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Chapter 2 Accounting Standards

Chapter 2 Accounting Standards. New words and terms. Accounting practice guideline Accounting theory Accounting principle directive GAAP Generally Accepted Accounting Principles. 2.1 Accounting Assumption. Accounting Entity Assumption Going Concern Assumption

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Chapter 2 Accounting Standards

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  1. Chapter 2Accounting Standards

  2. New words and terms • Accounting practice • guideline • Accounting theory • Accounting principle • directive • GAAP Generally Accepted Accounting Principles

  3. 2.1 Accounting Assumption • Accounting Entity Assumption • Going Concern Assumption • The Stable Monetary Unit Assumption • Accounting Period Assumption

  4. New words and terms • accountability • foreseeable future • supplies • market value • historical cost • reliable • accounting measure • interested party

  5. New words and terms • quantitative data • inflation • add • subtract • measure • eventual liquidation

  6. 2.2 Accounting Basis • Cash-basis • Accrual- basis

  7. 2.2 Accounting Basis

  8. Exercise for 2.2 Accounting Basis In the first year of operations, A co. earned 39,000 in revenues and received 33,000 cash from customers. The company incured expenses of 22,500, but had not paid for 2,250 of them at year-end. In addition, A co. prepaid 3,750 for expense that would be incurred the next year. Calculate the first year’s net income under Cash-basis and Accrual-basis.

  9. New words and terms • Cash receipt • Cash payment • expenses • receivables • payables • depreciation • incure (expense)

  10. New words and terms • journal • earn • revenue recognition concept • on account • prepaid

  11. 2.3 Accounting Principle • The cost principle • The realization principle • The matching principle • The objective principle • The full disclosur principle • The materiablity principle • The consistency principle • Conservatism principle

  12. New words and terms • acquisition cost • actual cost • historical cost • ship goods • render service • realized revenue • reliable data • accurat

  13. New words and terms • outsider----insider • knowledgeable decision= informed decision • significant • consistent • valuation • alternative • overstate

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