This document discusses key accounting principles including gains, expenses, losses, consistency, and comparability. Gains are amounts not from main operations. Expenses are costs used for operations, reported when related sales occur. Losses are also from non-operating transactions. Consistency requires applying accounting principles uniformly. Comparability allows comparing financial statements across companies in the same industry.

1. BASIC ACCOUNTING
PRINCIPLES PT. II
TOM CARLSON

2. • Welcome back for the second edition of Basic
Accounting Principles
• I’m excited to see you return to learn more about
accounting
• Being a CPA and professional accountant is a lot
of fun and there is always room for improvement
or refreshing what you've already learned
• Enjoy and hopefully you can take something
educational away from this

3. Gains
Gains are basically a net amount
related to transactions that are
not considered part of the
company's main operations
If a company were to somehow
become involved in a business
that is not a normal or day-to-day
type operation, this would be
considered a gain
The company will also have to
report on any financial
improvements from the gain

4. Expenses
When you think about expenses you
think about costs
These costs are used up by the
company in helping to perform its
main and targeted operations
The matching principle (which I
mentioned in the previous post)
requires that expenses be reported on
the income statement when the
related sales are made or when the
costs are used up
Not in the period or time when they
are paid

5. Losses
Losses are essentially a net
amount related to transactions
that are not considered part of
the company's main operating
activities
If a company sells an item they
must remove that item from its
accounting records and the
selling price of the item will not
be included in the company’s
sales or revenues

6. Consistency
Accountants are highly expected to be
consistent in their work as they are
handling money from multiple sources
They must be consistent when applying
accounting principles, procedures, and
practices
A good example of consistency is how
a company views their cost flow
assumption in terms of FIFO and LIFO
If a company regularly uses FIFO is
would be a huge mistake to one day
switch to a LIFO policy unless it was
clearly brought up to clients and was
generally accepted

7. Comparability
In accounting and general business, investors,
lenders, and any other person using financial
statements have come to expect that financial
statements of one company can be compared
to the financial statements of another company
within the same industry
The businesses use generally accepted
accounting principles to provide comparability
between the financial statements of different
companies
This helps everyone in the financial pipeline or
who is concerned with the financials for one or
many companies involved in the same industry
to easily navigate through information and
understand everything as easy as possible