FAR Diagnostic 1 Flashcards

1
Q

What is FASB

A
  • recognized as authoritative by SEC and AICPA
  • establishes accounting concepts, standards for financial accounting and reporting
  • provides guidance on implementation of standards.
  • provides a conceptual framework that helps to increase understanding and confidence for users.
  • writes GAAP
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2
Q

Equation for Accrual based purchases

A

Beginning AP + Accrual purchases—Cash payments= Ending AP

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3
Q

Converting cash based operating expense to Accrual

A

+ beginning of the year prepaid expenses
- end of year prepaid expenses
- beginning of the year accrued expenses
+ end of year accrued expenses

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4
Q

Equity

A

Total Assests- Total liabilities

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5
Q

How should you report unearned rent that has already been paid

A

Current liability because landlord has not fulfilled their duty. Landlord would Dr cash, Cr unearned revenue. Current if less than 12 months.

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6
Q

Most useful guidance for practicing accountants concerning the FASB Accounting Standards Codification.

A

The Codification is the sole source of U.S. GAAP, for nongovernmental entities.

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7
Q

According to framework, objectives of financial reporting for business enterprises are based on

A

Needs of users of the financial information

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8
Q

Conceptual framework intends to establish?

A

objectives and concepts used in developing standards of financial accounting and reporting

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9
Q

Economic Entity

A

Accounting concept recognized when parent- subsidiary consolidated financial statements are prepared.

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10
Q

Recognition

A

When an item is reported on the financial statements.

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11
Q

Conservatism

A

Suppressing of positive financial information when uncertain and reporting negative financial info when likely.

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12
Q

Cost-benefit

A

Constraint of usefulness of financial information. Financial information should not be reported if costs exceed benefit even if it is useful.

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13
Q

Fair market value

A

market based measurement not entity based measurement.

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14
Q

Cost approach FMV

A

Amount currently required to replace service of asset.

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15
Q

Highest level of Fair Value Heirachy.

A

Level 1

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16
Q

Lowest level of Fair Value Heirachy.

A

Level 3

17
Q

Disclosure requirements when Fair Market Value measurement are used.

A

Differentiated into two categories
1. items measured at fair value on a reoccurring basis. adjusted period after period.
2. items measured at FV on a nonrecurring basis.
adjusted only when certain conditions are met.