Last Minute Flashcards
What is the cost principle?
Assets are valued at historical cost
What is the revenue recognition principle?
Revenue is recognized when earned = when goods are delivered or services provided
What is the matching principle?
Costs are reported as expenses in the same period as the related revenues
Name the two ways in which cash flow can be calculated and their definitions
Direct method
Explicitly states where the cash came from and went to
Indirect method
Adjusts net income to arrive to cash activities
What is the rule regarding conformity between tax and accrual accounting?
LIFO conformity rule
What is the method for calculating bad debts, and how is it done?
Allowance method
[days late] * [% suspected bad]
How do are bad debts recorded on the BS and IS?
Ending allowance (BS)- Beginning allowance (BS) = bed debt expense (IS)
Net AR = gross AR - ending allowance
Bonds have a carrying value over the face value. What can we know about their issuing price?
They were issued at a premium
Bond is issued at a discount. What can we say about the interest rate of the bond cf the market rate at time of issuance?
The interest rate was higher than the market rate
What is the equity rule and when does it apply?
Explain who issues the consolidated financial statements
