Study for Exam 1 Flashcards
Financial reporting and accounting is focused on giving information to _________ users.
external
Which external users contribute capital in return for equity?
investors
These investors contribute capital in the form of a loan or by purchasing bonds in the hopes of gaining interest income.
creditors
Stock brokers and _______ _________ provide advice using financial information.
fund managers
Explain the concept of capital markets.
It is a mechanism that allows the economy to allocate resources to investors/creditors etc.
What is the primary objective of financial accounting?
Provide investors and creditors w/ info that is useful for making investment & credit decisions.
Who were the three parties that developed GAAP?
CAP - Committee on Accounting Procedures (1938-1959)
APB - Accounting Research Board (1959 - 1973)
FASB - Federal Accounting Standards Board (1973 - present)
Who has the legal authority to set financial standards for the private sector?
The SEC
_______ tends to be more rules based and ______ tends to be more principle based in its standards.
GAAP
IFRS
What has statutory/legal authority to set accounting standards?
the SEC
Statements of Financial Accounting, Accounting Research Bulletins, and the Accounting Principles Board Opinions are the the pronouncements included in _________.
GAAP
These entries account for the effect of internal events on the accounting equation.
adjusting entries
What kind of payments occur when cash flow precedes either rev/exp recognition?
prepayments
__________ occur after expense or revenue recognition.
accruals
What is the alternative approach to recording prepaid expense and when is it used?
Record the entire cost of the asset to expense and make an AJE at the end of the month that debits your asset account and credits your expense account.
On the first month.
