ACCT201 Module 2 Vocab

The Securities and Exchange Commission (SEC)

oversees the financial reporting of US publicly traded corporations and requires these companies to provide financial statements to the public

Generally Accepted Accounting Principles (GAAP)

provide detailed guidance for companies to follow in preparing
financial statements

Financial Accounting Standards Board (FASB)

set the Generally Accepted Accounting Principles (GAAP)

International Financial Reporting Standards (IFRS)

Like the GAAP but considered concept-based principles and used worldwide.

International Accounting Standards Board (IASB)

sets the International Financial Reporting Standards (IFRS)

Relevancy

All material information should be disclosed.

Faithful Representation

Information that is considered reliable, meaning it is complete, free from bias and error.

Comparability

Information from one company should be able to be compared with information from other companies.

Verifiability

Independent accountants or experts should be able to arrive at similar information with the same inputs.

Timeliness

Information should be available to decision makers in a timely fashion so the information can be used to influence decisions.

Understandability

Information should be classified, characterized, and presented clearly and concisely so users with a reasonable knowledgeable of business, economics, and accounting can understand it.

Cost-Benefit Constraint

accountants should select the accounting treatment that
will be least likely to overstate income and assets or understate liabilities and expenses.

Economic Entity Assumption

A company reports all its assets, liabilities, equity, and results of operations and only those pertaining to the company. Owners are not allowed to use company resources for their own personal affairs. In turn, the owners’ personal resources must be kept separate from the company.

Monetary Unit Assumption

Financial information is presented in the home currency of the reporting company.

Periodic Reporting Assumption

To provide a basis for measurement, a company must establish an accounting period for which to report the results of its operations (i.e., fiscal year, quarters, or months). The SEC allows companies to select any point in the fiscal year to be its year end.

Going Concern Assumption

Financial information is presented in the home currency of the reporting company.

Full Disclosure Principle

Companies must disclose any circumstances and events that would be important for financial statement users to better understand the information in the financial statements (i.e., material information). The notes to the financial statements provide greater disclosure about the company and the amounts found within the financial statements.

Historical Cost Principle

Assets are recorded and reported at the cost paid to acquire them.