basic accounting principles

What's "Understandability"?

• A financial statement uses simple terms and graphics to be easy to read.

• A company reports its losses so investors can evaluate its profitability.

• A $1 mistake may not matter, but a $10,000 income error must be corrected.

• A business records all sales with invoices to ensure accuracy.

An example or RELEVANCE

• A company reports its losses so investors can evaluate its profitability.

• A financial statement uses simple terms and graphics to be easy to read

• A $1 mistake may not matter, but a $10,000 income error must be corrected.

• A business records all sales with invoices to ensure accuracy.

one example of "Materiality"

• A $1 mistake may not matter, but a $10,000 income error must be corrected.

• A business records all sales with invoices to ensure accuracy.

• A financial statement uses simple terms and graphics to be easy to read.

• A company reports its losses so investors can evaluate its profitability.

One example of "Reliability"

• A business records all sales with invoices to ensure accuracy.

• If a company rents a car with an option to buy, it is recorded as a purchase.

• If there is doubt about a customer's payment, the company assumes a potential loss.

• A company must include both its income and debts in financial reports.

One example of Substance over Form

• If a company rents a car with an option to buy, it is recorded as a purchase.

• A business records all sales with invoices to ensure accuracy.

• A company reports its losses so investors can evaluate its profitability.

• A financial report delivered two years late is no longer useful.

One example of "Prudence"

• business records all sales with invoices to ensure accuracy.

• If a company rents a car with an option to buy, it is recorded as a purchase.

• If there is doubt about a customer's payment, the company assumes a potential loss.

• A company must include both its income and debts in financial reports.

One example of Cost vs. Benefit Balance

• A financial report delivered two years late is no longer useful.

• A small business does not spend thousands on unnecessary audits.

• A store uses the same accounting method each year to compare results.

• A company must include both its income and debts in financial reports.

Complete the principle:
"A financial statement uses simple terms and graphics to be easy to read."

Complete the principle
"A company must include both its income and debts in financial reports."

Complete the principle:
"A financial report delivered two years late is no longer useful."