ABSTRACT
This chapter describes the concepts underlying the development and use of accounting principles in the general purpose financial statements of profit oriented enterprises. Financial statements normally include a balance sheet, income statement, statement of retained earnings and statement of changes in financial position. In the Canadian economic environment, the production of goods and the provision of services are, to a significant extent, carried out by investor-owned business entities in the private sector and to a lesser extent by government-owned business entities. The Committee recognizes that the benefits and costs may accrue to different parties and that the evaluation of the nature and amount of benefits and costs is substantially a judgmental process. Investors, creditors and other users are interested in information that may affect their decision making. Materiality is the term used to describe the significance of financial statement information to decision makers. Recognition is the process of including an item in the financial statements of an entity.
