Accrual Accounting

Question 1

When is revenue recognized under accrual accounting?

Answer 1

Revenues are recognized when earned and collection is reasonably assured, regardless of the period of cash collection.

Question 2

What body developed Generally Accepted Accounting Principles (GAAP)?

Answer 2

The Financial Accounting Standards Board (FASB).

Question 3

What topics does the Financial Accounting Standards Board (FASB) Accounting Standards Codification not include?

Answer 3

1. Other comprehensive basis of accounting;
2. Cash basis;
3. Income tax basis;
4. Regulatory accounting principles.

Question 4

When are expenses recognized under accrual accounting?

Answer 4

Expenses are recognized when incurred, regardless of the period of cash payment

Question 5

What is the classification of assets that are in the form of cash, or will be converted into cash, or consumed within one year or the operating cycle of the business, whichever is longer?

Answer 5

Current Assets

Question 6

What purpose does the Financial Accounting Standards Board (FASB) Accounting Standards Codification serve?

Answer 6

The FASB Accounting Standards Codification is the sole source of authoritative U.S. Generally Accepted Accounting Principles for nongovernmental entities, except for the Securities Exchange Commission guidance.

Question 7

What are long-term assets?

Answer 7

Long-term assets are reported on the balance sheet and represent a company’s property, equipment, and other capital assets (reduced by depreciation) expected to be useable for more than one year.

Question 8

What does Generally Accepted Accounting Principles (GAAP) address?

Answer 8

Recognition, measurement, and disclosure.

Question 9

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

Answer 9

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 10

Which agency enforces Generally Accepted Accounting Principles (GAAP)?

Answer 10

Securities and Exchange Commission (SEC).

Question 11

What is the Accounting Principles Board?

Answer 11

The entity that published thirty-one opinions, some of which are now part of the Codification.