1. Chapter 2 Accounting Standards

2. New words and terms Accounting practice guideline Accounting theory Accounting principle directive GAAP Generally Accepted Accounting Principles

3. 2.1 Accounting Assumption I. Accounting Entity Assumption II. Going Concern Assumption III. The Stable Monetary Unit Assumption IV. Accounting Period Assumption

4. New words and terms accountability foreseeable future supplies market value historical cost reliable accounting measure interested party

5. New words and terms quantitative data inflation add subtract measure eventual liquidation

6. 2.2 Accounting Basis I. Cash-basis II. Accrual- basis

7. 2.2 Accounting Basis Cash- basisAccrual- basis Cash receipt Cash payment Revenue earned Expenses incured

8. Exercise for 2.2 Accounting Basis In the first year of operations, A co. earned 39,000 in revenues and received 33,000 cash from customers. The company incured expenses of 22,500, but had not paid for 2,250 of them at year-end. In addition, A co. prepaid 3,750 for expense that would be incurred the next year. Calculate the first year’s net income under Cash-basis and Accrual-basis.

9. New words and terms Cash receipt Cash payment expenses receivables payables depreciation incure (expense)

10. New words and terms journal earn revenue recognition concept on account prepaid

11. 2.3 Accounting Principle I. The cost principle II. The realization principle III. The matching principle IV. The objective principle V. The full disclosur principle VI. The materiablity principle VII. The consistency principle VIII. Conservatism principle

12. New words and terms acquisition cost actual cost historical cost ship goods render service realized revenue reliable data accurat

13. New words and terms outsider----insider knowledgeable decision= informed decision significant consistent valuation alternative overstate