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ACTG 343 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Capital Markets

A

All investor and creditors

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2
Q

Accrual Accounting

A

Measures income according to the entity’s accomplishments and resource sacrifices during the period from transactions related to providing goods and services to customers, regardless of when cash is received or paid.

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3
Q

Hierarchy of Standard Setting Authority

A

Congress
SEC
Private Sector
CAP, APB, FASB

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4
Q

Fundamental Qualitative Characteristics

A

Relevance, Faithful Representation

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5
Q

Relevance

A

Predictive Value
Confirmatory Value
Material

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6
Q

Predictive Value

A

Confirmation of investor expectations about future cash-generating ability

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7
Q

Confirmatory Value

A

Confirmation of investor expectations about future cash-generating ability

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8
Q

Material

A

Has quantitative/ qualitative characteristics that make it matter for decision-making

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9
Q

Faithful Representation

A

Agreement between a measure or description and the phenomenon it purports to represent ( complete, neutral , free from error )

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10
Q

Complete

A

Includes all information necessary for faithful represent

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11
Q

Neutral

A

It is free from bias.

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12
Q

Free From Error

A

Contains no errors or omissions used in the report

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13
Q

Applying this to deal with errors

A

Conservatism

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14
Q

Conservatism

A

Requires greater verification for good news than for bad news

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15
Q

Economic Entity Assumption

A

Presumes that economic events can be identified specifically with an economic entity

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16
Q

Going Concern Assumption

A

In absence of information, that a business entity will continue to operate indefinitely

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17
Q

Periodicity Assumption

A

Allows the life of a company to be divided into artificial time periods to provide information

18
Q

Monetary Unity Assumption

A

Requires that used the dollar in the united states without adjusting it for inflation

19
Q

An item is recongnized in the basic financial statements when it meets

A

Definition
Measurability
Relevance
Reliabiltiy

20
Q

Definition

A

An item meets the definition of an element in the financial statement

21
Q

Measurability

A

Item has relevant attribute neasurable with sufficent reliability

22
Q

Relevance

A

Information about it is capable of making a difference in user decisions.

23
Q

Reliability

A

IS representationally faithful, verifiable, and neutral

24
Q

Revenue Recognition

A

Revenue is typically recognized when a critical event has occurred, when a product or service has been delivered to a customer, and the dollar amount is easily measurable to the company.

25
Q

Expense Recognition

A

Expenses should be recognized in the same period as the revenues to which they relate. If this were not the case, expenses would likely be recognized as incurred, which might predate or follow the period in which the related amount of revenue is recognized.

26
Q

5 measurement attributes

A

Historical Cost
Net Realizable Value
Current Cost
Present ( discounted) value of future cash flows
Fair Value

27
Q

Historical Cost

A

The amount given or received in the original exchange transaction.

28
Q

Net Realizable Value

A

The estimated selling price in the ordinary course of business, minus the cost of completion ( inventory sold at 10,000 but transporting cost 2000, so NRV is 8000)

29
Q

Current Cost

A

The current cost of an asset that would incurred to purchase or reproduce the asset
- Operate in inflationary Economics

30
Q

Present Value

A

Bases measurement on future cash flows discounted for the time value of money

31
Q

Fair Value

A

Based on measurements on the price thst would be received to sell assets or transfer liabilities to market participants.
-used normally, especially for PPE

32
Q

Full Disclosure Principle

A

Requires that a company discloses anything that will affect their financial statements

33
Q

Quick Ratio ( Acid Test)

A

Assets that are readily available to pay current liabilities ( Quick Assets/ Current Liabilities)

34
Q

Quick Assets

A

Cash+ Short Term Investments ( 3 months) and accounts receivable

35
Q

Current Ratio

A

Current Assets/Current Liabilities
How can they pay back their obligations

36
Q

Liquidicity Ratios

A

Current Ratio and Acid Test

37
Q

Solvency Ratios

A

Debt to Equity Ratio
Times Interest Earned Ratio
Return on Equity

38
Q

Debt to Equity Ratio

A

Compares Resources provided by creditors with resources provided by owners ( Total liabilities/ Shareholder’s Equity)

39
Q

Times Interest Earned Ratio

A

EBIT Income/ interest expense

ACTG 343 (3 decks)

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