GAAP Flashcards

Personal and business separated

1.) Business Entity Concept - When you keep personal assets separate from business assets.

Car worth 30k in 2000 and worth 50k in 2020.

What’s the actual price you bought it for?

2) Cost Principle - The initial cost of the items when you buy them.

Person A questioning person B about finances/risk

3) Going Concern Principle - Assumption made by the creditor to determine whether the debtor will repay money in the agreed timeline

List of different currencies

4) Monetary Unit Principle - The currency is the same as the location you are serving.

Work——> earn money——> money is recorded/goes to bank account

5) Revenue Recognition Principle - Revenue is recorded when it is earned

5th of every month is circled - (statement released/bill due)

6) Time Period Principle - Express data in the same time frame/time period consistently. (Yearly, monthly, bimonthly weekly etc)

Money moving from company to people ( employers —→ salary)

7) Matching Principle - The paper trail of money (where its been and where it goes)

Bank statement with small amounts missing from it.

8) Materiality Principle - Small amounts of untraceable loss can be ignored or forgiven on a financial statement

Page with 100% factual information that has been verified(honesty) .

9) Full Disclosure Principle - All important information to financial decision must be honest/transparent and be disclosed

Step A, Step B, Step C all followed in the same order every 3 months, yielding at least 15k

10) Consistency Principle - Protocol management should be kept the same(consistent). How well you manage system.

Man overestimating losses/liabilities——> lower income.

But gross income is higher than estimate

11) Conservatism - Assumption that assets will stop working sooner, taking safer routes in risk management. (estimating lower/planning for the worst)

Original page with factual information that has been verified/approved.

12) Objectivity - bias free + verifiable information with proper documentation. (original bills/receipts/ paperwork.