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Insuarance Terminologies

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Submitted By Hassankhan4151
Words 793
Pages 4
Basic objectives
Financial reporting should provide information that is: * useful to present to potential investors and creditors and other users in making rational investment, credit, and other financial decisions * helpful to present to potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts * about economic resources, the claims to those resources, and the changes in them * helpful for making financial decisions * helpful in making long-term decisions * helpful in improving the performance of the business * useful in maintaining records
Basic concepts
To achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints.
Assumptions
* Accounting Entity: assumes that the business is separate from its owners or other businesses. Revenue and expense should be kept separate from personal expenses. * Going Concern: assumes that the business will be in operation indefinitely. This validates the methods of asset capitalization, depreciation, and amortization. Only when liquidation is certain this assumption is not applicable. The business will continue to exist in the unforeseeable future. * Monetary Unit principle: assumes a stable currency is going to be the unit of record. The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation. * The Time-period principle implies that the economic activities of an enterprise can be divided into artificial time periods.
Principles
* Historical cost principle requires companies to account and report based on acquisition costs rather than fair market value for most assets and liabilities. This principle provides information that is reliable (removing opportunity to provide subjective and potentially

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