DISCLOSURE PRINCIPLE Definition

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DISCLOSURE PRINCIPLE states that any and all information that affects the full understanding of a companys financial statements must be include with the financial statements. Some items may not affect the ledger accounts directly. These would be included in the form of accompanying notes. Examples of such items are outstanding lawsuits, tax disputes, and company takeovers.

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NEGATIVE CASH FLOW is where expenditures required to maintain an investment exceed income received on the investment, i.e. spending in a business is greater than earnings.

ELIMINATION is the the act of removing a mathematical quantity by combining equations. This is common practice in accounting when consolidating financial reports; one example would be inter-company transactions, currency translations, and account balances.

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