Intermediate Accounting I
HW 10%
MT 45%
Final 45%
HW is submitted electronically on the following Tuesday
Financial accounting:
(1) Investor—outside the company
(2) Creditor—outside the company
(3) Management—inside the company
Different points of view
(1)-–whether the investment is worthwhile
(2)—whether they can get the money back
(3)—prepare the financial statement and would not want to share every information with investors/creditors; but investors and creditors want to know the truth—accurate financial data
Management hire auditors. Auditors should remain independent and work in the interest of investors and creditors (provide assurance of accuracy)
Fundamental rule of accounting---accuracy
Internal auditors—make sure things work smoothly in the company.
5-year-rule—partners and clients
GAAP—rule-based-particular provision
IFRS—principle-based, here is the general outcome we expect, use your best judgment
Materiality--The materiality principle states that you are allowed to ignore an accounting standard if the net impact of doing so has such a small impact on the financial statements that a reader of the financial statements would not be misled.
Historical cost--A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. The historical-cost method is used for assets in the U.S. under generally accepted accounting principals (GAAP).
investopedia explains 'Historical Cost'
Based on the historical-cost principle, under U.S. GAAP, most assets held on the balance sheet are to be recorded at the historical cost even if they have significantly changed in value over time.
For example, say the main headquarters of a company, which includes the land and building, was bought for $100,000 in 1925, and its expectedmarket value today is $20 million. The asset is still recorded on the balance sheet at $100,000.
Not all assets are held at historical cost. For
MT 45%
Final 45%
HW is submitted electronically on the following Tuesday
Financial accounting:
(1) Investor—outside the company
(2) Creditor—outside the company
(3) Management—inside the company
Different points of view
(1)-–whether the investment is worthwhile
(2)—whether they can get the money back
(3)—prepare the financial statement and would not want to share every information with investors/creditors; but investors and creditors want to know the truth—accurate financial data
Management hire auditors. Auditors should remain independent and work in the interest of investors and creditors (provide assurance of accuracy)
Fundamental rule of accounting---accuracy
Internal auditors—make sure things work smoothly in the company.
5-year-rule—partners and clients
GAAP—rule-based-particular provision
IFRS—principle-based, here is the general outcome we expect, use your best judgment
Materiality--The materiality principle states that you are allowed to ignore an accounting standard if the net impact of doing so has such a small impact on the financial statements that a reader of the financial statements would not be misled.
Historical cost--A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. The historical-cost method is used for assets in the U.S. under generally accepted accounting principals (GAAP).
investopedia explains 'Historical Cost'
Based on the historical-cost principle, under U.S. GAAP, most assets held on the balance sheet are to be recorded at the historical cost even if they have significantly changed in value over time.
For example, say the main headquarters of a company, which includes the land and building, was bought for $100,000 in 1925, and its expectedmarket value today is $20 million. The asset is still recorded on the balance sheet at $100,000.
Not all assets are held at historical cost. For