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Definition
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Term
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A type of business that uses raw materials to make products.
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Manufacturing Business
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Financial events are recorded and reported for a specific period of time, which allows valid comparisons of performance to be made (Accounting Assumption)
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Period Assumption
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When two or more people are in a business together operating under their own names or a registered business name with a view to making a profit.
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Partnership
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Revenue and expenses are recognised when they can be measured in a faithful and verifiable way (Accounting Assumption)
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Accrual Basis Assumption
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A type of business that buys inventory and resells them, usually at a higher price
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Trading Business
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Relevant information should be available to decision makers in time to influence their decisions (Qualitative Characteristic)
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Timeliness
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A business will continue to operate indefinitely and will not be wound up in the near future (Accounting Assumption)
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Going Concern Assumption
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Information can be confirmed as correct, and accounting information can be checked against business documents (Qualitative Characteristic)
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Verifyability
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When businesses buy on credit from their suppliers, and must pay off their account within a certain period of time.
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Accounts Payable
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The excess of revenues over expenses for a specific period of time
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Profit
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A decrease in assets or an increase in liabilities that result in a decrease in owner's equity
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Expenses
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Business operators compete for a share of the dollars available for spending.
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Market Reactions
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Data put into a meaningful form for particular use
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Financial Information
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The owner's remaining value or interest in a business after liabilities are deducted from assets
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Owner's Equity
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Customers who buy on credit and will pay off their account within a certain period of time.
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Accounts Receivable
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Financial information should relate to an economic decision (Qualitative Characteristic)
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Relevance
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Records, assets, liabilities and business activities of the entity must be kept separate from those of the owner or other entities (Accounting Assumption)
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Accounting Entity Assumption
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A type of business that performs a particular service for the customer, and receives a fee for their service.
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Service Business
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An entity's present obligations to transfer economic resources to another entity
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Liabilities
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An exchange of either goods or services with another entity for payment
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Transaction
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An increase in assets or decrease in liabilities, that result in an increase in owner's equity, achieved by providing goods or services to their customers
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Revenue
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A type of business that combines different types of operation.
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Mixed Business
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Present economic resources under the control of a business entity, with the potential to produce future economic benefits for the business
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Assets
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Users with a reasonable knowledge of business and economics should be able to find the financial information understandable (Qualitative Characteristic)
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Understandability
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When a single owner operates the business in their own right, and under their own name or a registered business name.
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Sole Proprietorship
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Raw facts and figures
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Financial Data
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Financial reports should be prepared using consistent accounting methods so that performance can be compared (Qualitative Characteristic)
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Comparability
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A suggested retail price set by a supplier.
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Recommended Retail Price
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Information being reported must be complete, without bias, and free from error (Qualitative Characteristic)
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Faithful Representation
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A percentage added to a product cost to determine the selling price.
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Percentage Mark-Up
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