Accounting chapter 1 & 2 – Flashcards
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general-purpose financial statements are the product of
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financial accounting
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represents a form of communication through financial reporting but not through financial statements
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presidents letter
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helps in determining whether a business thrives
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competition, markets, & free enterprise
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the objective of financial reporting
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provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors
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is adopted as part of the objective of general-purpose financial reporting
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an entity perspective
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was responsible for issuing accounting research bulletins
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the committee of accounting procedure
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purpose of emerging issues task force
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provide a consensus on how to account for new and unusual financial transactions
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companies that are listed on a stock exchange are required to submit their financial statements to the...
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SEC
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the financial accounting foundation
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oversees the operations of the FASB
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the financial accounting standards board employs a "due process" system which
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enables intrested parties to express their views on issues under consideration
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pronouncements were issued by the accounting principals board
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APB Opinions
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has NOT been instrumental in the development of financial accounting standards in the us?
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IASB
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members of the FASB are...
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independent of any other organization
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what is the purpose of the FASB staff position?
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provide interpretive guidence
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what is NOT a reason that accounting standards may differ across counties?
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language
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user group that influenced the formulation of accounting standards
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government, acedemicians, CPA's & accounting firms
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which group selects members of FASB
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FAF
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all are the regarding FASB codification
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goal in developing the codification, is to provide in all one place all the authoritative literature related to a particular topic. simplify user access to all authoritative us generally accepted accounting principals. changes the way GAAP is documented, presented, and updated.
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relate to the need for one set of international accounting standards
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info tech, mergers, and acquisitions, financial markets
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objectives of financial reporting
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provide financial information about the reporting entity that is useful to present and potential equity investors, lenders,and other creditors in decisions about providing resources to the entity
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Financial accounting
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is the process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties.
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managerial accounting
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is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaaluate a company's operations
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financial statements
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most frequently provided are balance sheet income statement statement of cash flows statement of owners or stockholders equity
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some financial information is better provided, or can be provided only by means of ____________ other than formal financial statments
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financial reporting
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Efficient use of resources often determines whether a business
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thrives
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Financial reporting
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the financial information a company provides to help users with capital allocation decisions about the company
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users
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investors and creditors use financial reports to make their capital allocation decisions
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capital allocaiton
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the process of determining how and at what cost money is allocated among competing interest.
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objective of financial reporting
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general-purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders and other creditors in decisions about providing resources to the entity.
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General-purpose financial statements
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provide financial reporting info to a wide variety of users.
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general purpose financial statements
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issues financial statements, statements help shareholders, creditors suppliers, employees, and regulators to better understand it financial position and related performance
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general purpose financial statements
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provide at the least cost the most useful information possible
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the objective of financial reporting
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identifies investors and creditors as the primary users for general-purpose financial statements
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financial reporting
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its primary focus is on investors and creditors because they have the most critical and immediate need for information in financial reports
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as part of the objective of general-purpose financial reporting, an ________ is adopted
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entity perspective
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a perspective that financial reporting should be focused only on the needs of shareholders--- is not considered appropriate
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proprietary perspective
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decision-usefulness
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investors are interested in financial reporting because it provides information that is useful for making decisions...
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accrual-basis accounting
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it ensures that a company records events that change its financial statements in the periods in which the events occur
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general purpose financial statements
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to meet these needs, and to satisfy the stewardship reporting responsibility of management, companies prepare a single set of...
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common set of standards and procedures
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GAAP, generally accepted accounting principles
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GAAP
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standards that over time have proven to be most useful
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three organizations are instrumental in the development of financial accounting standards (GAAP)
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SEC, AICPA, FASB
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SEC- Securities and exchange commission
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help develop and standardize financial info presented to stockholders
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SEC
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administers the Securities Exchange Act of 1934 and several other acts.
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SEC
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companies that issue securities to the public or are listed on a stock exchange are requited to file audited financial statements with...
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SEC requires registrants to adhere to
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GAAP
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SEC
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relies on the FASB to develop accounting standards
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companies listed on stock exchange must submit their financial statements to the
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SEC
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stop order
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the SEC may issue a ____ ____ which prevents the registrant from issuing or trading securities on the exchanges
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American Institute of Certified Public Accountants (AICPA)
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the national professional organization of practicing certified public accountants, has been an important contributor to the development of GAAP
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Committee on Accounting Precedure (CAP)
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composed of practicing CPA's issued 51 Accounting Research Bulletins
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the _____ created the Accounting Principals Board
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AICPA
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Accounting Principals Board APB, major purposes
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advance the written expression of accounting principals determine appropriate practices narrow the areas of difference and inconsistency in practice
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APB's mission
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to develop an overall conceptual framework to assist in the resolution of problems as they become evident to substantively research individual issues before the AICPA issued pronouncements
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APB's official pronouncements
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APB Opinions- based mainly on research studies and be supported by reason and analysis
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the study group, examined the organization and operation of the APB and determined the necessary changes to attain better results
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Wheat Committee
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Wheat committee
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the replacement of the APB (accounting principals board)
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AICPA established the ______ as the committee authorized to speak for the AICPA in the area of financial accounting and reporting
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Accounting Standards Executive Committee-AcSEC
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Auditing Standards Board
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while the AICPA has been the leader in developing auditing standards through its ____ ____ ___, the Sarbanes-Oxley Act of 2002 requires the public company accounting oversight board to oversee the development of auditing standards.
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Wheat committee recommendations resulted in the creation of a new standard setting structure composed of three organizations
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FAF, FASB, FASAC
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FAF- Financial Accounting Foundation
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selects the members of the FASB and the advisory council, funs their activities, and generally oversees the FASB activities
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FASB- financial accounting standards board
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mission is to establish and improve standards of financial accounting and reporting for the guidance and education and education of the public, which includes issuers auditors and users of financial info
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FASB
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consist of 7 members well-paid, full-time renewable 5 year terms appointed by and answerable only to the FAF sever all ties with other firms not necessary to be a CPA
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Financial Accounting Standards Advisory Council FASAC
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to consult on major policy issues, technical issues, project priorities, and selection and organization of task forces.
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due process
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system that gives interested persons ample opportunity to make their views know
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the FASB issues two major types of pronouncements
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Accounting Standards Updates Financial Accounting Concepts
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the updates amend the accounting standards codification, represents the source of authoritative accounting standards, other than standards issued by the SEC
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Accounting Standards Updates
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EITF, emerging issues task force
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the purpose of the task is to reach a consensus on how to account for new and unusual financial transaction that may potentially create differing financial reporting practices.
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Statement of Financial Accounting Concepts
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a cohesive set of interrelated concepts- conceptual framework- that will serve as tools for solving existing and emerging problems in a consistent manner.
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Statement of financial accounting concepts
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does not establish GAAP
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GAAP
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generally accepted accounting principals
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Financial Accounting Standards Board Accounting Standards Codification
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to provide in one place all the authoritative literature related to a particular topic.
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Codification
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will simplify user access to all authoritative U.S. generally accepted accounting principals. Changes the way GAAP is documented, presented, and updated.
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Financial Accounting Standards Board Codification Reasearch System CRS
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is an online, real-time database that provides easy access to the codification
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CRS & Codification
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provide a topically organized structure, subdivided into topic, subtopics, sections, and paragraphs, using a numerical index system
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GAAP
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is as much a product of political action as it is of careful logic or empirical findings.
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Sarbanes-Oxley Acy
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was passed in response to a string of accounting scandals at companies like ENRON, CENDANT, SUNBEAM, etc.
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Public Company Accounting Oversight Board PCAOB
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has an oversight and enforcement authority and establishes auditing, quality control, and independence standards and rules
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internal controls
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a system of checks and balances designed to prevent and detect fraud and errors
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expectations gap
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what the public thinks accountants should do and what accountants think they can do
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financial reporting challanges
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nonfinancial measurements forward-looking info soft assets timeliness understandability
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two sets of rules accepted for international use
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GAAP & IFRS international financial reporting standards
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the IFRS is issued by the London-based
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IASB, international accounting standards board
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many similarities between GAAP &
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IFRS, international financial reporting standards
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IFRS insights
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understand the changes that are taking place I the financial reporting area as we move to one set of international standards.
