Financial Accounting Ch.2 (POWER POINT NOTES) – Flashcards
Unlock all answers in this set
Unlock answersquestion
The _____________ _____________ is based on the ______________ __________.
answer
income statement; matching concept
question
Companies may ____________________ (report) revenue in the income statement in a different accounting period from the period in which they collect the related cash.
answer
recognize
question
Focus is on the ______________________, NOT the timing of cash flows.
answer
timing of events
question
Since we need to focus on the timing of event and not the timing cash flows. This explains why we need a ______________________________________.
answer
separate statement of cash flows.
question
The phrase "accrual" encompasses both _________________ and ________________.
answer
"accruals" and "deferrals"
question
event occurs -----> cash exchange
answer
accrual
question
cash exchange ------> event occurs
answer
deferral
question
_______________ and _______________ can be accrued or deferred
answer
revenue; expenses
question
Are cash receipts always revenue?
answer
No
question
what you have today is the cumulative result of lifetime activities (assets, liabilities, and equity [C/S & R/E])
answer
permanent accounts
question
periodic sums that represent activities over a particular period (revenues, expenses, and dividends)
answer
temporary accounts
question
is the set of relationships between the board of directors, management, shareholders, auditors and other stakeholders that determines how a company is operated
answer
corporate governance
question
What is the importance of ethics in accounting?
answer
-the accountant's role requires trust and credibility -accounting information is worthless is the accountant is not trustworthy -therefore, the accounting profession requires high ethical standards
question
What is the code of professional conduct (AICPA)
answer
-exercises sensitive professional and moral judgements, act in a way to serve the public interest, perform with the highest sense of integrity, be objective and independent, in fact and appearance, exercise due care
question
prompted by the audit failures of Enron, WorldCom, and others
answer
Sarbanes-Oxley (SOX) Act of 2002
question
What did the Sarbanes-Oxley Act of 2002 create?
answer
-Created the public company accounting oversight board (PCAOB) -Requires management to certify financial statements -Imposes harsh penalties on management violations
question
What is included in the fraud triangle?
answer
pressure, opportunity, rationalization
question
How can companies reduce/minimize the fraud "opportunity"?
answer
by implementing internal controls
question
In an accounting problem purchasing "on account" means ___________________
answer
accounts payable
question
In an accounting problem selling "on account" means ______________________.
answer
accounts receivable
question
When a customer pays a company in advance, a company has an obligation to the customer. What is this obligation called?
answer
unearned revenues
question
Where is the unearned revenue shown on the balance sheet?
answer
under liabilities
question
Do we put unearned revenue on the income statement and use it to compute net income?
answer
no we don't
