GAAP vs. IFRS: Adjusting Entries definitions Flashcards
GAAP vs. IFRS: Adjusting Entries definitions
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GAAP U.S. accounting framework established by FASB, emphasizing consistency and comparability in financial reporting. IFRS International accounting standards set by IASB, focusing on global comparability and often allowing asset revaluation. FASB U.S. organization responsible for developing and updating generally accepted accounting principles. IASB International body that creates and maintains standards for financial reporting used outside the U.S. Accrual Accounting Method requiring revenues and expenses to be recorded when earned or incurred, not when cash is exchanged. Periodicity Assumption Concept of dividing a business's ongoing activities into artificial time periods for reporting purposes. Adjusting Entries End-of-period journal entries ensuring revenues and expenses are recorded in the correct accounting period. Revenue Recognition Guideline dictating when and how income is formally recorded in the financial statements. Fair Value Principle IFRS guideline allowing assets to be reported at current market value, impacting asset valuation and depreciation. Depreciation Systematic allocation of the cost of a long-term asset over its useful life. Revaluation IFRS-permitted process of adjusting the book value of long-term assets to reflect current fair market value. Expense Outflow or using up of assets in the normal course of business operations. Loss Financial decrease from events outside normal business activities, such as selling investments below cost. Long-term Asset Resource expected to provide economic benefit to a business for more than one year, subject to depreciation. Balance Sheet Financial statement presenting a company's assets, liabilities, and equity at a specific point in time.
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