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Intermediate Accounting > Cards I Made > Flashcards

Cards I Made Flashcards

1
Q

What statements are generally included in a financial report of a company?

A

Balance Sheet, Income Statement, Statement of Cash Flows, Stockholders equity

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2
Q

What are the three steps of capital allocation?

A

Financial reporting, users analyze financial reports, capital allocation based on analysis

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3
Q

What is the objective of financial reporting?

A

To provide financial info about the reporting entity that is useful to potential equity investors, creditors, and others in decisions about providing resources.

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4
Q

What are the four elements of the financial reporting objective?

A

General purpose statements, equity investors/creditors, entity perspective, decision usefulness

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5
Q

What makes a GAAP procedure accepted?

A

Either a rule making body pronouncement, OR universal acceptance and application.

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6
Q

What three agencies are involved in standard setting?

A

The SEC, AICPA, and FASB

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7
Q

Do all publicly traded companies have to file audited statements with the SEC?

A

Yes

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8
Q

True of False: FASB has more power in setting standards than the SEC

A

False, they usually go through the process of creating the standard but SEC is the more powerful, basically what they say goes.

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9
Q

Which of the following created the Accounting Principles Board, which released 31 APB opinions from ‘59-‘73?

AICPA
FASB
SEC
FAF

A

AICPA founded APB

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10
Q

What committee represents the AICPA currently in working with the FASB on accounting issues?

A

Accounting Standards Executive Committee (AcSEC)

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11
Q

True or false: The FAF funds the AICPA’s AcSEC

A

False

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12
Q

What role does the FAF (Financial Accounting Foundation) play in regards to FASB?

A

Selects members of FASB, funds the activities of FASB, and oversight

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13
Q

What is FASB’s mission?

A

establish/improve standards of financial reporting for the guidance/education of the public.

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14
Q

Which of the following isn’t true about the members of FASB?

There are 7 of them.

Not necessary to be a CPA

Can still be a partner in another company

serve in 5 year terms

A

Can still be a partner in another company. They are required to sever all business ties.

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15
Q

True or false: The Financial Standards Advisory Council (FASAC) consults with FASB on major policy issues, technical issues, and helps in selection/organization of task forces.

A

True

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16
Q

True or false: If FASB and AICPA agree on an issue, they can overrule the SEC with a 2/3 majority.

A

FALSE

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17
Q

In terms of the due process of FASB when establishing a standard, how many of the members need to back the new standard?

A

4 of 7

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18
Q

What is the process for FASB to create a new standard?

A

1) ID topic and place it on agenda
2) Research/analysis, prelim views of pros/cons
3) Public Hearing on proposed standard
4) Board evaluates research & public opinion, issues exposure draft
5) Board evaluates responses & changes exposure draft is needed
6) Final standard issued

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19
Q

When FASB wants to establish a new standard, they are only concerned with the opinions of CPA’s because they are the real accountants that will most use the standard. True or false

A

False. When establishing accounting standards FASB:

1) Should be responsive to the needs/viewpoints of the entire economic community, not just CPA’s.
2) Should operate in full view of the public through due process.

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20
Q

What are the two main types of pronouncements from FASB?

A

Accounting standards Updates, and Financial Accounting Concepts

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21
Q

Which of the two types of pronouncements actually establishes GAAP?

A

Accounting standards updates

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22
Q

True of false: There is no one place where all accounting standards to date are located to use as a reference.

A

False. The Codification contains all standards, and is available to search online

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23
Q

Does politics affect GAAP?

A

Yes

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24
Q

The Sarbanes Oxley act requires companies to attest to their internal controls. True of False

A

True

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25
Q

Which of the following is not a challenge for Financial Reporting:

Non financial measurements

Forward looking info

Soft assets

Timeliness

Understand-ability

Accumulated Depreciation

A

Accumulated Depreciation

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26
Q

Why is forward looking info a challenge for Financial Reporting?

A

Because the statements only show historical data, which then needs to be used to try to predict the future.

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27
Q

Only wholesalers in the EU are required to use IFRS (International Financial Reporting Standards) T or F

A

False. All companies in EU must use IFRS

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28
Q

T or F: The IFRS and GAAP are very different

A

False. They are pretty similar

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29
Q

What are the four enhancing qualities of relevance and faithful representation under FASB’s conceptual framework?

A

Comparability, Verifiability, Timeliness, understandibility

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30
Q

What makes something relevant?

A

capable of making a difference in a decision

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31
Q

True or False. Faithful Representation and completeness are the fundamental qualities under FASB’s conceptual framework.

A

False. Faithful rep and Relevance

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32
Q

Which one of the following is an assumption present on the third level of FASB’s conceptual framework?

Periodicity

Monetary Unit

Going Concern

Economic Entity

All are assumptions

A

All are assumptions

33
Q

What does the revenue recognition principle state?

A

Recognize revs when performance obligation is completed

34
Q

There is a tradeoff that takes place under the full disclosure principle. What is the tradeoff?

A

Sufficient detail to disclose matters that make a difference to the user, but sufficient condensation to keep the info understandable

35
Q

Info can be found in three places in a financial report. What are the three places?

A

Main body of statements, notes, supplementary info

36
Q

What is the major constraint on financial reporting that FASB ID’s?

A

Cost

37
Q

What are the two broad types of adjusting entries?

A

Deferrals, and Accruals

38
Q

Is unearned rev a deferral?

A

Yes

39
Q

Name the steps in the accounting cycle.

A

Journal, post to ledger, trial balance, adjustments, adj trial bal, statements, closing, post-close trial bal

40
Q

If I just got done creating the adjusted trial balance, what should I create next?

A

The income statement

41
Q

I just posted my last journal entry to the ledger for the month, what should I do next?

A

Create a trial balance (unadjusted)

42
Q

Supplies, insurance, and depreciation are examples of what type of expense?

A

Prepaid expense

43
Q

Are prepayments a deferral or an accrual?

A

Deferral

44
Q

Do you defer bad debts? or do you accrue them?

A

Accrue them

45
Q

I just bought supplies for 600 dollars on account. What journal entry should I make?

A

Supplies 600

Accounts payable 600

46
Q

I need to adjust the supplies because a physical count at the end of the period showed only 150 dollars worth remaining. What entry do I make to the journal?

A

Supplies expense 450

Supplies 450

47
Q

What does the income statement give the user for info?

A

Provides users info to predict the amounts, timing, and uncertainty of future cash flows.

48
Q

The text lists three things that the Income statement is useful for. What are they?

A

1) Evaluating the past performance of the company
2) Provide a basis for predicting future performance
3) Help assess the risk/uncertainty of achieving future cash flows

49
Q

The text lists three things that the Income Statement has for limitations. What are they?

A

1) Companies omit items from I.S. that can’t be measured reliably (unrealized gains/losses)
2) Income numbers are affected by the accounting methods used (fifo vs. lifo)
3) Income measurement involves judgement.( useful life estimates)

50
Q

What is earnings management?

A

Planned timing of rev,exp, gains, losses, to smooth out bumps in earnings.

51
Q

T of F. Earnings management increases quality of earnings.

A

False. Lowers quality of earnings

52
Q

T of F. We focus on the transaction approach when creating Income statements

A

True

53
Q

What are the four basic elements of an I.S.?

A

Revs, exps, gains, losses

54
Q

What four intermediate components of the I.S. are found under the operating section?

A

Sales/rev, COGS, Selling exps, admin/general exps

55
Q

t or f. Income tax comes before the unusual section of the I.S.

A

False, after unusual section

56
Q

What should the line directly after the unusual section of the I.S. say?

A

Income from ops before tax

57
Q

T or F. Unusual items need to be infrequent and unusual.

A

False

58
Q

T or F. Losses on the write down of receivables, inventories, and assets are part of the unusual section of the I.S.

A

True

59
Q

Bad Debt goes under the unusual section. True or False?

A

True

60
Q

What two criteria must be met for a discontinued op to be listed on the I.S.?

A

1) Company eliminates the results of ops of a component of the business.
2) there is no significant involvement in that component after disposal transaction

61
Q

T or F. You will only see “Income from continuing ops” on the income statement if there is an unusual item listed..

A

False. Only will see this if a discontinued op is listed

62
Q

Would Ice damage to a building in Northern Maine be unusual or extraordinary?

A

Unusual

63
Q

Would a flood in the desert of Nevada be unusual or extraordinary?

A

Extraordinary

64
Q

If a new law is passed that makes the product you make illegal, hence putting that product out of business, would this be unusual or extraordinary?

A

Extra

65
Q

T or F. Interest expense is an admin expense on the I.S.

A

F. Unusual

66
Q

T or F. For all intents and purposes, Unusual and non operating are the same section with different names on the I.S.

A

T

67
Q

What is the most significant business indicator now a days according to the book?

A

Earnings Per Share

68
Q

Earnings per share is the amount of the dividends paid to the investor per share. T or F.

A

False, it is the dollars earned per share, not the amount of dividends

69
Q

Earnings per share is usually found in the notes of the Income statement. T or F.

A

False, on face of I.S.

70
Q

A change in an accounting estimate requires retrospective adjustment. T or F.

A

False, not considered an error and just takes effect in the period the change was made.

71
Q

A change in an accounting principle requires a retrospective adjustment. T or F.

A

True.

72
Q

The adjustment to be made to beginning retained earnings in the event of an accounting principle change is equal to what?

A

The cumulative effect on prior years.

73
Q

I decided to switch from fifo to lifo to value my inventory. What kind of change is this?

A

Change in accounting principle

74
Q

I decided that the useful life of my equipment needs to be increased by two years. What kind of change is this?

A

Change in estimate

75
Q

When comprehensive income is listed on the I.S. an earning per share breakout is required for this section. T or F

A

False

76
Q

When comprehensive income is listed on the I.S. a two statement approach is required. T or F

A

False, can all be on one statment

77
Q

If you have an extraordinary event on your income statement and comprehensive income, than a two statement format is required. T or F.

A

False

78
Q

What is comprehensive income?

A

Includes all changes in equity during a period except from investments by owners and distributions by the owners

79
Q

The company has a security for sale that hasn’t sold yet, but is likely to make to the company 40k in gains. This should be reported under unusual section. (I sell t-shirts as my main business.) T of F.

A

F, comprehensive income

Intermediate Accounting (7 decks)

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