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Acct 3001 > Midterm 1 > Flashcards

Midterm 1 Flashcards

1
Q

GAAP is the term used to indicate the whole body of ____ authoritative literature.

A

FASB

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2
Q

The primary governmental body that has influence over the FASB is the ____.

A

SEC

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3
Q

Process for establishing accounting standards

A

Research, discussion paper, exposure draft, standard.

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4
Q

GAAP is comprised of any guidance included in the _______.

A

FASB Codification

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5
Q

When does the conceptual framework have authority?

A

when there is no standard or interpretation related to the reporting issues.

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6
Q

The objective of financial reporting places most emphasis on ______.

A

reporting to capital providers

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7
Q

General purpose financial statements are prepared primarily for _____.

A

External users

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8
Q

Accounting standards can have detrimental impacts on the wealth levels of the _______.

A

Providers of financial information

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9
Q

Expectation gap

A

what the public thinks accountants SHOULD do and what accountants think they CAN do

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10
Q

FASB should consider ______ when making rules.

A

improvement in reporting, international convergence and simplification of literature

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11
Q

The ____________ requires members to prepare financial statements in accordance with GAAP.

A

AICPA’s Code of Professional Conduct

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12
Q

Capital Allocation

A

determining how and at what cost money is allocated among competing interests

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13
Q

The PCAOB was established by the _____.

A

SOX act

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14
Q

What are the 4 enhancing qualities?

A

Verifiability, Understandability, Comparability, Timeliness (VUCT)

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15
Q

What are the 2 Fundamental Qualities?

A

Relevance and Faithful Representation

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16
Q

What are the ingredients to relevance?

A

Predictive value, confirmatory value, materiality

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17
Q

What are the 3 ingredients to faithful representation?

A

completeness, neutrality, free from error

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18
Q

What are the 4 basic assumptions?

A

Economic entity, going concern, monetary unit, periodicity (EGMP)

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19
Q

What are the 4 principles of accounting to record and report transactions?

A

Measurement, revenue recognition, expense recognition and full disclosure (MREF)

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20
Q

The measurement principle is comprised of _______.

A

Historical cost and Fair value

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21
Q

What is the cost constraint?

A

weigh the cost of providing information against the benefits derived from using it

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22
Q

What is completeness?

A

all information necessary for faithful representation is provided

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23
Q

What is neutrality?

A

company cannot select information to favor one set of interested parties over another (faithful rep)

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24
Q

What is free from error?

A

accurate (faithful rep)

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25
Q

What is comparability?

A

measured and reported in similar manner for different companies; consistency (enhancing)

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26
Q

What is verifiability?

A

when independent measurers use same methods and obtain similar results (enhancing)

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27
Q

What is timeliness?

A

having information before it loses capacity to influence decisions.

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28
Q

What is understandability?

A

quality of information that lets reasonably informed users see significance.

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29
Q

Asset

A

probable future economic benefit obtained by entity

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30
Q

Liability

A

probable future sacrifices of economic benefit

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31
Q

Equity

A

residual interest in assets of entity after deducting liabilities

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32
Q

Investments by owners

A

increase in net assets (equity)

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33
Q

Distributions to owners

A

decrease in net assets (equity) from transferring asset

34
Q

Comprehensive income

A

change in equity (net assets) from nonowner sources

35
Q

Reveues

A

inflows or enhancements of assets

36
Q

Expenses

A

outflows or using up of assets or incurrence of liabilities

37
Q

Gains

A

increases in equity from peripheral/incidental transactions

38
Q

Losses

A

decreases in equity from peripheral/incidental transactions

39
Q

Economic Entity Assumption

A

company keeps activity away from its owners and any other business unit

40
Q

Going concern assumption

A

company will have a long life

41
Q

Historical cost principle would have limited usefulness if the _______ assumption didn’t exist.

A

going concern

42
Q

Monetary unit assumption

A

money is basis for accounting

43
Q

Periodicity assumption

A

company can divide economic activities into artificial time periods

44
Q

Trade off between timeliness and free from error is ______ assumption.

A

Periodicity

45
Q

The measurement principle is made up of

A

historical cost and fair value

46
Q

Revenue recognition principle

A

requires companies to recognize revenue in the period where performance obligation is satisfied

47
Q

expense recognition principle

A

let expenses follow revenues. Matching expenses and revenues

48
Q

Full disclosure principle

A

provide info. of sufficient importance to influence decisions

49
Q

real account

A

asset, liability, equity account. Appear on balance sheet

50
Q

nominal accounts

A

revenue, expense, dividend accounts (all but dividend appear on income statement)

51
Q

What is the only nominal account that isnt on the income statement?

A

dividends

52
Q

What types of accounts have normal debit balances?

A

assets and expenses

53
Q

what types of accounts have normal credit balances?

A

Liabilities, Equity, and revenue

54
Q

Expanded accounting equation

A

A=L+Common Stock+RE-Div+Rev-Exp

55
Q

What are the 4 steps to posting?

A

Ledger, Journal, Ledger, Journal

56
Q

What are the 2 types of adjusting entries?

A

Deferrals and Accruals

57
Q

What are the two types of deferrals?

A

Prepaid expenses and unearned revenues

58
Q

What are the two types of accruals?

A

Accrued revenues and accrued expenses

59
Q

How to journalize a prepaid expense used up?

A

Credit the asset, debit the expense

60
Q

How to journalize unearned revenues used?

A

Debit the liability, credit the revenue

61
Q

How to journalize accrued revenues

A

debit accounts receivable and credit service revenue

62
Q

how to journalize accrued interest realized

A

debit interest expense and credit interest payable

63
Q

What is in Stockholders Equity category for accounts?

A

Common stock - dividends + revenues - expenses

64
Q

What types of accounts have closing entries?

A

Revenues, expenses

65
Q

In closing entries, where does Net Income go?

A

to retained earnings, then allocated to dividends

66
Q

earnings management

A

planned timing of revenues, expenses, gains and losses

67
Q

What are the sections of the Income Statement

A

Operating, non-operating, income tax, discontinued operations, non-controlling interest, EPS

68
Q

current operating performance approach

A

only regular revenues and expenses affect future earning power, not unusual/infrequent gains/losses.

69
Q

Earnings Per Share Formula

A

(Net Income - Dividends) / Weighted Avg Common Shares Outstanding

70
Q

Does changing accounting principle warrant changing PY statements?

A

Yes

71
Q

Comprehensive income

A

all changes to equity NOT from investments/distributions by/to owners

72
Q

Liquidity

A

amount of time expected until an asset is realized/converted to cash or until liability has to be paid

73
Q

Solvency

A

ability of company to pay debts as they mature

74
Q

current assets

A

cash, short term investments, receivables, inventory, prepaid expenses

75
Q

What are the three types of short-term investments?

A

held to maturity, trading, available for sale

76
Q

Long-Term Investments

A

securities, land held for speculation, special funds, investments in subsidiaries

77
Q

Examples of intangible assets?

A

goodwill, trademarks, copyrights

78
Q

FASB Codification

A

Topics, subtopics, sections, paragraph

79
Q

FASB pronouncements that are primary source of GAAP

A

standards, interpretations, staff positions

80
Q

The SEC thinks accounting standards should come from the

A

private sector

81
Q

GAAP includes over ____ documents

A

2,000

82
Q

The APB was replaced by

A

FASB

Acct 3001 (1 decks)

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