Chapter 6 Flashcards
Who are the recipients of financial statement information?
External Users
They are interested in the performance of the organizations a whole.
Outside users of information
It must be prepared and presented by all organizations in a manner that is generally accepted and understood by external users.
Financial Reporting Information
Enumerate the Financial Reporting Procedures
- Capture the transaction
- Post to General Ledger
- Prepare Unadjusted Trial Balance
- Make adjusting entries
- Journalize and post adjusting entries
- Prepare Adjusting Trial Balance
- Prepare the Financial Statement
- Closing Entries
- Post-closing Trial Balance
It is the internet standard specifically designed for business reporting and information exchange
XBRL or Extensible Business Reporting Language
It is a freely available and global standard for exchanging business information
Extensible Business Reporting Language
It is the financial and operational business reporting offshoot of Extensible Markup Language (XML)
Extensible Business Reporting Language
Enumerate the benefits of XBRL
- Investors will have more time for analysis and insight.
- The influence of XBRL in the financial reporting chain is such that regulatory reporting agencies like the Security Exchange Commission (SEC) are able to receive financial information faster, and hopefully detect and prevent fraud.
Enumerate the Controlling the FRS
- Transaction Authorization
- Segregation of Duties
- Access Controls
- Accounting Records
The entity should be available to classify the important activities, particularly for economic operations. For each activity and significant event, the entity should ensure that documentation is adequate with respect to operations.
Transaction Authorization
The task of updating the general ledger must be separate from all accounting and asset custody responsibility within the organization.
Segregation of Duties
Enumerate what individuals wit access authority to GL accounts should not
1) Have record-keeping responsibility for special journals or subsidiary ledgers.
2) Prepare journal vouchers.
3) Have custody of physical assets.
Unauthorized access to the GL accounts can result in errors, fraud, and misrepresentation in financial statements
Access Control
It must undergo to an audit trail because it facilitates error prevention and correction when the data files are conveniently and logically organized
Accounting Records
Enumerate the 3 Management Reporting System
Provides a formal means for monitoring the function of internal controls.
Applications are discretionary.
Produces the financial and nonfinancial information needed by management to plan and control its business.
6 Factors that influence the MRS
- Management principles
- Management function, level, and decision type
- Problem structure
- Types of management reports
- Responsibility accounting
- Behavioral considerations
4 Management Principles
- Formalization of tasks
- Responsibility and authority
- Span of control
- Management by exception
Under Management Principles, management structures the firm around the tasks it performs rather than around individuals with unique skills.
Formalization of tasks
It allows specification of the information needed to support the tasks
Formalization of tasks
It is an individual’s obligation to achieve desired results
Responsibility
It is an individual’s power to make decisions within the limits of that responsibiity
Authority
Who delegates responsibility and authority downward to subordinates?
Managers
It is the number of subordinates directly under the manager’s control
Span of control
Managers should limit their attention to potential problem areas
Management by exception
