FAR Diagnostic 1 Flashcards
What is FASB
- 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
Equation for Accrual based purchases
Beginning AP + Accrual purchases—Cash payments= Ending AP
Converting cash based operating expense to Accrual
+ beginning of the year prepaid expenses
- end of year prepaid expenses
- beginning of the year accrued expenses
+ end of year accrued expenses
Equity
Total Assests- Total liabilities
How should you report unearned rent that has already been paid
Current liability because landlord has not fulfilled their duty. Landlord would Dr cash, Cr unearned revenue. Current if less than 12 months.
Most useful guidance for practicing accountants concerning the FASB Accounting Standards Codification.
The Codification is the sole source of U.S. GAAP, for nongovernmental entities.
According to framework, objectives of financial reporting for business enterprises are based on
Needs of users of the financial information
Conceptual framework intends to establish?
objectives and concepts used in developing standards of financial accounting and reporting
Economic Entity
Accounting concept recognized when parent- subsidiary consolidated financial statements are prepared.
Recognition
When an item is reported on the financial statements.
Conservatism
Suppressing of positive financial information when uncertain and reporting negative financial info when likely.
Cost-benefit
Constraint of usefulness of financial information. Financial information should not be reported if costs exceed benefit even if it is useful.
Fair market value
market based measurement not entity based measurement.
Cost approach FMV
Amount currently required to replace service of asset.
Highest level of Fair Value Heirachy.
Level 1
