Principles
This accounting principle states that assets should be recorded at their original purchase price.
What is the cost principle?
For the month ended December 31, this statement shows whether the company earned a profit or suffered a loss.
What is the income statement?
This accounting process allocates the cost of a tangible asset over its useful life.
What is depreciation?
These policies and procedures are designed to safeguard assets, ensure accurate records, and promote operational efficiency.
What are internal controls?
This U.S. government agency regulates financial markets and oversees publicly traded companies.
What is the SEC?
This principle requires revenue to be recorded only after the business has satisfied its performance obligation.
What is the revenue recognition principle?
It shows the accounting equation in action
What is the balance sheet?
If a machine costs $50,000 and has a 5-year useful life, this method would allocate $10,000 of expense each year.
What is straight-line depreciation?
This 2002 law strengthens internal controls and imposes penalties for fraudulent financial reporting.
What is the Sarbanes-Oxley Act (SOX)?
Generally Accepted Accounting Principles (GAAP) are created and maintained by this board.
What is the FASB?
A company records the cost of goods sold in the same period as the related sales revenue according to this principle.
What is the matching principle?
After net income is calculated on the income statement, it flows into this statement to update the owner’s equity balance.
What is the statement of owner’s equity?
This intangible asset is recorded only when one company acquires another for more than the fair value of net assets.
What is goodwill?
This acronym represents the five principles of internal control: Control environment, Risk assessment, Information & communication, Monitoring, and Existing control activities.
What is CRIME?
It was created by the Sarbanes-Oxley Act to monitor auditors of publicly traded companies in the U.S.
What is the PCAOB?
This principle states that a company should use the same accounting methods from period to period.
What is consistency?
A merchandising company often uses this statement to highlight the difference between sales revenue and cost of goods sold before considering operating expenses.
What is a multistep income statement?
Gross profit is calculated as sales revenue minus this account.
What is cost of goods sold?
A company requires one employee to receive cash and another to post receipts. This principle is being followed.
What is separation of duties?
This organization provides a widely used framework for internal control, risk management, and fraud prevention.
What is COSO?
Under this principle, accountants choose methods that will not overstate assets or income.
What is conservatism?
By separating short-term and long-term items, this balance sheet provides more useful information about liquidity and financial position.
What is a classified balance sheet?
During inflation, this inventory method assigns lower cost to COGS and higher cost to ending inventory.
What is FIFO?
This occurs when two or more employees work together to circumvent internal controls for personal gain.
What is collusion?
This board develops International Financial Reporting Standards (IFRS) used in many countries outside the U.S.
What is the IASB?