AFA 300 Chapter Notes - Chapter 2: Net Impact, Cash Flow, Prepayment Of Loan

• School: Ryerson University
• Department: Accounting
• Course: AFA 300
• Professor: Else Grech

Document Summary

Underlying assumptions --form the foundation upon which all accounting measurement rests. Qualitative characteristics why they are measured that way. The principles of comparability and understandability are examples. Measurement methods how transactions and events are measured and reported. Historical cost is a widely used measurement method in which assets are reported at their acquisition cost. Historical cost is not a fundamental concept of financial accounting, but verifiability is. Without a high degree of verifiability provided by historical cost, accounting reports would have less credibility, and accounting would not serve its most basic objective of conveying useful information. Policy choice: underlying assumption, qualitative criteria, accounting choices, f/s elements, recognition and realization, measurement method. An accountant exercises ethical professional judgement by taking into account many factors: The users of f/s, and their specific info needs. As an accountant, it is crucial to carry out fiduciary duty a legal obligation of one party to act in the best interest of another: underlying assumption.