click below
click below
Normal Size Small Size show me how
Terms
Term | Definition |
---|---|
Accrual Principle | Revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged. |
Conservatism Principle | When choosing between solutions, the one that is least likely to overstate assets and income should be selected. |
Consistency Principle | Once an accounting method is adopted, it should be used consistently across reporting periods unless a change is warranted and disclosed. |
Cost Principle | Assets should be recorded at their historical cost, meaning the price paid to acquire them. |
Going Concern Principle | Assumes that a business will continue to operate indefinitely unless there is evidence to the contrary. |
Economic Entity Principle | The financial activities of a business must be kept separate from those of its owners or other businesses. |
Full Disclosure Principle | Financial statements should disclose all relevant information that could affect the understanding of a reader. |
Matching Principle | Expenses should be recorded in the same period as the revenues they help to generate. |
Materiality Principle | Financial reporting should focus on information that is significant enough to influence the decisions of users. |
Reliability Principle | Financial information should be accurate and verifiable, ensuring users can rely on it for decision-making. |
Time Period Principle | Businesses should report financial results over specific periods, such as quarterly or annually, to provide timely information. |
Revenue Recognition Principle | Revenue is recognized when it is earned and realizable, not necessarily when cash is received. |
GAAP | (Generally Accepted Accounting Principles): A collection of commonly followed accounting rules and standards for financial reporting in the U.S., designed to ensure consistency and transparency in financial statements. |