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Intermediate Accounting 1 > Chapter 1 > Flashcards

Chapter 1 Flashcards

0
Q

Functions of accounting

A

Transaction processing
Decision support
Governmental reporting

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1
Q

Purpose of financial accounting

A

To provide relevant information to external users

Specifically profits oriented companies to investors and creditors

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2
Q

Gains

A

Increases in equity

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3
Q

Losses

A

Decreases in equity

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4
Q

Purpose of comprehensive income

A

To report other changes in shareholders equity during the period that were not the result of transactions with owners.

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5
Q

Capital markets

A

Composite of all investors and creditors and fosters the efficient allocation of resources.

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6
Q

Cash basis accounting

A

Revenue is recognized when cash is received.

Expenses are recognized when cash is paid.

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7
Q

Accrual accounting

A

Revenue is recognized when earned

Expenses are recognized when incurred.

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8
Q

GAAP Generally accepted accounting principles

A

Concepts, principles and procedures developed to meet the needs of external users.

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9
Q

How was sec created

A

As a result of the stock market crash of 1929, congress passed SEC

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10
Q

Hierarchy of standard setting authority

A

Congress sec private sector and FASB

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11
Q

SEC

A

Created to develop and standrdize financial information presented to stockholders

Must follow rules of GAAP

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12
Q

FASB

A

Sets out to improve corporate accounting practices by enhancing guidelines set out for accounting reports. Identifying and resolving issues in a timely manner and creating a uniform standard across the financial markets.

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13
Q

CAP committee on Accounting procedures

A

The first of the private sector to establish accounting standards

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14
Q

APB

A

Replaced CAP but was never able to create a conceptual framework

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15
Q

EITF

A

Attempts to identify financial reporting issues and solve the problems without the help of GAAP

16
Q

Due process

A
  1. Board reviews recommendations and requests
  2. FASB decides rather to add the project to the agenda.
  3. The board deliberates at one or more political meeting
  4. Board issued an exposure draft
  5. Board holds a public round table
  6. Staff analysis letters and discussions
  7. The board issues an update explaining amendments to the accounting standards codification
17
Q

Fundamental qualitative characteristics

A

Relevance and faithful representation

18
Q

Relevance

A

One of the primary decision-specific qualities that make accounting information useful made up of predictive value and feedback value and timeliness

19
Q

Faithful representation

A

Agreement between a measure and the phenomenon it purports to represent

20
Q

Assumptions

A

Economic entity
Going concern
The periodicity
Monetary unit

21
Q

Economic entity

A

All economic events can be identified specifically

22
Q

Going concern

A

In the absence of information to the contrary, it is anticipated that a business entity will continue to operate indefinitely

23
Q

Periodicity

A

Allows the life of the company to be so divided into artifices time periods to provide timely information

24
Q

Monetary

A

Measurement scale used in financial statements

25
Q

Realization principle: REVENUE

A

Revenue should be recognized when the earnings process is virtually complete and collection is reasonable assured

26
Q

Matching principle: EXPENSE

A

Expenses should be recognized in the period in which they produce revenues

27
Q

Measurement

A 
Historical cost
Bet realizable value
Current cost
Present or discounted value of future cash flows
Fair value
28
Q

Historical cost

A

Measures assets and liabilities based on their original transaction

29
Q

Net realizable value

A

The amount of cash into which an asset is expected to be converted in the ordinary course of business

30
Q

Current cost

A

Some inventories are reported at their current replacement cost

31
Q

Present value

A

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

32
Q

Fair value

A

Bases measurement on the price that would be received to sell assets or transfer liabilities in an orderly market transaction

33
Q

Full disclosure principle

A

The financial reports should include any information that could affect the decisions made by external users

Intermediate Accounting 1 (2 decks)

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