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GT-OMSA-MGT-8803 > Financial Accounting Week 2 > Flashcards

Financial Accounting Week 2 Flashcards

1
Q

Revenue Recognition

A

Companies recognize revenue when “performance obligation is stratified” and have completed the five steps of Revenue Recognition.

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2
Q

What are the five steps in Revenue Recognition

A
  1. Identify the contract with a customer.
  2. Identify the performance obligation(s) in the contract.
  3. Determine the transaction price.
  4. Allocate the transaction price to each performance obligation.
  5. Recognize revenue when (or as) each performance obligation is satisfied.
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3
Q

What does Cash and Cash Equivalents refer to within financial accounting?

A
  • Cash: money or currency
  • Cash equivalents: money market funds, short term certificates, treasury bills, etc.
  • Restricted Cash: cash that is restricted because it’s an investment or similar asset
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4
Q

What does Accounts Receivable (A/R) refer to within financial accounting?

A

Funds owed to target company from the sale of goods or services. The initial valuation of A/R is at the amount of the credit sale, with subsequent valuation of A/R is at the amount expected to be received.

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5
Q

What two things must be estimated to determine the Net Realizable?

A
  • The amount that will not be collected because some customers are unable to pay
  • The amount that will not be collected because of sales returns
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6
Q

What do you call an amount that will not be collected because some customers are unable to pay?

A

Uncollectible, or Uncollectible A/R

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7
Q

What is the Provision Method?

A

Allowance for Uncollectible Accounts

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8
Q

What is Inventory within financial accounting?

A

Assets consisting of goods owned by the business and held for resale or for future

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9
Q

What costs should be included in inventory?

A

Inventory should include costs of the goods plus all costs required to obtain physical possession and to put the merchandise in saleable condition.

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10
Q

What are the two types of inventory within financial accounting?

A
  • Merchandising Inventories
  • Manufacturing Inventories
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11
Q

What are Inventory Cost Flow Assumptions?

A

Firms purchase or manufacture products at different times and different costs

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12
Q

What are the four Inventory Costing Methods?

A
  1. Specific Identification
  2. First-In, First-Out (FIFO)
  3. Last-In, First-Out (LIFO)
  4. Average cost
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13
Q

What kind of assets are Investments within financial accounting?

A

Assets that include company investments in other entities’ debt securities and equity securities.

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14
Q

What do Investments categorized under Consolidation offer?

A

Equity with “control”

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15
Q

What do Investments categorized under Equity Method offer?

A

Equity with “significant influence”

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16
Q

What do Investments categorized under Fair-Value Method offer?

A

Equity without “significant influence”

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17
Q

What do Investments categorized under Held-to-Maturity offer?

A

Debt with intention of holding to maturity

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18
Q

What do Investments categorized under Trading offer?

A

Debt with intention of holding for a short period to get a gain

19
Q

What do Investments categorized under Available-for-Sale offer?

A

Debt without intention of holding to maturity or intention of holding for a short period to get a gain

20
Q

What requirements do Property Plant and Equipment (PPE) need?

A
  • Actively used in operations
  • Long-term periods of service utility
  • Have physical substance
21
Q

How do you report PPE on Balance Sheet?

A

Reported at Historical Cost less Accumulated Depreciation. If impairment of value, write down to reflect lower fair market value.

22
Q

Which expenditures should we include in “Historical Cost” for PPE?

A

All costs necessary to (1) acquire the asset and (2) make it ready for use. Historical Cost would include any costs to get the asset ready for use, called “capitalized costs”.

23
Q

In reference to PPE on balance sheets, what are capitalized costs?

A

Costs included in the assets account

24
Q

How is a PPE a capitalization versus when it is an expense?

A

Expenditures which have been capitalized depreciate over time of the asset, whereas net income is the same over the life of the company

25
Q

What is the definition of depreciation by the FASB?

A

System of accounting which aims to distribute the cost over the estimate life of the unit; in a systematic and rational manner.
- It is a process of allocation, not valuation

26
Q

What does the FASB stand for?

A

Financial accounting standards board

27
Q

What three estimates comprise depreciation within financial accounting?

A
  • Useful life
  • Salvage value
  • Depreciation rate
28
Q

What are the three main methods in depreciation relative to financial accounting?

A
  • straight line method
  • accelerated methods
  • Activity based methods
29
Q

What is a triggering event for an impairment of value?

A

Certain events or changes that raise the possibility at long lived assets may be impaired

30
Q

What are intangible assets relative to financial accounting?

A

They have no physical substance, they are not financial instruments, they convey certain legal/economic rights, and there is uncertainty associated with future economic benefits

31
Q

How do you classify intangible assets relative to financial accounting?

A

You classify them as identifiable or unidentifiable. Identifiable can include patterns, copyrights, or trademarks, where unidentifiable is often thought of as goodwill.

32
Q

How can intangible assets be acquired relative to financial accounting?

A

They can be acquired externally or developed internally

33
Q

What are current liabilities with financial accounting?

A

Probable future sacrifices of economic benefits, arising from present obligations to other entities, resulting from past transactions or events

34
Q

How are current liabilities expected to be satisfied?

A

They are expected to be satisfied with current assets or the creation of other current liabilities within one year or one operating cycle, whichever is longer

35
Q

What is long-term debt relative financial accounting?

A

Obligations that extend beyond one year or the operating cycle, whichever is longer

36
Q

What is a bond relative financial accounting?

A

A bond issue divides a larger liability into smaller liabilities

37
Q

What is the effective interest method within financial accounting?

A

Interest occurs on an outstanding debt each., And is recorded as an expense to the issuer and revenue to the investor

38
Q

What are the main three types of business structure?

A

Sole proprietorship, partnership, and corporation

39
Q

What are the three categories for manufacturing inventories?

A

Raw materials, work in progress, and finished good

40
Q

What does issued and outstanding mean within Stock from Shareholder’s Equity?

A

Issued stocks are the number of shares distributed to the stockholders (not retied), whereas Outstanding is the number of shares by stockholders currently held outside of the cooperation.

41
Q

What is the main difference between Common and Preferred Stock?

A

Preferred stock has preference in dividends and/or liquidation but not debt.

42
Q

What is the main difference between Common and Treasury Stock?

A

Treasury stock represents the firm’s reacquisition of stock from the shareholders.

43
Q

What is the main difference between Common and Retained Earnings Stock?

A

Accumulations of earnings minus dividends

GT-OMSA-MGT-8803 (5 decks)

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