question

Interpretations

answer

Pronouncements that provide clarification of conflicting or unclear issues relating to previously issued FASB Statements of Standards, APB Opinions, or Accounting Research Bulletins

question

Technical Bulletins

answer

Issued by the FASB to provide guidance on accounting and reporting problems related to Statements of Standards or Interpretations

question

Opinions

answer

Pronouncements of the APB that constitute generally accepted accounting principles unless specifically amended or rescinded

question

Statement of Financial Accounting Concepts

answer

Issued by the FASB as a series establishing a theoretical foundation (concepts) upon which to base financial accounting and reporting standards

question

Accounting Research Bulletins (ARBs)

answer

Pronouncement of the Committee on Accounting Procedure (CAP) that constitute generally accepted accounting principles unless superceded or amended by the FASB

question

Statement of Financial Accounting Standards (SFAs)

answer

Pronouncements issued by the FASB that establish generally accepted accounting principles and indicate the methods and procedures required on specific accounting issues

question

Staff Positions

answer

Pronouncements issued to provide more timely and consistent application guidance in regard to FASB literature

question

Comparability

answer

A company uses the same depreciation method from period to period

question

Materislity

answer

A trash can that is purchased for $10 is expensed even though it will be used for many years

question

Verifiability

answer

Skepticism about bias in the financial statement is mitigated when different and knowledgeable independent observers can reach a consensus that the words to describe an account or an activity represent fairly what they purport to represent, and the amount or value used to depict that account or activity is measured without error or bias (although they may not necessarily agree on the exact amount)

question

Timeliness

answer

An investment advisor needs information within the next week in order to make an investment decision even though the information may not be immediately verifiable

question

Relevance

answer

A financial statement analyst requires information to possess this characteristics in order to use the information as an input into his company valuation model as he decides whether or not to purchase an investment or to be able to assess performance of his past investment decisions

question

Cost (cost vs. benefit)

answer

A financial statement that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great

question

Faithful Representation

answer

Recording a long-term lease that resembles a purchase as an asset instead of a rental

question

Neutrality

answer

Accounting information should not favor a particular group

question

Confirmatory Value

answer

Information that provides feedback on a user's prior expectations has this characteristic

question

Understandability

answer

By requiring accounting information to be comprehensible to users who have a reasonable knowledge of business and economic activities and who are willing to study the information carefully, this characteristic serves as a link between the decision-makers and accounting information

question

Revenue Recognition

answer

Specifies that revenue should only be recognized when earned and realized

question

Historical Cost

answer

Requires that an activity be recorded at the exchange price at the time the activity occurred instead of the current value

question

Monetary Unit

answer

Implies that items such as customer satisfaction cannot be reported in the financial statements

question

Matching

answer

Requires that expenses related to future payments for pensions be recorded and reported in the period the employees work instead of when the payments are made

question

Going-Concern

answer

Justifies why some assets and liabilities are not reported at their current selling price

question

Time Period

answer

Allows the life of a company to be divided into artificial time periods so accounting reports can be provided on a timely basis

question

Conservatism

answer

A prudent reaction to uncertainty. Also a practical justification for some accounting choices

question

Benefits > Costs

answer

What is considered a constraint on useful information by Statement of Financial Accounting Concepts No. 8?

question

Predictive Value=Yes Confirmatory Value=Yes

answer

According to Statement of Financial Accounting Concepts No. 8, to be relevant an earnings report is expected to have which of the following?

question

Verifiability

answer

What characteristic states that accounting information should be supported by sufficient evidence to allow two or more qualified individuals to arrive at similar measures and conclusions?

question

Timeliness

answer

Under Statement of Financial Accounting Concepts No. 8, which of the following enhances decision-useful information?

question

Recognition

answer

Under Statement of Financial Accounting Concepts No. 6, which of the following means the process of formally recording and reporting an item in the financial statements of a company?

question

Conservatism

answer

Accruing net losses on obsolete inventory is an example of the accounting concept of?

question

Going Concern

answer

The valuation of a promise to receive cash in the future at present value on the financial statements of a company is valid because of the accounting concept of?

question

Incurred but not paid

answer

An accrued expense is an expense that what?

question

Immediate Consumption

answer

A patent purchased in 2013 and being amortized over a 10 year life was determined to be worthless in 2016. The write-off of the asset in 2016 is an example of which of the following expense recognition principles?

question

Verifiability

answer

Different knowledge and independent observers can reach consensus that a particular representation is faithful.

question

Timeliness

answer

Making information available to decision makers before it loses its capacity to influence decisions.

question

Relevance

answer

Capacity to make a difference in a decision, enabling users to predict future outcomes and/or confirm prior expectations.

question

Decision Usefulness

answer

Overall objective of financial information.

question

Neutrality

answer

Absence of bias intended to influence financial statement user's behavior in a particular direction.

question

Free from Error

answer

Presented as accurately as possible, using a process that reflects the best available inputs.

question

Predictive Value

answer

Helps decision makers form expectations about the future.

question

Completeness

answer

Full disclosure of all the information necessary to understand the information being reported.

question

Comparability

answer

Enables users to identify and explain similarities and differences between two or more sets of economic facts.

question

Materiality

answer

The nature and magnitude of an omission or misstatement that would influence the judgement of reasonable users of that information.

question

Consistency

answer

Accounting methods and procedures applied in the same manner form period to period.

question

Confirmatory Value

answer

Helps decision makers confirm or correct prior predictions or expectations.

question

Faithful Representation

answer

When the words and amounts accurately depict the economic substance of what they purport to depict.

question

Understandability

answer

Comprehensible to users.

question

Period of Time

answer

To provide timely information, companies prepare and report financial statements at the end of each year.

question

Expense Recognition

answer

Appropriate recognition when a company consumes economic resources in conducting business operations.

question

Monetary Unit

answer

Accounting measurements for U.S. companies are reported in dollars.

question

Reporting Entity

answer

The financial statements represent the business, rather than its owners.

question

Going Concern

answer

In the absence of evidence to the contrary, the business can be reasonably expected to operate long enough to carry out its existing commitments.

question

Revenue Recognition

answer

Appropriate recognition when a company creates economic benefits (inflows of assets or settlements of obligations) by providing goods or services to customers.

question

Historical Cost

answer

Transactions and events are recognized initially at the exchange price to provide relevant and reliable information.

question

Conservatism

answer

An accounting alternative is selected that is least likely to overstate assets and income.

question

Recognition

answer

The process of formally recording and reporting an item in the financial statements of a company.

question

Accrual Accounting

answer

The process of measuring and reporting the economic effects of transactions, events, and circumstances in the appropriate period when those effects occur, even though the cash consequences may occur in a different period.

question

Financial Accounting

answer

What identifies, measures, record, and reports relevant and reliable financial information about companies to present and potential future stakeholders.

question

Generally Accepted Accounting Principles (GAAP)

answer

The guidelines, procedures, and practices that a company is required to use in recording and reporting the accounting information in its audited financial statements.

question

The Securities and Exchange Commission (SEC)

answer

Created by the U.S. Congress to administer the Securities Act of 1933 and the Securities Exchange Act of 1934. The stated mission is to "protest investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." Has the legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets.

question

FASB

answer

U.S. companies. What was formed in 1973 and was codification of Standards as of 7/09 and is present to today?

question

IASB

answer

Foreign companies and established IFRS which are required or permited in roughly 120 countries?

question

CAP

answer

What was formed in 1938 and issued 51 ARBs (Accounting Research Bulletins)?

question

APB

answer

What was formed in 1959 and issued 31 Opinions?

question

AICP

answer

What formed the Committee on Accounting Procedure (CAP) in 1938 which issued Accounting Research Bulletins (ARBs) to establish accounting procedures?

question

Opinions of the Accounting Principles Board

answer

In 1959, the AICP replaced the CAP by forming the Accounting Principles BOard (APB), which issued pronouncements called?

question

Financial Accounting Standards Board (FASB)

answer

The APB was phased out in 1973 and replaced with the what?

question

FASB

answer

However, ARBs and APB Opinions remain sources of GAAP unless they have been specifically superseded or amended by the what?

question

Financial Accounting Foundation

answer

What is the primary organization?

question

FASB

answer

What is the only source of GAAP?

question

IFRS

answer

What is more concept based, less detailed implementation guidance, less extensive industry guidance (lots of red flags, fraud), core standards established in 1998, adoption by the European Union in 2005, (strongly favored by SEC, FASB,AICPA, BIg 4 and most U.S. multinational companies)?

question

GAAP

answer

What is more rule based?

question

Balance Sheet

answer

Assets = Liabilities + Stockholder's Equity

question

Income Statement

answer

Net Income = Revenues - Expenses + Gains - Losses

question

Statement of Cash Flows

answer

Beginning Cash + Net Operating + Net Investing + Net Financing = Ending Cash

question

Statement of Stockholder's Equity (SE)

answer

Contributed Capital + Retained Earnings + Accumulated OCI = Total SE

question

Primary Objective

answer

What provide information that is useful to existing and prospective investors, lenders, and other creditors in making decisions about providing resources to the entity

question

Specific Objectives

answer

To provide information that helps users to assess the amounts, timing and uncertainty of future net cash flows, provide info about a company's economic resources (assets) and claims on the company's resources (liabilities and stockholder's equity), and provide info about changes in company's resources (net income, comprehensive income, cash flows)

question

Relevance and Faithful Representation

answer

What are the Qualitative Characteristics?

question

Relevance

answer

What is Predictive Value, Confirmatory Value, and Materiality?

question

Faithful Representation

answer

What is Completeness, Neutrality, and Free from Error?

question

Mixed Attribute Measurement

answer

What seeks to measure financial statement elements with the most relevant and faithfully represented measure available?

question

Ending Retained Earning Principles Formula

answer

Beginning Retained Earnings + Net Income - Dividends

question

Debt, Owner Contributions , and Prior Year Earnings

answer

How does a business acquire economic resources?

question

Real Accounts

answer

What are balance sheets and they are also called permanent accounts?

question

Nominal Accounts

answer

What are revenues, expenses, and dividends and are also called temporary accounts?

question

Income Statement

answer

What measures the results of operations during a period?

question

Statement of Retained Earnings

answer

What reconciles the balance of retained earnings during the period?

question

End of period closing process

answer

How does net income get into the RE account?

question

End of period closing process or dividend declaration if the company does not use a "dividends" account

answer

How do Dividends get into the RE account?

question

Balance Sheet

answer

What shows the financial condition of the enterprise at the end of the period?

question

Statement of Cash Flows

answer

What reports the cash provided by and used by operating, investing, and financing activities during the period?

question

Net Sales Formula

answer

Sales - Sales Returns & Allowances - Sales Discount =?

question

COGS Formula

answer

Beginning Inventory + Net Purchases + Freight - In = GAFS (COGS available for sale) - Ending Inventory = ?

question

Net Purchase Formula

answer

Freight in + COGS

question

Book Value Formula

answer

Cost - Account Depreciation = ?

question

Direct Write Off Method

answer

What method has no estimate of uncollectible accounts receivable is made?

question

Allowance Method

answer

What method is an estimate of uncollectible accounts receivable IS made and recorded?

question

Entry reversing an adjusting entry

answer

What is a Reversing Entry?

question

Simplify recording transactions in the new accounting period

answer

Purpose of Reversing Entries

question

Retained Earnings

answer

Net Income + Dividends = ?

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