Got it:
 Vocabulary
 Three Principles of Accounting
 Who uses financial accounting verses
management accounting reports.
 What assumptions provide the foundation for
accounting systems.
Accounting is :
 foundation of business
 Language of business (pg. 32)
Remember:
 Every industry has an accounting
department or pays a company to manage
their payroll, accounts receivables/payables.
FASB: Financial Accounting
Standards Board
 A board of seven members (accounting
professionals) that establish and
communicate standards to the GAAP.
 Purpose: set out to improve corporate
accounting practices, create a uniform
standard across the financial markets.
http://www.investopedia.com/terms/f/fasb.asp
GAAP: Generally Accepted
Accounting Principles
 Common set of principles, standards and
procedures that accountants should use.
commonly accepted ways of reporting
and recording accounting information
 Purpose to have a minimum level of
consistency in the financial statements.
http://www.investopedia.com/ask/answers/06/rulesandpriciplesbasedaccounting.asp#a
xzz25RArsBAw
Financial Reports:
 Summarizes information about the
financial status of a business
Inputs
Source
Documents
Page 32 Figure 2-7
Processing
Outputs
Task
Financial and
Management
Accounting
Reports
Accounting Assumptions:
o Business Entity
o is when businesses financial information is
recorded and reported separately from the
owner’s personal financial information.
o Accounting Period
o a period covered by the accounting report
o Going Concern
o the operation & survivals of the company is
indefinitely.
3 Principles in Accounting
 Recording the value of the asset at current
market.
Exchange
 The information that “makes a difference” to a
user in reaching a business decision.
Relevance
3 Principles in Accounting (continued)
 Matching expense with one period with the
revenue from that same period, provides a
reliable measure of profit.
Matching Principle
 To make this much profit, it cost this much
money.
1. Complete Problem 2-5 page 40
copy in textbook in your notebook
2. Understanding Concepts and
Procedures (UCP) page 38: 2, 3, 5-8