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Measurement #2
• Four measurement attributes: o Historical cost is the price paid to acquire an asset or the amount received pursuant to the incurrence of a liability in an actual exchange transaction. o Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. o Replacement cost is the price that would be paid to acquire an asset with equivalent service potential in an orderly market transaction at the measurement date. o Settlement amount is the amount at which an asset could be realized or a liability could be liquidated with the counterparty, other than in an active market.
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Terminology #1
• Event – the source and cause of changes in assets, liabilities, equity, etc. Events could be internal or external.
• Transaction – an external event involving a transfer or exchange between two or more entities.
• Account – a systematic arrangement that shows the effect of transactions and other events on a specific element (asset, liability, etc.) o Real Accounts are not closed periodically – assets, liability and equity (balance sheet) o Nominal Accounts are closed periodically – revenues, expenses / expenditures (income statement)
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