Introduction

Question 1

What is accounting?

Answer 1

Accounting is a system for recording information about business TRANSACTIONS to provide SUMMARY STATEMENTS of a company’s financial position and performance to USERS who require such information.

Question 2

What are the financial reporting requirements in the USA?

Answer 2

The Securities and Exchange Commission (SEC) requires periodic financial statements fillings:

• 10-K: Annual report
• 10-Q: Quarterly report
• 8-K: Current report (material events)

Question 3

What are the financial reporting rules in USA? Who make them?

Answer 3

Generally Accepted Accounting Principles (GAAP) are the rules and all reporting must be prepared in accordance with them. These rules should be made by U.S. Congress, but they delegate to Securities and Exchange Commission (SEC), but they delegate to Financial Accounting Standards Board (FASB).
Emerging Issues Task Force (EITF) and American Institute of CPA’s help FASP to make the rules.

Question 4

Who is responsible for financial reporting?

Answer 4

Management is responsible for preparing financial statements. The Audit Committee of Board of Directors provides oversight of management’s process. Auditors are hired by the board to “express an opinion” about whether the statements are prepared in conformity with GAAP (generally accepted accounting principles).

Question 5

What are the required financial statements?

Answer 5

• Balance Sheet,
• Income Statement,
• Statement of Cash Flow, and
• Statement of Stockholders’ Equity

Question 6

What are the financial reporting rules in EU? Who make them?

Answer 6

The rules are the International Financial Reporting Standards (IFRS). They are established by the International Accounting Standards Board (IASB) and are required in over 100 countries.