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Accounting 321 > Unit exam 1 > Flashcards

Unit exam 1 Flashcards

1
Q

Provide financial information about the reporting entity that is useful (to help users with capital allocation decisions about company)present and potential equity investors,lenders, and creditors

A

Financial reporting

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2
Q

Provide at the least cost the most useful information possible; provide financial reporting information for a variety of users

A

Financial statements

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3
Q

Capital allocation process

A

Financial reporting ➡️ users(present/potential ➡️

capital allocation

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4
Q

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

A

Capital allocation

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5
Q

Financial statements provide:

A

Balance sheet
Income statement
Statement of cash flows
Statement of owners/stockholders equity

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6
Q

Examples of financial reporting

A 
Presidents letter
Supplementary schedules
Prospectuses 
Reports filed with govt. agencies 
News releases 
Management forecasts 
Social/environmental impact statements
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7
Q

Define GAAP

who sets it?

A

Generally accepted accounting principles

AICPA requires that members prepare financial stats in accordance with GAAP

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8
Q

3 groups who were instrumental in developing GAAP

A

SEC
AICPA
FASB

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9
Q

Due process

A

Topics ID and placed on agenda
Research and analysis conducted and preliminary views of pros/cons issued
Public hearing on proposed standard
Board evaluates research and public response and issue exposure draft
Board evaluates responses and changes exposure draft, if necessary
Final standard issued

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10
Q

What is the codification of GAAP?

A

developed by FASB
Provide in one place all the authoritative literature related to a particular topic
(Simplified user access to all US GAAP)

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11
Q

FASB Standards

A

FASB updates/standards amend the accounting standard codification which represents the source of authoritative accounting standards, other than standards issued by SEC

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12
Q

Financial accounting concepts

A

Part of a long-range effort to move away from the problem by problem approach, the FASB issued statements of financial accounting concepts as part of its conceptual framework project

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13
Q

What public thinks accountants should do and what accountants think they can do

A

Expectations gap

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14
Q

What challenges in financial reporting are being faced now and in the future?

A 
Non financial measurements 
Forward-looking info
Soft assets
Timeliness
Understandability
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15
Q

Which measurement is the MOST subjective?

A

Unobservable inputs

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16
Q

— is verifiable and the least subjective measurement

A

Historical cost

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17
Q

What constraint is recognized by the conceptual framework?

A

Cost constraint

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18
Q

Under IFRS companies may apply fair value to natural resources and the monetary unit assumption is still used

A

The existing conceptual frameworks under IFRS and GAAP are very similar

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19
Q

Coherent system of concepts that flow from an objective
Show allow accounting profession to quickly solve new/emerging practical problems
Increases financial stat users understanding of and confidence in financial reporting

A

Conceptual framework

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20
Q

First level of conceptual framework

A

Recognition
Measurement
Disclosure concepts

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21
Q

An implicit assumption of financial reporting is that

A

Users need reasonable knowledge of business and financial accounting matters

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22
Q

Enhancing qualities include

A

Verifiability
Timeliness
Comparability

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23
Q

What describes amounts of resources or claims to resources at a moment in time?

A

Assets, liabilities, equity

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24
Q

Which assumption makes the current/noncurrent classification of assets/liabilities on the balance sheet lose much of its significance if a company adopts a liquidation approach?

A

Going concern assumption

25
Q

What is made at the end of an accounting period to bring all accounts up to date on an accrual basis?

A

Adjusting entries

26
Q

What account is increased on the credit side?

A

Retained earnings

27
Q

A required step in the accounting cycle is the preparation of

A

Closing entries

28
Q

Summarizes transactions possessing a common characteristic
Reduces bookkeeping time
Includes cash receipts and cash payments

A

Special journals

29
Q

Deferrals include

A

Expenses paid in cash before they are used or consumed

30
Q

The financial statements are prepared from the

A

Adjusted trial balance

31
Q

When a merchandiser prepares closing entries, COGS is — and Income Summary is —

A

Credited

Devoted

32
Q

What challenges in financial reporting are being faced now and in the future?

A 
Nonfinancial measurements
Forward-looking information 
Soft assets 
Timeliness
Understandability
33
Q

First primary level of conceptual framework

A

Basic objective - useful to present and potential equity investors, lenders, and other creditors in making decision about providing resources to the entity

34
Q

Qualitative characteristics GAAP

A

Determining which alternative provides the most useful information for decision making purposes

35
Q

Fundamental qualitative characteristics

A

Relevance - predictive value, confirmatory value, materiality

36
Q

Fundamental qualities continued

A

Faithful representation - Completeness, neutrality, free from error

37
Q

Enhancing qualitative characteristics

A

Comparability, verifiability, timeliness, understandability

38
Q

Basic elements

A

Assets
Liabilities
Equity
- moment in time

39
Q

Basic elements continued

A 
Investments by owners 
Distribution to owners
Comprehensive income 
Revenues 
Expenses 
Gains 
Losses
- period of time
40
Q

4 basic assumptions

A

Economic entity
Going concern
Monetary unit
Periodicity

41
Q

Economic activity can be identified with a particular unity of accountability

A

Economic entity assumption

42
Q

Company will have a long life

A

Going concern

43
Q

Is relevant, simple, universally available, understandable, and useful

A

Monetary unity assumption

44
Q

Implies that a company can divide its economic activities into artificial time periods

A

Periodicity assumption

45
Q

Four basic principles of accounting to record and report transactions

A

Measurement
Revenue recognition
Expense recognition
Full disclosure

46
Q

GAAP requires that companies account for and report many assets and liabilities on the basis of acquisition price

A

Historical cost principle

47
Q

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

A

Fair value

48
Q

Requires that companies recognize revenue in the accounting period I which the performance obligation is satisfied

A

Performance obligation

49
Q

Let the expense follow the revenues

A

Expense recognition principle

50
Q

Recognizes that the nature and amount of information included in financial reports reflects a series of judgmental trade-offs

A

Full disclosure principle

51
Q

Companies must weight the costs of providing the information against the benefits that can be derived from using it

A

Cost constraint

52
Q

Collects and processes transaction data and then disseminates the financial information to interested parties

A

Accounting information system

53
Q

List of all open accounts in the ledger and their balances

A

Trial balance

54
Q

In order for revenues to be recorded in the period in which services are performed and for expenses to be recognized in the period in which they are incurred, companies make —

A

Adjusting entries

55
Q

Purpose of adjusting entries

A

Makes it possible to report on BS the appropriate assets, liabilities, and SE at the statement date

56
Q

Prepaid expenses

Unearned revenues

A

Deferrals

57
Q

Accrued revenues

Accrued expenses

A

Accruals

58
Q

Permanent/real accounts

A

Assets
Liabilities
Stockholders equity

Accounting 321 (4 decks)

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