Generally Accepted Accounting Principles
in the United States

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Statements of Financial Accounting Concepts (SFAC)

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Other Statements of Financial Accounting Concepts (SFAC)
   
SFAC
No.

Title

Issue Date
1 Objectives of Financial Reporting by Business Enterprises November 1978
2 Qualitative Characteristics of Accounting Information May 1980
3 Superseded by SFAC No. 6  
4 Objectives of Financial Reporting by Nonbusiness Organizations December 1980
5 Recognition and Measurement in Financial Statements of Business Enterprises December 1984
6 Elements of Financial Statements December 1985
7 Using Cash Flow Information and Present Value in Accounting Measurements February 2000
   
 
SFAC No. 6

Statement of Financial Accounting Concepts (SFAC) No. 6
        a. 
Elements of Financial Statements
        b.  Issued in December 1985
        c.  SFAC No. 6 replaces SFAC No. 3.


SFAC No. 6 includes the concepts of 

     Assets
 
            --> probable future economic benefits
                   obtained or controlled by an entity
                   as a result of past transactions or events.


    
Liabilities
 
            --> probable future sacrifices of economic benefits
                   arise from present obligations of an entity
                   to transfer assets or provide services in the future
                   as a result of past transactions or events.


    
Equity (Net Assets)
 
            --> the residual interest in
                   the assets of an entity after deducting its liabilities.
             --> Equity (Net Assets) = Assets - Liabilities

     Investments by Owners
 
   Distributions to Owners
     Comprehensive Income
     Revenues
 
            --> inflows of assets (or settlements of its liabilities)
                   from activities that constitute
                   the entity's ongoing major or central operations.

     Expenses
 
            --> outflows of assets (or incurrences of liabilities)
                   from activities that constitute
                   the entity's ongoing major or central operations.
     Gains
     Losses
     Transaction
    
Event
     Accrual Accounting
     Accruals
             --> Revenues and gains are recognized first and cash is received later.
             --> Expenses and losses are recognized first and cash is paid later.

     Examples of Accruals
             --> sale (or purchase) of goods on account
             --> interest, rent, wages, salaries, tax expenses not yet paid
                        (Expenses are recognized first and cash is paid later. )
             --> interest and rent income not yet received
                        (Revenues are recognized first and cash is received later.)

      Deferrals
             --> Cash is received first and revenues and gains are recognized later.
             --> Cash is paid first and expenses and losses are recognized later.

     Examples of Deferrals
             --> prepaid insurance
                        (Cash is paid first, expense is recognized later.)
             --> unearned subscriptions 
                        (Cash is received first, revenue is recognized later.)

     Realization
             --> the process of converting noncash resources to cash.

     Recognition
             --> the process of formally recording an item in the financial statements.

     Matching Principle
             --> Revenues and related expenses require recognition at the same time.
             --> Expenses are recognized in the period
                   in which related revenues are recognized.

     Allocation
             --> Expenses resulting from the use of assets that
                   provide benefits over several periods
             --> Examples:  Depreciation and amortization







 
U.S. GAAP Codification
International Financial Reporting Standards (IFRS)
 
Accounting Topics
Inventory Valuation Methods
Depreciation Methods
Revenue Recognition Principle
Accrual Basis vs. Cash Basis Accounting
Basics of Journal Entries
Ratios for Financial Statement Analysis
Overview of Financial Statements








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