Definitions of important words in accounting units 3 and 4 PDF

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This is a bookmark with important words you HAVE to know in accounting....

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ACCOUNTING ASSUMPTIONS: ACCOUNTING ENTITYThe accounting entity assumption states that from an Accounting perspective, the business is separate from the owner and the other entities, and its records should be kept on this basis. GOING CONCERN ASSUMPTIONThe Going concern assumption assumes that the business will continue to operate in the future, and its records are kept on that basis. The life of the business is assumed to be continuous. PERIOD ASSUMPTION-

business and economic undertakings. To ensure it is understood it needs to be presented clearly and concisely.

ACCOUNTING ELEMENTS CURRENT ASSETSCurrent assets are a present economic resource controlled by the entity (and a result of a pat event) that is expected to be sold, consumed or converted into ash within 12 months after the end of the reporting period. NON-CURRENT ASSETS-

The Period assumption states that the reports are prepared for a particular period of time, such as a month or year, in order to obtain comparability of results.

Non-current assets are a present economic resource controlled by the entity (as a result of a past event) that is expected to be used by the business for a number of years and is not held for the purpose of resale.

ACCRUAL BASIS ASSUMPTION-

CURRENT LIABILITY-

Because it recognizes elements of the reports when they meet their respective definitions, The Accrual basis assumption will calculate profit by subtracting expenses incurred from the revenue earned in a particular reporting period.

Current liability is an obligation of the entity (arising from the oat events) that are reasonably expected to be settled in the next 12 months after the end of the reporting period.

QUALITATIVE CHARACTERISTICS

Non-current liability is an obligation of the entity (arising from past events) that are not expected to be settled in the next 212 months after the end of the reporting period.

RELEVANCERelevance states that financial information must be capable of making a difference in the decisions made by users of the report. This information needs to be related to an economic decision at hand. Relevant information either helps users to form predictions about the outcomes of events or confirm (or change) their previous evaluations or both. FAITHFUL REPRESENTATIONFaithful representation stated that the financial information reported is a faithful representation of the real-world economic event it claims to represent. It therefore can be depended on as the financial information presented will be complete, free from material error and neutral (without bias). COMPARABILTIYComparability states that useful information is provided when the financial reports of a business can be compared over time and compared with similar information of other businesses. VERIFIABILITYVerifiability helps assure users that the information presented faithfully represents what it claims to exemplify. It ensures that different, knowledge and independent observers can reach the same conclusion that a particular representation of an event is faithfully represented. TIMELINESSTimeliness states that the stakeholders must have financial information available in time that is able to impact their decision-making. Generally, the older the information the less useful it is regarding decision-making. Therefore, to make the most informed decision the stakeholder requires the most current financial information. UNDERSTANDABILITYUnderstandability states that financial information should be comprehended by users that have a reasonable understanding of

NON-CURRENT LIABILITY-

OWNER’S EQUITYOwner’s equity is the residual interest in the assets of the entity after the liabilities are deducted. REVENUERevenue is an increase in an asset or reduction in liabilities that leads to an increase in owner's equity (except for a Capital contribution) EXPENSES Expenses is a decrease in assets (or increase in liabilities) that reduce owner’s equity (except for Drawings)...