comparability |
Qualitative characteristic being employed when companies in the same industry are using the same accounting principles. |
confirmatory value |
Quality of information that confirms users' earlier expectations. |
consistency |
Imperative for providing comparisons of a company from period to period. |
neutrality |
Ignores the economic consequences of a standard or rule. |
verifiability |
Requires a high degree of consensus among individuals on a given measurement. |
relevance |
Predictive value is an ingredient of this primary quality of information. |
comparability, verifiability, timeliness and understandability |
Four qualitative characteristics that are related to both relevance and faithful representation. |
materiality |
An item is not recorded because its effect on income would not change a decision. |
faithful representation |
Neutrality is an ingredient of this primary quality of accounting information. |
relevance and faithful representation |
Two primary qualities that make accounting information useful for decision-making purposes. |
timeliness |
Issuance of interim reports is an example of what enhancing quality? |
gains and losses |
Arises from peripheral or incidental transactions. |
liabilities |
Obligation to transfer resources arising from a past transaction. |
investment by owners and comprehensive income |
Increases ownership interest. |
distribution to owners |
Declares and pays cash dividends to owners. |
comprehensive income |
Increases in net assets in a period from nonowner sources. |
assets |
Items characterized by service potential or future economic benefit. |
comprehensive income |
Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners. |
revenues & expenses |
Arises from income statement activities that constitute the entity's ongoing major or central operations. |
equity |
Residual interest in the assets of the enterprise after deducting its liabilities. |
revenues |
Increases assets during a period through sale of product. |
distribution to owners |
Decreases assets during the period by purchasing the company's own stock. |
comprehensive income |
Includes all changes in equity during the period, except those resulting from investments by owners and distributions to owners. |
expense recognition principle |
Allocates expenses to revenues in the proper period |
historical cost principle |
Indicates that fair value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle.) |
full disclosure principle |
Ensures that all relevant financial information is reported. |
going concern principle |
Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle.) |
economic entity assumption |
Indicates that personal and business record keeping should be separately maintained. |
periodicity assumption |
Separates financial information into time periods for reporting purposes. |
industry practices |
Permits the use of fair value valuation in certain industries. (Do not use fair value principle.) |
monetary unit assumption |
Assumes that the dollar is the "measuring stick" used to report on financial performance. |
monetary unit assumption |
Under current GAAP, inflation is ignored in accounting due to the |
economic entity assumption |
Parent-subsidiary financials are an example of the ___________ assumption |