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In a sole proprietorship, there is a legal distinction between contributed capital and
earned capital.
A troubled debt restructuring occurs when a creditor, for economic or legal reasons
related to the debtor's financial difficulties, grants a concession to the debtor that it
would not otherwise consider.
The simplest type of measuring system is the nominal scale.
Flexibility applies to situations in which there are relevant circumstances and more than
one possible accounting method exists.
There is a tendency for overproduction in unregulated markets.
Accounting theory includes the basic rules, definitions, and principles that underlie the
drafting of accounting standards and how they are derived.
Surveys of individual investors have generally indicated a high readership of
accounting information.
Accounting research of two generations ago was purely normative.
SFAS No. 87 presumes an explicit contract in calculating accrued pension expense.
SFAS No. 95 requires that all noncash investing and financing transactions be reported
in the body of the cash flow statement.
The balance sheet equation for entity theory is "Total Assets - Total Liabilities =
Owners' Equities.'
The benefits of accounting information pertain to how useful the accounting
information is relative to the capital maintenance and accountability objectives.
Inventory is carried at the lower of historical cost or replacement cost.
Prior period adjustments are accounting changes that should be accounted for in
comprehensive income on the income statement of the period of change.
One of the purposes of positive research is to satisfy information demand by managers,
auditors, creditors, and standard setters.
Signalling theory appears to be inconsistent with the advocacy of greater disclosure.
A purchase combination is argued to be simply the formal unification of two previously
separate ownership groups.
Several important committee reports gave rise to objectives and standards in place of
the postulates and principles approach.
