Accounting Concepts by thuhuong

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Reviews content as described from the textbook 'Corporate Financial Accounting' Edition 10e published by Cengage and written by Warren/Reeve/Duchac

This content, Accounting Concepts, was created on 31st January, 2012 and was last updated on 15th April, 2014.

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accounting, beginner, financial, review, summary

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Accounting Concepts

BUSINESS ENTITY CONCEPT
Shows the economic data in an accounting system directly related to the business ONLY and does not include personal activi­ties, properties and debts by the owner.
A business entity can take the form of a propri­eto­rship, partne­rship, corpor­ation or limite­dli­ability company (LLC).
Prop­rie­tor­ship
- own by one individual
- easy and cheap to organize
- resources are limited to owner
- used by small businesses
Part­ner­ship
- own by two or more indivi­duals
- combined skills and resources
Corp­ora­tion
- a separated legal tax entity
- generates 90% of business revenues
- ownership divided into shares (stock)
- obtain resources by issuing stock
- used by large businesses
Limited liability company (LLC)
- combines partne­rship & corpor­ation
- used as altern­ative to partne­rship
- tax and legal liability advantages
COST CONCEPT
Amounts are recorded in accounting records at their cost or purchase price.
The cost concept includes the object­ivity and unit of measure concepts.
obje­ctivity concept requires the amount be based upon objective evidence where the final agreed upon amount has been establ­ished.
Revisions upward­/do­wnward on offers, appraisals and opinions can make the accounting report unstable or unreli­able.
unit of measure concept requires the economic data be recorded in dollars.