BU127 Chapter Notes - Chapter 2: Faithful Representation, Retained Earnings, Historical Cost
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BU127 Full Course Notes
Verified Note
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Document Summary
Chapter 2 textbook: investing and financing decisions and the statement of financial position. Primary objective of external financial reporting is to provide financial information about a business to help external parties make sound financial decisions. To provide useful economic information to external users for decision makers. Relevant information can influence a decision with predictive value. Material amounts are amount that are large enough to influence a user"s decision. Suggests that information provided in financial statement must reflect the substance of the underlying transactions which may differ from their legal form. Comparability of accounting information across businesses is enhanced when similar accounting methods have been applied. Information is verifiable if independent accountants can agree on the nature and amount of a transaction. Timely information enhances the information"s ability to predict future values and to confirm past values. Understandability is the quality of information that enables users to comprehend its meaning.
