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Generally Accepted Auditing Standards
Generally Accepted Auditing
Auditing
Standards, or GAAS are sets of standards against which the quality of audits are performed and may be judged. Several organizations have developed such sets of principles, which vary by territory. In the United States, the standards are promulgated by the Auditing
Auditing
Standards Board, a division of the American Institute of Certified Public Accountants (AICPA). AU[1] Section 150 states that there are ten standards:[2] three general standards, three fieldwork standards, and four reporting standards. These standards are issued and clarified Statements of Accounting
Accounting
Standards, with the first issued in 1972 to replace previous guidance. Typically, the first number of the AU section refers to which standard applies
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Accounting
Accounting
Accounting
or accountancy is the measurement, processing, and communication of financial information about economic entities[1][2] such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli
Luca Pacioli
in 1494.[3] Accounting, which has been called the "language of business",[4] measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, management, and regulators.[5] Practitioners of accounting are known as accountants
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International Financial Reporting Standards
International Financial Reporting Standards, usually called IFRS,[1] are standards issued by the IFRS Foundation
IFRS Foundation
and the International Accounting
Accounting
Standards Board (IASB) to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. They are the rules to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external
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Equity (finance)
In accounting, equity (or owner's equity) is the difference between the value of the assets and the value of the liabilities of something owned. It is governed by the following equation: equity = assets value − liabilities displaystyle text equity = text assets value - text liabilities For example, if someone owns a car worth $15,000 (an asset), but owes $5,000 on a loan against that car (a liability), the car represents $10,000 of equity. Equity can be negative if liabilities exceed assets. Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the equity of a company as divided among shareholders of common or preferred stock. Negative shareholders' equity is often referred to as a shareholders' deficit. Alternatively, equity can also refer to a corporation's share capital (capital stock in American English)
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Expense
In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often referred to as an expense. An expense is a cost that is "paid" or "remitted", usually in exchange for something of value. Something that seems to cost a great deal is "expensive". Something that seems to cost little is "inexpensive". " Expenses
Expenses
of the table" are expenses of dining, refreshments, a feast, etc. In accounting, expense has a very specific meaning. It is an outflow of cash or other valuable assets from a person or company to another person or company. This outflow of cash is generally one side of a trade for products or services that have equal or better current or future value to the buyer than to the seller
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Goodwill (accounting)
Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable. Goodwill does not include identifiable assets that are capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability regardless of whether the entity intends to do so. Goodwill also does not include contractual or other legal rights regardless of whether those are transferable or separable from the entity or other rights and obligations. Examples of identifiable assets that are not goodwill include a company’s brand name, customer relationships, artistic intangible assets, and any patents or proprietary technology. The goodwill amounts to the excess of the "purchase consideration" (the money paid to purchase the asset or business) over the total value of the assets and liabilities
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Liability (financial Accounting)
In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events,[1] the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. A liability is defined by the following characteristics:Any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time; A duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services, or other transaction yielding an economic benefit, at a specified or determinable date, on occurrence of a specified event, or on demand; A duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement; and, A transaction or event obligating the entity that has already occurred<
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Profit (accounting)
Profit, in accounting, is an income distributed to the owner in a profitable market production process (business). Profit is a measure of profitability which is the owner’s major interest in income formation process of market production. There are several profit measures in common use. Income
Income
formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to himself/herself in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production
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Revenue
In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue
Revenue
is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees.[1] Revenue
Revenue
may refer to business income in general, or it may refer to the amount, in a monetary unit, earned during a period of time, as in "Last year, Company X had revenue of $42 million". Profits or net income generally imply total revenue minus total expenses in a given period. In accounting, in the balance statement it is a subsection of the Equity section and revenue increases equity, it is often referred to as the "top line" due to its position on the income statement at the very top
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Accounting Standards
Financial statements prepared and presented by a company typically follow an external standard that specifically guides their preparation. These standards vary across the globe and are typically overseen by some combination of the private accounting profession in that specific nation and the various government regulators. Variations across countries may be considerable making cross country evaluation of financial data challenging. Publicly traded companies typically are subject to the most rigorous standards. Small and midsize businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straight forward. Larger firms most often operate on an accrual basis
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Generally Accepted Accounting Principles
Financial statements prepared and presented by a company typically follow an external standard that specifically guides their preparation. These standards vary across the globe and are typically overseen by some combination of the private accounting profession in that specific nation and the various government regulators. Variations across countries may be considerable making cross country evaluation of financial data challenging. Publicly traded companies typically are subject to the most rigorous standards. Small and midsize businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straight forward. Larger firms most often operate on an accrual basis
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Convergence Of Accounting Standards
The convergence of accounting standards refers to the goal of establishing a single set of accounting standards that will be used internationally.[1] Convergence in some form has been taking place for several decades,[2] and efforts today include projects that aim to reduce the differences between accounting standards.[3] Convergence is driven by several factors, including the belief that having a single set of accounting requirements would increase the comparability of different entities' accounting numbers, which will contribute to the flow of international investment and benefit a variety of stakeholders.[1][4] Criticisms of convergence include its cost and pace,[5] and the idea that the link between convergence and comparability may not be strong.[6]Contents1 Overview1.1 European Union 1.2 United Kingdom 1.3 United States2 Motivation 3 Criticisms3.1 Nature of standards4 History4.1 1950s and 1960s 4.2 1970s and 1990s 4.3 2000s 4.4 201
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Management Accounting Principles
Management accounting
Management accounting
principles (MAP) were developed to serve the core needs of internal management to improve decision support objectives, internal business processes, resource application, customer value, and capacity utilization needed to achieve corporate goals in an optimal manner. Another term often used for management accounting principles for these purposes is managerial costing principles. The two management accounting principles are:Principle of Causality (i.e., the need for cause and effect insights) and, Principle of Analogy (i.e., the application of causal insights by management in their activities).These two principles serve the management accounting community and its customers – the management of businesses. The above principles are incorporated into the Managerial Costing Conceptual Framework (MCCF) along with concepts and constraints to help govern the management accounting practice
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Historical Cost
In accounting under the traditional historical cost paradigm, historical cost is the original nominal monetary value of an economic item.[1] Historical cost
Historical cost
is based on the stable measuring unit assumption. In some circumstances, assets and liabilities may be shown at their historical cost, as if there had been no change in value since the date of acquisition. The balance sheet value of the item may therefore differ from the real value. While historical cost is criticised for its inaccuracy (deviation from real value), it remains in use in most accounting systems during low and high inflation and deflation
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Financial Statement
[1][clarification needed] Historical financial statements Financial statements
Financial statements
(or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand. They typically include four basic financial statements accompanied by a management discussion and analysis:[2]A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time. An income statement—or profit and loss report (P&L report), or statement of comprehensive income, or statement of revenue & expense—reports on a company's income, expenses, and profits over a stated period of time. A profit and loss statement provides information on the operation of the enterprise
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Annual Report
An annual report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company's activities and financial performance. They may be considered as grey literature. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company's registry
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