《Financial Accounting 2th财务会计 rick Antle》ch02.pptVIP

Chapter 2 Balance Sheet Concepts: Assets, Liabilities, and Stockholders’Equities Mark Higgins Basic Terms Relevance - information makes a difference in decisions. Reliability - information must be free of error and bias. Basic Terms Comparability - ability to compare information of different companies. Consistency - companies must use the same accounting principles and methods from year to year. Concepts in Accounting Monetary Unit – Money (US $) is the unit used to measure economic activity. Economic Entity – This concept provides a context or “point of view” for the economic events (i.e., transactions) captured by the financial statements. In short, it answers the questions, “Whose asset is it?”; “Whose liability is it?” Concepts in Accounting Time Period – A business can be divided into artificial time periods. The most commonly used time periods for public corporations is quarterly and annually. Going Concern - A company is expected to carry out its operations into the foreseeable future. Concepts in Accounting Cost Principle – Assets acquired are recorded at cost. Full Disclosure Principle – Information that would effect an investor or creditors view of the company should be disclosed. Constraints in Accounting Permits companies to modify GAAP without hurting the usefulness of information Materiality - if item doesn’t make a difference, GAAP doesn’t have to be followed Conservatism - in “gray” areas choose guide which does not overstate assets or income A Classified Balance Sheet... Generally contains the following standard classifications: Current Assets Long-Term Investments Property, Plant, and Equipment Other Assets Current Liabilities Long-Term Liabilities Stockholders Equity Assets The probable future economic benefit an entity obtains by entering into a transaction Current Assets Assets that are expected to be converted to cash or used in the business within a short period of time, usually one year. Curre