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Flash Card Slides

Accounting
Terms, Principles, Conventions,
Assumptions, Constraints and
Internal Control Principles
Accounting Flash Card Slides

Accounting Terms
The increase in assets that
result from the sale of a
Revenues
product or service in the
normal course of business.
The cost of assets Expenses
consumed or services used
in the process of generating
revenues.
Resources owned by a Assets
business.
The debts and obligations of Liabilities
a business. Liabilities
represent the amounts
owed to creditors.
Stockholders’
The stockholders’ claim on
total assets.
equity
Accounting Flash Card Slides

Accounting Principles, Conventions and


Assumptions
An accounting principle that
states that companies should
record assets at the cost
Cost principle
(purchase price).
An assumption that economic
events can be identified with a Economic
particular unit of accountability.
To keep business transaction entity
separate from personal
transactions.
assumption
Accounting principle that dictates
that companies disclose Full disclosure
circumstances and events that
make a difference to financial principle
statements users.
The assumption that the
enterprise will continue in
Going concern
operation for the foreseeable
future.
assumption
An assumption that requires that
only those things that can be Monetary unit
expressed in money are included
in the accounting records. assumption
.
An assumption that the life of a
business can be divided into
artificial time periods and that
Time period
useful reports covering those
periods can be prepared for the
assumption
business.
The principle that companies
Revenue
recognize revenue in the
accounting period in which it is
recognition
earned. principle
The principle that dictates that
companies match efforts
(expenses) with accomplishments
Matching
(revenues). Revenues are match
with expenses in the same fiscal
principle
period.
The approach of choosing an
accounting method, when in
doubt, that will least likely Conservatism
overstate assets and net income.
The constraint of determining
whether an item or event is large
enough to likely influence the Materiality
decision of an investor or creditor.

.
Use of the same accounting
principles and methods from year Consistency
to year within a company.
Ability to compare the accounting
information of different companies Comparability
because they use the same
accounting principles.
The quality of information that
indicates the information makes a Relevance
difference in a decision.
.
The quality of information that
gives assurance that it is free of
Reliability
error and bias.
.
Accounting Flash Card Slides

Internal Control Principles


Only designated personal are Establishment of
authorized to handle cash
receipts (cashiers)
Responsibility
Different individuals receive cash, Segregation of
record cash receipts, and hold the
cash
Duties
Use remittance advice (mail Documentation
receipts), cash register Procedures
tapes, and deposit slips
Physical,
Store cash in safes and bank
vaults; limit access to storage
Mechanical, and
areas; use cash registers other Electronic
Controls
Independent
Supervisors count cash receipts Internal
daily; treasurer compares total
receipts to bank deposits daily
Verification
Bond personnel who handle Other Controls
cash; require employees to
take vacations; deposit all
cash in bank daily