FAR - F1 Review Concepts

Question 1

Conceptual Framework for Financial Reporting

Answer 1

Know the fundamental qualitative characteristics (relevance and faithful representation) and the enhancing qualitative characteristics (comparability, verifiability, timeliness and understandability).

Question 2

Financial Accounting Standards

Answer 2

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Question 3

Uses of the Income Statement and Terminology

Answer 3

The purpose of the income statement is to provide information about the uses of funds in the income process, the uses of funds that will never be used to earn income, the sources of funds created by those expenses, and the sources of funds not associated with the earnings process.

Know the difference between expired and unexpired costs and also the difference between the gross concept and the net concept.

Question 4

Income from Continuing Operations

Answer 4

Know the difference between a multiple-step income statement and a single-step income statement. The multiple-step income statement reports revenues and expenses separately from nonoperating revenues and expenses and other gains and losses. in the single-step presentation of income from continuing operations, total expenses (including income tax expense) are subtracted from total revenues; thus, the income statement has a single step.

Question 5

Balance Sheet

Answer 5

Under U.S. GAAP, entities may present a classified balance sheet that distinguishes current and non-current assets and liabilities. When appropriate, a balance sheet based on liquidity is also permissible. Review the terminology and be able to recognize a classified balance sheet.

Question 6

Five-Step Approach to Revenue Recognition

Answer 6

Step 1: Identify the Contract with the Customer - Contracts are agreements between parties that create enforceable rights or obligations. In order for revenue to be recognized, a contract must: be approved by all parties, contain identifiable rights for each party