Questions: Relevance - Periodicity assumption Faithful representation - Going concern assumption Comparability - Historical cost principle Consistency - Full disclosure principle Monetary unit assumption - Materiality Economic entity assumption

Relevance - Periodicity assumption Faithful representation - Going concern assumption Comparability - Historical cost principle Consistency - Full disclosure principle Monetary unit assumption - Materiality Economic entity assumption
Transcript text: DO IT! 1: Financial Accounting Concepts and Principles Terms The following items guide the FASB when it creates accounting standards. \begin{tabular}{ll} Relevance & Periodicity assumption \\ Faithful representation & Going concern assumption \\ Comparability & Historical cost principle \\ Consistency & Full disclosure principle \\ Monetary unit assumption & Materiality \\ Economic entity assumption & \end{tabular} WILEY Copyright $@$ John Wiley \& Sons, Inc. 101
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The question appears to be related to financial accounting concepts and principles that guide the Financial Accounting Standards Board (FASB) in creating accounting standards. Below is an explanation of each term mentioned:

  1. Relevance: This principle ensures that the financial information provided is useful for decision-making. Relevant information can influence the economic decisions of users by helping them evaluate past, present, or future events.

  2. Periodicity Assumption: This assumption states that the economic activities of an entity can be divided into artificial time periods for reporting purposes, such as months, quarters, or years.

  3. Faithful Representation: This concept requires that financial information accurately reflects the economic phenomena it purports to represent. It should be complete, neutral, and free from error.

  4. Going Concern Assumption: This assumption presumes that an entity will continue to operate indefinitely, or at least for the foreseeable future, and not liquidate its operations.

  5. Comparability: This principle allows users to identify similarities and differences between two sets of economic phenomena. It is essential for comparing financial statements of different entities.

  6. Historical Cost Principle: This principle states that assets should be recorded at their original cost at the time of purchase, rather than their current market value.

  7. Consistency: This principle requires that companies use the same accounting methods and procedures from period to period unless a change is justified and disclosed.

  8. Full Disclosure Principle: This principle mandates that all information that could affect users' understanding of financial statements should be included in the financial reports.

  9. Monetary Unit Assumption: This assumption states that only transactions that can be expressed in monetary terms are recorded in the accounting records.

  10. Materiality: This concept refers to the significance of financial information. An item is considered material if its inclusion or omission would influence the decision-making of users.

  11. Economic Entity Assumption: This assumption states that the activities of a business are separate from those of its owners or other businesses.

These concepts and principles form the foundation of financial accounting and guide the FASB in developing standards that ensure the reliability and comparability of financial statements.

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