Basic Concepts Flashcards
How do you convert cash payments to suppliers to CGS? (Formula)
Cash payments to suppliers
+ Inc in A/P
- Inc in Inv
=CGS
What org is responsible for setting IFRS?
International Accounting Standards Board (IASB)
What are the two main components that contribute to the main objective of decision usefulness?
Relevance and Faithful Representation
What are the components of relevance?
Confirmatory Value
Predictive Value
Materiality
The balance a deferred revenue account should reflect what?
The liability for outstanding performance obligations.
Earnings EXCLUDE certain gains and losses that are INCLUDED in comprehensive income? TF
True
Earnings INCLUDE certain gains and losses that are EXCLUDED in comprehensive income? TF
False
How would you compute the total debits to installment AR?
Deferred GP/GP Ratio
How would you compute cash collections?
Total debits to AR (DGP/GP Ratios) - AR ending balance
How would you compute GP realized?
GP Ratio x Cash Collections
What are the components of faithful representation?
Neutrality
Free from material error
Completeness
What are enhancing characteristics of financial information?
Comparability
Understandability
Timeliness
Verifiability
What is the final step before issuing a new FASB statement?
A majority vote by the members of the FASB
Revenues are recognized when…
They are realized/realizable and have been earned
Cash basis accounting includes AR. TF
False
Cash basis accounting includes unearned revenues? TF
True
Collections = Cash basis Revenues. TF
True
Collections are subtracted from AR. TF
True
Sales Revenues = Cash basis Revenues. TF
False. Only collections = cash basis revenues.
Inability to determine BI for supplies would cause NI to be understated. TF
F. Overstated, due to supplies expense being understated for the year.
Inability to determine BI for supplies would cause OE to be understated. TF
False. There would be no effect on OE.
What is the formula for Deferred Gross Profit?
DGP = GP Rate x AR
What is the private company council?
An organization that will assist setting accounting standards for private companies established by the FAF.
The private company council allows private entities to amortize goodwill. TF
True
When is liquidation basis accounting required?
When liquidation is imminent
Assets are presented at fair value under the liquidation basis?
False. The are presented at the amount of cash expected from the liquidation process.
The statment of changes in equity is a required account under US GAAP. TF
False, shareholders equity
Prepaid taxes are not current assets. TF
True
Gains and losses on sales of plan assets are recorded in what section of the statement of cash flows prepared using the indirect method?
Operating
What is the defensive interval ratio?
The ratio of quick assets to daily operating expenditures. Measures liquidity
Notes payable are not to be measured at anything other than their original amount during liquidation. TF
True
