MGAB01H3 Chapter Notes - Chapter 2: Accounting Equation, Comprehensive Income, Retained Earnings
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MGAB01H3 Full Course Notes
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Document Summary
Primary objective of external financial reporting: provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity. Elements to be measured and reported: assets, liabilities, shareholders" equity, investments y owners, distribution to owners, revenues, expenses, gains and losses, comprehensive income. Concepts of measuring and reporting information: assumptions: separate entity, stable monetary unit, continuity (going concern), periodicity, principles: mixed-attribute measurement, revenue recognition, full disclosure, constraints: cost. Relevant information: can influence a decision; it has predictive and/or confirmatory value. Faithful representation: information provided in financial statements must reflect the substance of underlying transactions. Comparability: accounting information across businesses is enhanced when similar accounting methods have been applied. Verifiable: independent accountants can agree on the nature and amount of the transaction. Timely: information enhances both its predictive and confirmatory values. Understandability: the quality of information that enables users to comprehend its meaning.