chapter 5 engineering management

fundamental guideline that governs how financial transactions are recorded, summarized, and reported in financial statements.

• Financial accounting principle

• Accrual Principle

• Matching Principle

• Dual Aspects

is a fundamental concept that states that transactions should be recorded in the accounting period in which they occur, regardless of when the actual cash flows happen.

• Financial accounting principle

• Accrual Principle

• Matching Principle

• Dual Aspects

is a fundamental concept that states that transactions should be recorded in the accounting period in which they occur, regardless of when the actual cash flows happen.

• Financial accounting principle

• Accrual Principle

• Matching Principle

• Dual Aspects

specifies that costs and expenses are established when incurred, even before actual payments are made.

• Financial accounting principle

• Accrual Principle

• Matching Principle

• Dual Aspects

Expenses are recognized by matching them with the revenue generated in a given account ing period.

• Financial accounting principle

• Accrual Principle

• Matching Principle

• Dual Aspects

The assets of a company are always equal to the claims against it. This principle states that a company's assets are always equal to the sum of its liabilities and owner's equity.

ASSETS = LIABILITIES + OWNER'S EQUITY

• Financial accounting principle

• Accrual Principle

• Matching Principle

• Dual Aspects

All relevant information is disclosed to the users of the company’s financial reports.

• Full Disclosure Principle

• Accrual Principle

• Matching Principle

• Dual Aspects

Assets are to be recorded at the lowest value consistent with objectivity

• Full Disclosure Principle

• Accrual Principle

• Conservatism

• Dual Aspects

As stated in Section 7.1, it is assumed that the company’s business will go on forever. This assumption justifies the current practice of using historical data and a reasonable method of depreciation (e.g., straight line) by which the book value of corporate tangible assets is defined.

• Full Disclosure Principle

• Accrual Principle

• Conservatism

• Going concern

is the total revenue realized by the firm during an accounting period.

• Sales Revenue

• Cost of Goods Sold

• Gross Margin

• Expenses