Revenue Recognition Principle
Revenue should be recognized when it is earned, which is usually at the point of sale.
Full Disclosure Principle
All information necessary to ensure that the financial statments are NOT misleading should be reported.
Going Concern Assumption
This concept eliminates the "liquidation concept" in viewing business affairs.
Periodicity Assumption
Measurement of the standing and progress of entities should be made at regular intervals rather than at the end of the business's life.
Materiality Constraint
Although an item such as a wastebasket may be of service for eight years, the total cost of the item may be expensed when it is purchased, because the amount is too insignificant to warrant the strict treatment of depreciation over the eight years.
Conservatism Constraint
The lower-of-cost-or-market rule for inventories is an application of this concept.
Historical Cost Principle
The recorded amount of an acquired item should be the fmv of what was given or the fmv of what was received in the exchange whichever can be more objectively determined.
Full Disclosure Principle
There must be complete and understandable reporting on financial statements.
Economic Entity Assumption
The president of a business should NOT loan his spouse the company's credit card for personal gasoline purchases.
Conservatism
In matters of doubt or uncertainty, select the accounting treatment that will result in the lowest figure for net income, assets, and owners' equity.
Expense Recognition (Matching) Principle
Expenses should be recognized in the same period that the related revenues are recognized.
Full Disclosure Principle
This concept is often exemplified by numerous notes to the financial statements.
Expense Recognition (Matching) Principle
If revenue is deferred to a future period, the related costs of generating that income should be deferred to the same future period.
Revenue Recognition Principle
This concept includes a set of rules concerning when to recognize revenue and how to measure its amount.
Monetary Unit Assumption
All transactions and events are expressed in terms of a common denominator.
Conservatism
Avoid overstatement of net income, assets, and owners' equity, but do not intentionally understate them.
Going Concern Principle
it is assumed that an organization will remain in business long enough to recovery its cost of its assets.
Monetary Unit Assumption
Changes in the purchasing power of the dollar are so small from one period to the next that they are ignored in preparing the basic financial statements.
Materiality Constraint
Items whose amounts are very small relative to other amounts on the financial statements may be accounting for in the most expedient manner, rather than requiring strict accounting treatment under GAAP.
Historical Cost Principle
The cost of an item should be measured by the amount of the resources expended to acquire it.
Expense Recognition (Matching) Principle
Accruals and deferrals are often necessary in order to report expenses in the proper time periods.
Economic Entity Assumption
Each accounting unit is considered separate and distinct from all other accounting units.
Going Concern Principle
An accountant assumes that a business will continue indefinitely.
Historical Cost Principle
Assets which have appreciated in value are NOT reported at their current worth subsequent to acquisition because of this principle.
Historical Cost Principle
Depreciation of a long-term tangible asset is based on the asset's original acquisition cost rather than the asset's current market value.
Materiality Constraint
If an item will not affect any business decisions, it need NOT be separately reported in the financial statements.
Cost- Benefit Relationship
In order to justify requiring a particular measurement or disclosure, the benefits perceived to be derived from it must exceed costs expected to be association with it.
Expense Recognition (Matching) Principle
Externally acquired intangible assets are capitalized and amortized over the periods benefited.
Materiality Constraint
Repair tools are expensed when purchased even though they may be of use for more than one period.
Industry Practices Constraint
Brokerage firms use market value for purposes of valuation of all marketable securities. Changes in those market values are recognized in the income statement in the periods the changes occur.
Full Disclosure Principle
All significant postbalance sheet events are reported in the notes of the financial statements.
Revenue Recognition Principle
Revenue for a retail establishment is recorded at the point of sale.
Full Disclosure Principle
All important aspects of bond indentures (contracts) are presented in the financial statements.
Periodicity Assumption
Reporting must be done at defined time intervals. The time intervals are of equal length.
Expense Recognition (Matching) Principle
An allowance for doubtful (uncollectible) accounts is established.
Materiality Constraint
All payments out of petty cash are charged to Miscellaneous Expense, even though some expenditures will benefit the following period. (Do not use conservatism).
Conservatism Constraint
No profits are anticipated but all possible losses are recognized.
Expense Recognition (Matching) Principle
A company charges its sales commission costs to expense in the same period that the sale is made.
Going Concern Assumption
When the liquidation of an enterprise looks imminent, this assumption is inapplicable and thus, the historical cost principle does not apply. Rather, assets are reported at their net realizable value.
Full Disclosure Principle
The initial note to financial statements is usually a summary of significant accounting policies.