2. Accrual Accounting

Question 1

What does GAAP address?

Answer 1

1. Recognition
2. Measurement
3. Disclosure

Question 2

What body developed GAAP?

Answer 2

FASB

Question 3

When are expenses recognized under accrual accounting?

Answer 3

When incurred, regardless of the period of cash payment

Question 4

What are the 7 key components of the general-purpose external financial report?

Answer 4

1. Income statement
2. Balance sheet
3. Statement of cash flows
4. Statement of retained earnings
5. Statement of comprehensive income
6. Footnote disclosures
7. Auditor’s opinion

Question 5

What purpose does the FASB Accounting Standards Codification serve?

Answer 5

Compilation of authoritative U.S. GAAP for nongovernmental entities

Question 6

What topics does the FASB Codification not include?

Answer 6

• Other comprehensive basis of accounting
• Cash basis
• Income tax basis
• Regulatory accounting principles