3. Basic accounting assumptions 基本会计假设
(1) Economic entity assumption 会计主体假设
This assumption simply says that the business and the owner of the business are two separate legal and economic entities. Each entity should account and report its own financial activities.
(2) Going concern assumption 持续经营假设
This assumption states that the enterprise will continue in operation long enough to carry out its existing objectives.
This assumption enables accountants to make estimates about asset lives and how transactions might be amortized over time.
This assumption enables an accountant to use accrual accounting which records accrual and deferral entries as of each balance sheet date.
(3) Time period assumption 会计分期假设
This assumption assumes that the economic life of a business can be divided into artificial time periods.
The most typical time segment = Calendar Year
Next most typical time segment = Fiscal Year
(4) Monetary unit assumption 货币计量假设
This assumption states that only transaction data that can be expressed in terms of money be included in the accounting records, and the unit of measure remains relatively constant over time in terms of purchasing power.
In essence, this assumption disregards the effects of inflation or deflation in the economy in which the entity operates.
This assumption provides support for the "Historical Cost" principle.
4. Accrual-basis accounting 权责发生制会计
5. Qualitative characteristics 会计信息质量特征
(1) Reliability 可靠性
For accounting information to be reliable, it must be dependable and trustworthy.
Accounting information is reliable to the extend that it is:
Verifiable: means that information has been objectively determined, arrived at, or created. More than one person could consider the facts of a situation and reach a similar conclusion.
Representationally faithful: that something is what it is represented to be. For example, if a machine is listed as a fixed asset on the balance sheet, then the company can prove that the machine exists, is owned by the company, is in working condition, and is currently being used to support the revenue generating activities of the company.
Neutral: means that information is presented in accordance with generally accepted accounting principles and practices, and without bias.
(2) Relevance 相关性
Relevant information is capable of making a difference in the decisions of users by helping them to evaluate the potential effects of past, present, or future transactions or other events on future cash flows (predictive value) or to confirm or correct their previous evaluations (confirmatory value).
(3) Understandability 可理解性
Understandability is the quality of information that enables users who have a reasonable knowledge of business and economic activities and financial reporting, and who study the information with reasonable diligence, to comprehend its meaning.
(4) Comparability 可比性
Comparability: suggests that accounting information that has been measured and reported in a similar manner by different enterprises should be capable of being compared because each of the enterprises is applying the same generally accepted accounting principles and practices.
Consistency: suggests that an entity has used the same accounting principle or practice from one period to another, therefore, if the dollar amount reported for a category is different from one period to the next, then chances are that the difference is due to a change like an increase or decrease in sales volume rather than being due to a change in the method of calculating the dollar amount.
(5) Substance over form 实质重于形式
Substance over form emphasizes the economic substance of an event even though its legal form may provide a different result.
It requires that business enterprise should perform accounting recognition, measurement and reporting in accordance with the economic substance rather than the legal form of an event or transaction.
(6) Materiality 重要性
Information is material if its omission or misstatement could influence the resource allocation decisions that users make on the basis of an entity’s financial report. Materiality depends on the nature and amount of the item judged in the particular circumstances of its omission or misstatement. Deciding when an amount is material in relation to other amounts is a matter of judgment and professional expertise.
(7) Conservatism 谨慎性
Conservatism dictates that when in doubt, choose the method that will be least likely to overstate assets and income, and understate liabilities and expenses.
(8) Timeliness 及时性
Timeliness means having information available to decision makers before it loses its capacity to influence decisions. If information becomes available only after the time that a decision must be made, it has no capacity to influence that decision and thus lacks relevance.
6. Basic accounting elements 基本会计要素
(1) Asset 资产
An asset is a resource that is owned or controlled by an enterprise as a result of past transactions or events and is expected to generate economic benefits to the enterprise.
(2) Liability 负债
A liability is a present obligation arising from past transactions or events which are expected to give rise to an outflow of economic benefits from the enterprise.
A present obligation is a duty committed by the enterprise under current circumstances. Obligations that will result from the occurrence of future transactions or events are not present obligations and shall not be recognized as liabilities.
(3) owners’ equity 所有者权益
Owners’ equity is the residual interest in the assets of an enterprise after deducting all its liabilities.
Owners’ equity of a company is also known as shareholders’ equity.
(4) Revenue 收入
Revenue is the gross inflow of economic benefits derived from the course of ordinary activities that result in increases in equity, other than those relating to contributions from owners.
(5) Expense 费用
Expenses are the gross outflow of economic benefits resulted from the course of ordinary activities that result in decreases in owners’ equity, other than those relating to appropriations of profits to owners.
(6) Profit 利润
Profit is the operating result of an enterprise over a specific accounting period. Profit includes the net amount of revenue after deducting expenses, gains and losses directly recognized in profit of the current period, etc.
7. Five measurement attributes 会计计量属性
(1) Historical cost 历史成本
Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds or assets received in exchange for the present obligation, or the amount payable under contract for assuming the present obligation, or at the amount of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
(2) Current replacement cost 现时重置成本
Assets are carried at the amount of cash or cash equivalents that would have to be paid if a same or similar asset was acquired currently. Liabilities are carried at the amount of cash or cash equivalents that would be currently required to settle the obligation.
(3) Net realizable value 可实现净值
Assets are carried at the amount of cash or cash equivalents that could be obtained by selling the asset in the ordinary course of business, less the estimated costs of completion, the estimated selling costs and related tax payments.
(4) Present value 现值
Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate from its continuing use and ultimate disposal. Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities within the expected settlement period.
(5) Fair value 公允价值
Assets and liabilities are carried at the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
8. Financial statements 财务报表
(1) Balance sheet 资产负债表
A balance sheet is an accounting statement that reflects the financial position of an enterprise at a specific date.
(2) Income statement 损益表
An income statement is an accounting statement that reflects the operating results of an enterprise for a certain accounting period.
(3) Statement of cash flows 现金流量表
A cash flow statement is an accounting statement that reflects the inflows and outflows of cash and cash equivalents of an enterprise for a certain accounting period.
(4) Statement of changes in owners’equity 所有者权益变动表
A statement of changes in owners’ equity reports the changes in owners’ equity for a specific period of time.
(5) Notes to financial statements 财务报表附注
Notes to the accounting statements are further explanations of items presented in the accounting statements, and explanations of items not presented in the accounting statements, etc.
9. Accounting entry 会计分录
Debit: Cash
Credit: Common Stock
10. Basic accounting equation 基本会计等式
Assets = Liabilities + owners’ equity
11. List of present and potential users of financial information 财务信息的使用者
investors, creditors, employees, suppliers, customers, and governmental agencies.
