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Description : Electronic Presentations for Chapter 4.
2. Key Points
3. Basic Assumptions
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1. Definition of Financial Accounting
Financial Accounting is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.
Financial Accounting is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.
2. Key Points
- Four basic assumptions of financial accounting.
- The markets in which business entities operate and the valuation bases used on the balance sheet.
- The principle of objectivity and how it determines the dollar values that appear on the financial statements.
- The principles of matching, revenue recognition, and consistency.
- Two exceptions to the principles of financial accounting measurement: materiality and conservatism.
3. Basic Assumptions
- Economic entity
- Fiscal period
- Going concern
- Stable dollar
4. Basic Assumptions
- A company is assumed to be a separate economic entity that can be identified and measured.
- This concept helps determine the scope of financial statements.
- Examples — Disney and ABC, General Electric and NBC.
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