ACC1002 notes
Fundamental Qualitative Characteristics
Relevance: Gives numbers that users need for decisions
Faithful Representation: Provides a true and fair view
Enhancing Qualitative Characteristics
Comparability: enables users to identify and understand similarities in, and differences among, items.
Verifiability: Can check if the numbers are correct
Timeliness: The information is not stale or out of date
Understandability: Users can understand the information
Accounting principles The cost (measurement / historical cost) principle is the general concept that you should initially record an asset, liability, or equity investment at its original acquisition cost.
The full disclosure principle（充分揭示原则） states that you should include in an entity's financial statements all information that would affect a reader's understanding of those statements.
The revenue recognition principle states that, under the accrual basis of accounting, you should only record revenue when an entity has substantially completed a revenue generation process; thus, you record revenue when it has been earned.
The matching (expense recognition) principle is one of the cornerstones of the accrual basis of accounting. Under this principle, when you record revenue, also record at the same time any expenses directly related to the revenue. Thus, if there is a cause-and-effect relationship between revenue and the expenses, record them in the same accounting period.
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.
Accounting assumptions
The going concern principle is the assumption that an entity will remain in business for the foreseeable future.
The monetary unit principle states that you only record business transactions that can be expressed in terms of a currency.
The time period principle is the concept
Relevance: Gives numbers that users need for decisions
Faithful Representation: Provides a true and fair view
Enhancing Qualitative Characteristics
Comparability: enables users to identify and understand similarities in, and differences among, items.
Verifiability: Can check if the numbers are correct
Timeliness: The information is not stale or out of date
Understandability: Users can understand the information
Accounting principles The cost (measurement / historical cost) principle is the general concept that you should initially record an asset, liability, or equity investment at its original acquisition cost.
The full disclosure principle（充分揭示原则） states that you should include in an entity's financial statements all information that would affect a reader's understanding of those statements.
The revenue recognition principle states that, under the accrual basis of accounting, you should only record revenue when an entity has substantially completed a revenue generation process; thus, you record revenue when it has been earned.
The matching (expense recognition) principle is one of the cornerstones of the accrual basis of accounting. Under this principle, when you record revenue, also record at the same time any expenses directly related to the revenue. Thus, if there is a cause-and-effect relationship between revenue and the expenses, record them in the same accounting period.
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.
Accounting assumptions
The going concern principle is the assumption that an entity will remain in business for the foreseeable future.
The monetary unit principle states that you only record business transactions that can be expressed in terms of a currency.
The time period principle is the concept