An accounting change refers to the modification in accounting principles, estimates, or the reporting entity. Proper disclosure is required to justify and clarify the financial impact of these changes.
An overview of basic theoretical ideas devised to support the activity of accounting. These concepts form the fundamental principles needed for producing comparable, relevant, reliable, and understandable financial information.
Accounting principles are the fundamental rules, concepts, and guidelines governing currently accepted accounting practices and procedures. They form the foundation upon which financial transactions are recorded and reported, ensuring consistency, reliability, and comparability of financial statements.
Accounting principles are the foundation rules and guidelines that companies must follow when reporting financial data, ensuring consistency, transparency, and comparability of financial statements.
A system of accounting in which revenue is recognized when it is earned and expenses are recognized as they are incurred, providing a more accurate picture of a company's financial status across different periods.
The accruals concept is a fundamental accounting principle that requires revenue and costs to be recognized as they are earned or incurred, rather than when money is received or paid. This concept ensures that income and expenses are matched with one another in the correct accounting period.
Accrued liabilities are expenses that a company has recognized in the books before it has paid them. This concept is integral to the accrual method of accounting which emphasizes recognizing economic events regardless of cash transactions.
Accrued revenue refers to revenue that has been earned by a company but has not yet been recorded in the accounts because the corresponding invoice has not been sent or payment has not been received. It is considered an asset on the balance sheet.
The All-Inclusive Income Concept is a principle used in accounting to include all items of profit and loss in a statement to arrive at a figure of earnings. It is commonly used in the UK and the USA for a comprehensive view of an enterprise's financial performance.
The allowance for bad debts is an estimate of the accounts receivable that a company does not expect to collect. This estimation is used to anticipate potential losses and adhere to the accounting principle of conservatism.
Allowance for depreciation refers to the reduction in the book value of a fixed asset due to wear and tear, age, or obsolescence. It is an accounting term that allows businesses to allocate the cost of an asset over its useful life.
A Certified Financial Statement is a set of financial documents including the balance sheet, income statement, and possibly other related financial reports, that a Certified Public Accountant (CPA) has audited and attested to. These statements confirm that the financial records present fairly, in all material respects, the financial position and performance of a company in accordance with applicable accounting principles.
The accounting principle that financial information for a company should be comparable with financial information for other similar companies, ensuring that stakeholders can make well-informed decisions.
Conservatism in accounting focuses on understating assets and revenues and overstating liabilities and expenses to provide a prudent and less risky portrayal of a company's financial position. In business, it refers to a cautious and careful attitude, typically avoiding excessive risk. In politics, conservatism promotes limited government spending and lower taxes.
Consignment Stock refers to products owned by one party but held and managed by another party with the right to sell or return the goods. This ownership arrangement requires careful accounting practices to reflect commercial realities accurately in financial statements.
A contra account is an account used in a general ledger to reduce the value of a related account. These entries are used to adhere to accounting principles such as matching and conservatism.
In accounting, a convention refers to a general agreement, customary practice, or accepted norm that is followed by accountants in the preparation and presentation of financial statements. Accounting conventions aim to provide consistency and comparability across financial statements.
Cost apportionment, a vital concept in accounting, involves the distribution of costs across various departments, products, or periods based on specific criteria. This ensures that expenses are accurately allocated, enabling precise financial tracking and reporting.
Double-entry cost accounting involves maintaining cost accounting records using the principles of double-entry bookkeeping, which ensures that every financial transaction is recorded in at least two accounts, balancing debits and credits.
Equity accounting refers to a method of accounting whereby a company reports a proportionate share of the undistributed profits and net assets of another company in which it holds a share of the equity.
Faithful representation means that financial information accurately reflects the real-world economic events or conditions it represents. This concept is central to the credibility of financial reports and ensures that information is complete, free from bias, and free from error.
The Financial Accounting Foundation (FAF) in the USA oversees and provides funding for the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). It appoints members and supervises the standard-setting process to ensure the integrity and reliability of accounting principles.
The Financial Accounting Standards Board (FASB) is an independent board responsible for establishing and interpreting Generally Accepted Accounting Principles (GAAP).
A forensic accountant is a professional who applies accounting principles, theories, and discipline to uncover facts and hypotheses relevant to legal disputes. They integrate investigative and accounting skills to analyze financial statements and numbers.
FRS 102 sets the standard for accounting principles and practices for small to medium-sized enterprises in the UK and Republic of Ireland, aiming to simplify reporting requirements and enhance financial transparency.
Fundamental accounting concepts are the core principles that underpin the practice of accountancy, shaping the integrity, consistency, and efficiency of financial reporting.
Conventions, rules, and procedures that define accepted accounting practice, including broad guidelines as well as detailed procedures, ensuring consistency and transparency in financial reporting.
An overview of the Generally Accepted Auditing Standards (GAAS) set by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA), detailing the three General Standards, three Field Work Standards, and four Standards of Reporting.
A method of valuing units of stock or other assets based on the original cost incurred by the organization, charging the original cost against profits through various means such as FIFO or average cost, and reporting depreciation based on the original cost.
Impairment is an accounting principle that outlines the process of reducing the book value of an asset when its fair market value drops below the asset's carrying amount on the balance sheet. It is a critical concept in financial reporting that ensures that the value of assets is not overstated in an organization's balance sheet.
The matching principle is a fundamental accounting concept that dictates pairing revenues with the costs that were incurred to generate those revenues. This ensures that a company's financial statements reflect a more accurate picture of its financial performance.
The monetary measurement convention in accounting demands that transactions be recognized in financial statements only if they can be measured in monetary terms. This convention assumes money as a stable unit of measurement and discourages the inclusion of non-monetary assets.
Objectivity in accounting aims to minimize subjective actions by preparers of accounts to ensure comparisons of financial statements across different companies are based on consistent principles.
Paid-In Capital Surplus represents capital received from investors in exchange for stock. It is distinguished from capital generated from earnings or donations and includes capital stock and contributions from stockholders that are credited to accounts other than capital stock, such as an excess over par value.
The accounting concept that ensures the financial statements of a company are produced at regular intervals, providing consistency, comparability, and regular communication to stakeholders.
Physical capital maintenance is an accounting concept that focuses on preparing financial statements to ensure an enterprise's capacity to operate at its physical capital level is maintained over time.
The prudence concept is an accounting principle that mandates a realistic view of business activity, emphasizing the inclusion of anticipated revenues and profits in the profit and loss account only upon realization.
The accounting principle that ensures financial information provided by a company is accurate, neutral, and free from material error, making it a faithful representation of the company's financial status.
Retroactive adjustment refers to the process of restating prior years' financial statements to present financial data on a comparable basis as necessitated by accounting error corrections, changes in accounting principles, or other significant financial recalibrations.
Revaluation of Fixed Assets refers to the process of re-assessing the value of a company's capital assets, either because they have increased in value or due to inflation rendering balance-sheet values unrealistic. This accounting practice is crucial for presenting accurate financial statements.
The process of recording revenue in the accounts of an organization in the appropriate accounting period is known as revenue recognition. This principle determines the specific conditions under which income becomes realized as revenue.
The Separate-Entity Concept is a fundamental principle in accounting that treats a business as distinct and separate from its owners and other entities, ensuring clear financial accountability and reporting.
Statements of Standard Accounting Practice (SSAPs) are formal standards for financial reporting and accounting, issued by recognized authorities to ensure consistency, transparency, and adherence to best practices across organizations.
The principle that a company should provide financial information to its users without undue delay, ensuring the data arrives in time to influence economic decisions. Timeliness is critical in maintaining the information's relevance and impact.
UK GAAP, or Generally Accepted Accounting Practice, refers to the framework of accounting standards and principles that accountants in the United Kingdom must follow to ensure financial statements are consistent and comparable.
Understandability is a core principle in financial reporting which ensures that financial information provided by a company can be comprehended by individuals with a reasonable knowledge of business and accounting.
