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Accounting 3001 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Conceptual Framework

A

Leads to consistent standards and it prescribes the nature, functions, and limitations of financial accounting and financial statements

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2
Q

What are the Statements of Financial Accounting Concepts intended to establish?

A

The objectives and concepts for use in developing standards of financial accounting and reporting.

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3
Q

What’s the objective of financial reporting?

A

To provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity.

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4
Q

What are the two groups of Qualitative Concepts?

A
  1. Fundamental qualities

2. Enhancing qualities

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5
Q

What are the two subtopics of Fundamental Qualities?

A
  1. Relevance

2. Faithful Representation

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6
Q

Relevance

Two topics

A

must be capable in making a difference in a decision.

1: Relevance
2. Faithful representation

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7
Q

The three subtopics of relevance are:

A
  1. Predictive value
  2. Confirmatory value
  3. Materiality
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8
Q

The 3 subtopics of faithful representation

A
  1. Completeness
  2. Neutrality
  3. Free from error
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9
Q

The four subtopics of enhancing qualities are:

A
  1. Understandability
  2. Verifiability
  3. Comparability
  4. Timeliness
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10
Q

On the second level of the pyramid includes elements. What do these consist of?

A 
Assets
Liabilities 
Equity
Investment by owners
Distribution to owners
Comprehensive income
Revenues 
Expenses
Gains
Losses
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11
Q

At the top of the pyramid is:

Recognition, Measurement, and Disclosure Concepts. What are the three topics of these?

A
  • Assumptions
  • Principles
  • Constraints
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12
Q

Assumptions

A
  • Economic entity
  • Going-Concern
  • Monetary Unit
  • Periodicity
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13
Q

Going-Concern

A

company will last long enough to fulfill objectives and commitments

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14
Q

Monetary unit

A

money is the common denominator

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15
Q

Periodicity

A

Company can divide its economic activities into time periods

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16
Q

Measurement Principle

A

The most commonly used measurements are based on the historical cost and fair value.

17
Q

Historical cost

A

provides a reliable benchmark for measuring historical trends

18
Q

Fair value

A

Measurement at its price

19
Q

Revenue recognition

A

Requires that the company recognize revenue in the accounting period in which the performance obligation is satisfied.

20
Q

Expense

A

“Let the ___ follow the revenues”

21
Q

Full disclosure

A

Providing information that is of sufficient importance to influence the judgment and decisions of an informed user:

  • Financial statements
  • Notes to the financial statements
  • Supplementary information
22
Q

Cost constraint

A

cost of providing information must be weighed against the benefits that can be derived from using it.

23
Q

Comprehensive income

A

Includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

24
Q

Investment by owners

A

increases equity
-result from transfers of assets or services from other entities to an enterprise to
obtain or increase ownership interests in it.

25
Q

Distribution to owners

A

decreases equity
-results from transferring assets, rendering services, or incurring liabilities by the
enterprise to owners.

26
Q

Revenues

A

inflows generated from delivering goods, rendering services, or other activities during a
period that are related to an entity’s main operations

27
Q

Expenses

A

are outflows or the using up of assets or incurring liabilities during a period to generate
revenue from delivering goods, rendering services, or carrying out other activities that are associated
with an entity’s central operations.

28
Q

Gains

A

s increase equity and are caused by peripheral or incidental transactions

29
Q

Losses

A

decrease equity and could result from incidental transactions of an entity.

30
Q

What is an obligation to transfer resources arising from a past transaction

A

liability

31
Q

Equity

A

Residual interest in the assets of the enterprise after deducting liabilities

Accounting 3001 (2 decks)

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