Week 2 Flashcards
Financial Statements II (20 cards)
What does GAAP stand for
Generally Accepted Accounting Principles
What is the definition of GAAP
A set of Concepts and Rules with a goal of relevance and faithful representation in accounting
Who is responsible for setting Australian GAAP
AASB (Australian Accounting Standard Board)
What does AASB stand for
Australian Accounting Standard Board
What is the Measurement Principle
States that Accounting Information is based on actual cost which is Objective
What is the Revenue Recognition Principle
???
What is the Expense Recognition Principle
???
What is the Full Disclosure Principle
States that a Company does not hide any financials (trusting what companies say is up to you)
Can you provide non GAAP numbers
Yes, but you need to explain how you came up with them
What is the Going-Concern Assumption
The Business is presumed to continue operating instead of being closed or sold
What is the Monetary Unit Assumption
Transactions and events are expressed in monetary, or money units
What is the Time Period Assumption
The life of a company can be divided into time periods, such as months and years
What is the Business Entity Assumption
A business is it’s own Entity and is accounted for separately from other business entities, including its owner
What is the Cost-Benefit Constraint
The cost of providing financial information should not exceed the benefits gained from using that information
What is the Materiality Constraint
Small or Insignificant items do not need to be reported in detail if they wouldn’t influence the decision-making of users
What is Conservatism
Recording Expenses and Liabilities as soon as possible, but recognizing revenues only when they are certain. This helps prevent overstatement of financial health.
What is Industry Practice
A guide for how companies in that industry report financial information
What is the Accounting Equation
Assets = Liabilities + Equity
What is ‘Assets = Liabilities + Equity’ Called
Accounting Equation
What is Equity broken up into in the Accounting Equation
Capital - Dividends + Revenues - Expenses
