for services ofH. Hay, who is the sole propri-etor of the company, are reported aswithdrawals. 6. Small tools used by a large manufacturing firm are^recorded as expenses when purchased. 7. Investments in equitysecurities are initially recorded at cost. 8. A retail storeestimates inventory rather than taking a complete physical countfor purposes of preparing monthly financial statements. 9. A notedescribing the company's possible liability in a lawsuit isincluded with the financial statements even though no formalliability exists at the balance sheet date. 10. Depreciation onplant assets is consistently computed each year by thestraight-line method. a) Understandability b) Verifiability c)Timeliness d) Representational faithfulness e) Neutrality f)Relevance g) Going concern h) Economic entity i) Historical cost j)Measurability k) Materiality l) Comparability Type your answers ina Word Document, and submit to the Drop Box.