Term
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Definition
| Assumption - The activity of a company can be kept separate and distinct from its owners and any other business unit |
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Term
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Definition
| Assumption - The company will have a long life |
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Term
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Definition
| Assumption - Money is the common denominator by which economic activity is conducted, and the monetary unit provides an appropriate basis for measurement and analysis |
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Term
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Definition
| Assumption - The economic activities of a company can be divided into artificial time periods |
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Term
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Definition
| Principle - Existing GAAP permits the use of historical cost, fair value and other valuation bases. Although the historical cost principle (measurement based on acquisition price) continues to be an important basis for valuation, recording and reporting of fair value information is increasing |
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Term
| Revenue recognition principle |
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Definition
| Principle - A company generally recognizes revenue when (a) realized or realizable and (b) earned. |
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Term
| Expense recognition principle |
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Definition
| Principle - As a general rule, companies recognize expenses when the service or product actually makes its contribution to revenue (commonly referred to as matching) |
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Term
| Full disclosure principle |
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Definition
| Principle - Companies generally provide information that is of sufficient importance to influence the judgment and decisions of an informed user |
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Term
| Cost-benefit relationship |
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Definition
| Constraint - The cost of providing the information must be weighed against the benefits that can be derived from using the information |
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Term
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Definition
| Constraint - Sound and acceptable standards should be followed if the amount involved is significant when compared with the other revenues and expenses, assets and liabilities, or net income of the company |
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Term
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Definition
| Constraint - Follow the general practices in the company's industry, which sometimes requires the departure from basic theory |
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Term
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Definition
| Constraint - When in doubt, choose the solution that will be the least likely to overstate net assets and net income |
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