Row 1
The national professional organizations of CPA's
AICPA (American Institute of Certified Public Accountants)
A negotiable financial instrument representing financial value. Examples are banknotes, bonds, common stocks, options, and futures.
Securities
Helps detect and explain similarities and differences between companies.
Comparability
States that every transaction is measured by the stated unit of measurement, such as the dollar.
Measurement Concept
Assets are recorded at historical cost, not fair market value
Cost Principle Assumption
The standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of of financial statements.
GAAP (Generally Accepted Accounting Principles)
Also called Truth in Securities Act - Established after the stock market crash of 1929 during the Great Depression. It requires that any offer of sale of securities be registered.
Securities Act of 1933
Using the same method of accounting from one period to another to help decision makers.
Consistency
All of the business transactions should be separate from those of the owners.
Economic Business Entity Assumption
All information pertaining to operations and financial position of the entity must be reported within the period of time in question.
Full Disclosure Principle
Develops GAAP for public companies
FASB (Financial Accounting Standards Board)
A law governing the secondary trading of securities in the US - established the SEC (Securities and Exchange Commission).
Securities Act of 1934
Big enough to make a difference in the user's decision-making process.
Materiality Constraint
Financial statements are prepared under the assumption that the company will remain in business indefinitely unless significant evidence otherwise
Going Concern Assumption
Revenue is earned and recognized upon product delivery or service completion, no matter when cash is received.
Revenue Recognition Principle
Primary responsible for enforcing federal securities laws and regulating the securities industry.
SEC (Securities and Exchange Commission)
Capable of making a difference in decision-making of the user.
Relevance
Given two equally likely alternatives to estimate, accountants will choose the less optimistic alternative.
Conservatism Constraint
Assumes a stable currency is going to be the unit of record
Monetary Unit Assumption
Costs of doing business are recorded in the same period as the revenue they help generate, regardless of when money is actually paid.
Matching Principle
Develops GAAP for state and local governments.
GASB (Governmental Accounting Standards Board)
Information must be verifiable, a faithful representation, and reasonably free from error and bias.
Reliability
States that an item should be recognized (recorded) in the financial statements when it can be defined, measured, relevant and reliable.
Recognition Concept
The entity's activities are separated into periods of time such as months, quarters or years
Time Period Assumption
Fairness; uninfluenced by emotion or personal opinion; does not allow bias or conflicts of interest.
Objectivity