1. Foundations
Decision usefulness, elements and accrual logic
1. Foundations
Before recording a number, decide what it represents.
| Chapter | Case question | Output |
|---|---|---|
| Objectives and qualitative characteristics | Is Northstar’s order book revenue? | Decision-usefulness test |
| Equation and elements | What changed in five start-up events? | Transaction-effects table |
| Accounting bases and principles | Which December amounts belong in December? | Accrual adjustments |
Preparation
Be able to distinguish:
- a resource from an expense;
- an obligation from a future intention;
- owner financing from revenue;
- cash timing from performance timing.
Mastery check
You are ready for recording when you can explain why an equation may balance even though the accounts or period are wrong.