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CPA > FAR > Flashcards

FAR Flashcards

1
Q

What is the primary objective of accounting?

A

To measure income

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2
Q

What is the most authoritative set of accounting pronouncements?

A

The FASB Codification

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3
Q

What are the 2 Levels of Authority within the FASB codification?

A

Authoritative and Non-Authoritative

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4
Q

How does managerial accounting differ from financial accounting

A

Managerial Accounting has a timliness focus

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5
Q

Which financial reports are required to be filed with the SEC

A

Form 10K - Annual and Audited

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6
Q

What is the focus of financial reports for individual companies?

A

Focus is on the needs of users to help them make decisions and assessments about the company

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7
Q

What are the Primary Constraints of Financial Reporting?

A

Cost vs. Benefit

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8
Q

What are the Secondary Constraints of Financial Reporting?

A

Consistency - Year vs. Year

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9
Q

What are the Qualitative Characteristics of Financial Reporting?

A

Relevance & Faithful Representation

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10
Q

What are the Enhancing Qualitative Characteristics of Financial Reporting?

A

Comparability
Verifiability
Timeliness
Understandability

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11
Q

How does Conservatism affect the recording of accounting transactions

A

When an estimate is necessary to to uncertainty conservatism chooses the best option that won’t overstate the financial position of the company

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12
Q

What is an accrual?

A

Earned (Revenue) or Incurred (Expense) but no Cash Receipt/Outlay yet

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13
Q

What is a deferral?

A

Cash Receipt/Outlay but not Earned (Revenue) or Incurred (Expense)

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14
Q

What is recognition in accounting?

A

When an item is recorded and included in the financial statements.

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15
Q

Describe fair value with respect to an asset

A

The price you would receive if you sold the asset

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16
Q

What market assumptions are made in a fair value assessment?

A

Buyer and Seller are not Related

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17
Q

What items are included in a Level 1 input in the fair value hierarchy?

A

Price quotes or market prices

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18
Q

What items are included in a Level 2 valuation input?

A

Interest rates

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19
Q

What items are included in Level 3 inputs of the fair value hierarchy?

A

Unobservable inputs such as assumptions or forecasts

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20
Q

What are acceptable valuation techniques for fair value?

A

Market approach - uses market transactions and prices to value the asset

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21
Q

What are current assets?

A

Cash

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22
Q

What are current liabilities?

A

Liabilities that will use current assets during the present operating cycle.

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23
Q

What is an accrued liability?

A

Expense that has been incurred but not paid

24
Q

What is a deferred revenue?

A

A type of current liability

25
Q

When are revenues recognized?

A

When they have been earned; i.e. company has performed

26
Q

What is a gain?

A

Increase in equity from an activity or event that is not central to the main activities of the business

27
Q

What is a loss?

A

Decrease in equity from an activity or event that is not central to the main activities of the business

28
Q

What is an operating cycle?

A

Average time it takes to turn materials or services into Cash

29
Q

What is the present value of future cash flows?

A

Valuation method - the current value of a future amount of money using a specific interest rate

30
Q

What is historical cost?

A

How much an asset cost - (net of depreciation and amortization)

31
Q

What is replacement cost?

A

How much it would cost to reacquire an asset today (Entrance Cost)

32
Q

What is a market cost?

A

The sale price of an asset (Exit Cost)

33
Q

What is Net Realizable Value?

A

Sale Price of an Asset - Selling/Disposal Fee

34
Q

When is royalty income recognized? How is it recognized?

A

Recognized when earned

35
Q

When is revenue recognized in an installment sale?

A

Revenue recognized upon receipt of cash

36
Q

What is deferred gross profit?

A

Gross profit that can’t be recognized until cash is received

37
Q

What is the cost recovery method?

A

No revenue recognized until all costs are recovered from purchase of the asset

38
Q

WHat is subscription revenue? How is it recorded?

A

Payment has been received but performance is not complete

39
Q

How are franchise revenues recorded?

A

Franchisor - Startup franchise fee revenue deferred until substancial performance

40
Q

How do you calculate sales revenue starting from cash basis income?

A

Mnemonic: SPEAR-BAR

41
Q

How do you calculate COGS starting from Cash Basis?

A

Mnemonic: CRAP-I

42
Q

How are discontinued operations reported? When are they used?

A

Reported Net of Tax after Continuing Operations but before Extra Ordinary Items……IDEA

43
Q

What qualifies as an extraordinary item? How is it recorded?

A

Both unusual AND infrequent

44
Q

What is contant dollar accounting?

A

Adjusts assets to reflect a consistent level of purchasing power due to inflation

45
Q

When are expenses recognized?

A

When they are incurred. Accure if not yet paid.

46
Q

What are accrued expenses?

A

Those incurred but not paid

47
Q

When should impaired assets be written down to fair value and expensed?

A

Immediately

48
Q

What are business start-up costs?

A

One-time costs for opeing a new business

49
Q

When is interest “not” expensed?

A

Interest on projects (software) for internal use is not expensed but is instead capitalized

50
Q

What major items should be classified under General & Administrative (G&A) expenses?

A

Office staff salaries

51
Q

What are the major components of Comprehensive Income?

A

Net Income + Other Comprehensive Income (OCI)

52
Q

What items are considered cumulative accounting adjustments?

A

Foreign Currency Translation Adjustments

53
Q

What is the purpose of a reclassification adjustment?

A

Avoids double counting items that were included in both Net Income and OCI

54
Q

Where is Comprehensive Income Reported?

A

Reported in a Single or Combined Income Statement

55
Q

What disclosures on accounting policies are required in financial statements?

A

Accounting principles used

56
Q

What are some major risks and uncertainties that must be disclosed?

A

Nature of operations

CPA (19 decks)

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