Definition: Net income is sometimes called Net Profit, Bottom Line, or Net Earning. It is the net earnings from the operating activities and other income for a specific period of time. Net Income results from gross profits for the specific period less than their corresponding expenses of the same period. Those expenses are Cost of […]
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Definition: The matching principle is one of the accounting principles that require, as its name, the matching between revenues and their related expenses. The expenses correlated with revenues should be recognized in the same period in the financial statements. This concept tries to ensure that there are no over or under revenue or expenses records
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Definition: The Revenue Recognition Principle is the concept of how the revenue should be recognized in the entity’s Financial Statements. Revenue Recognition could be different from one accounting principle to another principle and one standard to another standard. For example, based on a cash basis or cash accounting principle, revenue is recognized in the Financial
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Accrual Basis: The Accrual basis is the accounting principle that use to recognize and record accounting transactions or events in the financial statements regardless of its cash flow. Under the accrual basis, expenses are recognized and recorded in the Financial Statements at the periods they are incurred rather than at the period they are paid.
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Definition: In accounting, going concerned is the concept that the entity’s Financial Statements are prepared based on the assumption that the entity operation is still operating normally in the next foreseeable period. This foreseeable period normally has twelve months from the ending period of Financial Statements. In order to assume that the entity has no
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Definition: Periodicity assumption is the accounting concept used to prepare and present Financial Statements into the artificial period of time required by internal management, shareholders, or investors. What does an artificial period mean? Well, most of the financial statements are prepared based on fiscal years. Sometimes, based on tax years for the tax purpose or
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Definition: The concept of the historical cost principle is that the assets are recorded based on the price at the time they are purchased, and the liabilities are recorded based on the values expected to pay at the original value rather than market value or inflation-adjusted value. The Historical cost accounting principles are used mainly
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This is the summary of ISA 210: Agreeing with the Term of Audit Engagement. In this summary, we follow the structure of ISA which starts with an Introduction, Objective, Definition, and Requirement. You may jump to the specific areas as your requirement. The summary here does not include all the standard points and is for
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Definition: Fraud is the intentional activity to gain personal benefit directly or indirectly illegally, against organization or entity policy. It is ultimately different from error and corruption. An elementary example of fraud is that the accounting staff pay salary to fake employee’s account that creates by himself is also called fraud. In such a case, accounting
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The Concept of Transfer Pricing: Transfer pricing (TP) is the price of goods or services sold or bought between divisions in the same group or entity. For the divisions that operate in the same jurisdiction, transfer pricing is set for performance management and motivation of division from the group or entity level. Sometimes it is set
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