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The Cost Principle
Assets and services acquired should be recorded at their
actual (historical) cost.
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Learn accounting concepts
and principles.
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Conceptual Framework
Information must be useful for decision makers
Can influence a decision
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1-9
Ethics in Accounting
Integrity is built in financial accounting as follows: Generally accepted accounting principles (GAAP)
Income Statement
Balance Sheet
Statement of Cash Flow
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1-4
The Flow of Accounting Information
1. People make decisions.
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International Accounting Standards Board (IASB)
IASB is charged with setting International Financial
Reporting Standards (IFRSs)
(1) are verifiable and
(2) can be confirmed by an independent observer.
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Adequate Disclosure
Financial statements should be accompanied by any information necessary for the statements to be interpreted properly.
The Financial Statements Chapter 1
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1-1
Learning Objective 1 Use accounting vocabulary.
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➢ meet GAAP standards for relevance and reliability
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1-7
Management Accounting
Financial and operating data about an organization’s activities, processes, operating units products services and customers
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Ethics in Accounting and Business
Standards of professional conduct for accountants Self-regulating bodies of accountants
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1-3
Accounting Language
Financial Statements:
Financial information about a business entity that is prepared
in a systematic report format that can be used by decision makers to make decisions
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Learning Objective 3
Apply the accounting equation to business
organizations.
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Summarize business transactions of business entity for a specified period
Users ➢ External decision makers
Information must: ➢ Be presented in systematic reports
1-2
Accounting Language
Accounting is an information system that:
•Measures business activities •Process data into reports (financial statements)
•Communicates results to decision makers
The Going-Concern Concept
The entity will continue to operate in the foreseeable future.
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The Objectivity Principle
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The Stable-Monetary-Unit Concept
The dollar’s purchasing power is relatively stable.
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Relevance Comparability
Reliability Understandability
GAAPBiblioteka Copyright © 2010 Pearson Education Canada
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GAAP Requirements for Financial Information
GAAP requires:
CICA
CGAAC
SMAC
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How to Organize a Business
Proprietorships
Partnerships
Corporations
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✓Accounting Standards Board (AcSB) ✓ Public Sector Accounting Standards Board ✓ Emerging Issues Committee (EIC) ✓ International Accounting Standards Board (IASB)
1-8
Ethics in Accounting
Information must be: 1. Relevant
Information has predictive or feedback value
2. Reliable
Information is verifiable
Timely
Information must be objective
business entity concept
objectivity principle
cost principle
adequate disclosure
going concern assumption stable dollar assumption
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2. Business transactions occur.
3. Businesses report their results.
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Users of Financial Statements
Individuals
Canadian GAAP will converge with IFRSs
1st year for reporting under IFRS-based standards will be 2011
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Learning Objective 2
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Corporations
Canadian Business Corporation
Act
Board of Directors