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Financial Statements, FRAMEWORK - Coggle Diagram
Financial Statements
QUALIFICATIONS
RELIABLE
VERIFIABLE same results (auditor)
NEUTRAL/NON BIASED
ACCURACY (truly happened)
RELEVANT
Confirm/correct false expectations
Timely
Help evaluate past & future events = feedback value
COMPARABLE
measure against another co
CONSISTENT
same methods applied
INCOME STATEMENT
AND
complete picture of finances
BALANCE SHEET
Everything a co owes & owns at a specific point in time.
ASSETS = LIABILITIES + SHAREHOLDERS EQUITY
used conjointly
amt of revenue & profit over a set period of time
FRAMEWORK
ASSUMPTIONS
ECONOMIC ENTITY ASSUMPTION
SEPARATE FROM OWNER/OTHER BUSINESSES
GOING CONCERN
LONG TIME IN OPERATION
asset capitalization
depreciation
ammortization
MONETARY UNIT ASSUMPTION
stable currency
PERIODIC RECORDING ASSUMPTION
months/quarters/years
PRINCIPLES
HISTORICAL COST
Report asset & liabilities on cost acquisition basis
Reliable, not relevant
REVENUE RECOGNITION
ACCRUAL BASIS ACCOUNTING
Note when 1.realised. 2 earned, different from received
MATCHING PRINCIPLE
Expenses need to match revenue
FULL DISCLOSURE PRINCIPLE
CONSTRAINTS
COST/BENEFIT RELATIONSHIP
INDUSTRY PRACTICES
MATERIALITY
significance taken into consideration
CONSERVATISN
most realistic