Accounting Concepts - Thomas Sanders

Accounting Period Cycle - Chapter 6 ● Changes in financial info are reported for a specific period of time in the form of financial statements. ● Used for information in work sheets. ● Goes on during accounting period, it is the time period financial statements are prepared. ● One part of the cycle is when businesses prepare taxes at the end of the year.

Adequate Disclosure - Chapter 7 ● Financial statements contain all info necessary to understand a business' financial condition. ● Used to make informed decisions on financial statements. ● When the balance sheet does not adequately disclose the liabilities, information still needs to be disclosed.

Business Entity - Chapter 1 ● Financial info is recorded and reported separately from the owner's personal financial information. ● Business info is separate from owner's info. ● Insurance purchased for the owner's personal home is not recorded in the business' financial records.

Consistent Reporting - Chapter 6 ● The same accounting procedures must be followed in the same way in each accounting period. ● Record info from one financial statement to another the same way so it can be compared. ● If one account is used to keep track of expenses, use the same account the next period.

Going Concern - Chapter 7 ● Financial statements are prepared with the expectation that a business will remain in operation indefinitely ● Maintain all business accounts as if the business will continue all operations indefinitely; if equipment is sold the amount of cash increases but equipment would only be sold if the business stops operations.

Historical Cost - Chapter 9 ● The actual amount paid for merchandise or other items bought is recorded ● If something is valued at $5,000 but sold at $4,500, the amount sold for is the price recorded. ● Historical cost is the amount an item is actually paid or sold for.

Matching Expenses with Revenue - Chapter 6 ● The revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period. ● Matching expenses with revenue results in an accurate net income or loss ● If sales are $100,000 and expenses are $85,000, the net income is $15,000.

Objective Evidence - Chapter 3 ● A source document is prepared for each transaction. ● Use an original source for an accurate form of proof for a transaction. ● A check is the original business paper for a cash payment.

Realization of Revenue - Chapter 1 ● Revenue is recorded at the time goods or services are sold. ● Cash is received at one time in the sell so if a car is $15,000 but has a down payment of $500 and the rest will be paid later, the entire $15,000 is first recorded.

Unit of Measurement - Chapter 1 ● Business transactions are reported in numbers that have common values, that is, using a common unit of measurement. ● All values in a business need to be alike so transactions and accounts can be viewed and compared.