ACTBAS1 Notes
Financial Statements convey the following information to different parties:
1. Financial Condition / Position (status of assets, liabilities and owner’s equities)
2. Financial Performance / Results of Operations (net income or net loss)
3. Financing and Investing Activities
International Accounting Standards (IAS)
- The accounting setting body that makes the Generally Accepted Accounting Principles (GAAP).
1. Going Concern Concept
- Business is to continue its operations indefinitely.
2. Entity Concept
- Business transactions are separate from its owners.
^ An exchange that follows “value received” and “value parted with” idea.
3. Monetary Concept
- Money is used as the unit of measure in preparing various financial reports.
4. Time Period / Periodicity Concept
- Business is divided into regular intervals - calendar year or fiscal year.
5. Accrual Basis Concept
- Income is recorded when earned, whether or not cash is received.
- Expense is recognized when incurred, whether or not payment is made.
6. Revenue Realization Concept
- Income is considered when services are fully rendered.
- Income is considered when the goods / merchandise are fully delivered.
7. Matching Concept
- Expenses incurred to generate revenues must be recorded in the same period that the income is recorded to properly determine net income or net loss of the period.
8. Materiality Concept
- Relative importance of items/events; having influence on users of financial statements.
9. Objectivity / Reliability Concept
- Business transactions are evidenced my business documents free from bias.
- Independent experts can verify such reports (official receipts, invoices, vouchers etc.).
10. Cost Concept
- Assets (resources acquired by the business) are recorded at acquisition price.
11. Conservatism Concept
- Businesses are given the less favorable financial condition or lower net income when faced with uncertainties.
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12. Consistency Concept
- Reported information follows unchanged procedures from
1. Financial Condition / Position (status of assets, liabilities and owner’s equities)
2. Financial Performance / Results of Operations (net income or net loss)
3. Financing and Investing Activities
International Accounting Standards (IAS)
- The accounting setting body that makes the Generally Accepted Accounting Principles (GAAP).
1. Going Concern Concept
- Business is to continue its operations indefinitely.
2. Entity Concept
- Business transactions are separate from its owners.
^ An exchange that follows “value received” and “value parted with” idea.
3. Monetary Concept
- Money is used as the unit of measure in preparing various financial reports.
4. Time Period / Periodicity Concept
- Business is divided into regular intervals - calendar year or fiscal year.
5. Accrual Basis Concept
- Income is recorded when earned, whether or not cash is received.
- Expense is recognized when incurred, whether or not payment is made.
6. Revenue Realization Concept
- Income is considered when services are fully rendered.
- Income is considered when the goods / merchandise are fully delivered.
7. Matching Concept
- Expenses incurred to generate revenues must be recorded in the same period that the income is recorded to properly determine net income or net loss of the period.
8. Materiality Concept
- Relative importance of items/events; having influence on users of financial statements.
9. Objectivity / Reliability Concept
- Business transactions are evidenced my business documents free from bias.
- Independent experts can verify such reports (official receipts, invoices, vouchers etc.).
10. Cost Concept
- Assets (resources acquired by the business) are recorded at acquisition price.
11. Conservatism Concept
- Businesses are given the less favorable financial condition or lower net income when faced with uncertainties.
`
12. Consistency Concept
- Reported information follows unchanged procedures from