• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/106

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

106 Cards in this Set

  • Front
  • Back
What is accounting?
identification measurement and communication of economic entities to interested users
According to GAAP standards whar is an economic entity?
a for profit company
what 5 financial statements are GAAP?
balance sheet, income statement, statement of cash flows, statement of owner's equiy and notes disclosures
What 6 financial statements are not GAAP?
presidents letter, prospectuses, SEC repoting, news releases, forecasts, enviromental report
What is a disclosure of information?
notes in the financial statements
What are the 4 challenges that are facing financial accounting?
non-financial measurements (people) forward looking information, soft assets, and timeliness (all steps take time)
What is the importance of financial accounting? (3)
1.) useful to present and potential investors, creditors and other users making investment credit, and simlar decisions
2.) helps present and potential investors, creditors, and users in assesing the amounts, timing and uncertainty of prosepective cash receipts
3.) clearly portrays the economic resources of an enterprise, the claims to those resources and the effects of transcation events and circumstances that change its resources and claims to those resources
what does SEC stand for?
securities and exchange commision
What does AICPA stand for?
American Institue of certified public accountants
What does FASB stand for?
financial accounting standards board
In what year was the Sarbanes Oxley Act enacted?
2002
What is the mission of FASB?
to establish and improve standards of financial accounting and reporting
what year was FASB created?
1973
What are the 2 premises of FASB?
they are responsive to the entire economic community and they work in full view of the public
What are the 5 steps of the due process that FASB relies on?
step 1 - topic placed on agenda
step 2 - rsearch conducted and discussion memorandum issued
Step 3 - public hearing
Step 4 - board evaluates research, public response and issues exposure draft
Step 5 - board evaluates responses and issues final statement of financial accounting standard (GAAP)
What is issued by the FASB? (3)
standards, interpretations and staff postions
financial accounting standards
emerging issues task force statements
What is decision uselfulness?
how info is used by the people who need it
what is qualitative chracteristics?
distinguish better information from nferior information for better decision making purposes
Who identifies qualitative chracterisitics?
FASB
What are the 2 primary qualities of the 2nd level?
relevance and reliability
What are the 2 secondary qualities of the 2nd level?
comparability and consistency
What is relevance?
making a diffrence in a decision
What are the 3 measurements whithin relevance?
predictive value, feedback value and timeliness
What are the 3 measurements whithin reliability?
verifiable, representational faithfulness, and neutral
What is "verfiable"?
objectively determined
What is "representational faithfulness"?
the picture is fair
what is "neutral"?
free of error or bias
what is comparability?
infor that is reported and measured in a simlar manner of different companies
what is consistency?
when a company applies the same accounting treatment to similar events from period to period
What is IFRS?
international financial reporting standards
Who is hoping to madate IFRS?
SEC
who is required to use IFRS in the future?
public companies
What are the 4 global criticisms?
cost, lack of consistency, specific industry issues, and comparability issues
what are the 4 advantages of IFRS?
uniformity, more reliable, saves time and money in the long run
What is one diffrence that IFRS introduces?
the balance sheet is set up more like a statement of cash flows
How many countries adopted IFRS (U.S. standards) in 2007?
29
How many countries adopted IFRS (U.S standards) in 2008?
159
What are the 4 assumpitions?
economic entity, going concern, monetary unit, and periodicity
what is economic entity?
company keeps its activity seperate from its owners and other businesses
what is going concern?
assumpition that a company will last long enough to fulfilll its objectives and commitments;
What is the monetary unit assumption?
money is the common demnominator and the montary unit is stable with no regard to inflation
what is the periodicity assumpition?
that a company can divide its economic activity into time periods
what is the historical cost?
the price established by the exchange transaction "the cost"
What are the 4 issues with historical cost?
provides an historical benchmark for measuring historical trends
fair value information may be more useful
FASB issued SFAS 15X "Fair Value Measurements"
reporiting of fair value info is increasing
what is the revenue recognition principle?
generally occurs when revenue is reliazed and when revenue is earned
what are the 3 exceptions to the revenue recognition principle?
if you receive revenue during production, at the end of production, or upon the recepit of cash.
What is the matching principle?
efforts should be matched with accomplishments whenever it is reasonable and practicle to do so
What are the 2 examples of product costs?
material and labor
What are two exapmples of period costs?
salaries and administrative costs
what is the full disclosure principle?
providing info that is of suffiecient importance to influence the judgement and decisions of an informal user
what is financial disclosure provided through? (3)
financial statements
notes to the financial statements
supplementary info
what are the 4 principles?
historical cost, revenue recognition, matching, and full disclosure
what are the 4 constraints?
cost benefit, materiality, industry practice, and conservatism
what is the cost benefit constraint?
the cost of providing the info must be weighted against the benefits that can be derived from using it
what is the materiality constraint?
an item is material if its inclusion or omission would influence or change the judgement of a reasonable person
what is the industry practice constraint?
the peculiar nature of some industries and businesses concerns sometimes requires departure from basic accoutning theory
what is the conservatism constraint?
when in doubt choose the solution that will be least likely to overstate asstes and income.
What are the three main objectives of financial accounting?
to provide information
useful in investment and credit decisions
useful in acessing future cash flows and
to provide information about enterprise resources, claims to resources and changes in them
What are the 10 elements of financial accounting?
assets, liabilities, equity, investment by owners, distribution by owners, comprehensive income, revenues, expenses, gains, losses
List the 4 things the conceptual Framework of Financial Accounting consists of?
Objectives, Qualitative chracteristics, elements, and recognition and measurement concepts
What are the 4 accounting assumptions?
economic entity, going concern, monetary unit, and periodicity
What are the 4 Accounting principles?
measurement, revenue recognition, expense recognition, full disclosure
What are the 4 accounting constraints?
cost benefit, materiality, industry practice, conservatism
What 3 elements make up "Moment in TIme"
assets liabilities and equity
What 7 elements make up "period of time"
Investment by owners, distribution by owners, comprehensive income, revenues, expenses, gains and losses
What are the 5 steps of the accounting cycle?
journalization, posting, adjustments, statment preperation and closing
What is a list of each account and its balance; used to prove equality of debit and credit balances?
trail balance
What are the 4 trial balances? (in order)
Unadjusted trial balance, trial balance, adjusted trial balance and post-closing trial blance
What are the order of elements in the ledger? (5)
assets liabilities equity revenues and expenses
When are revenues recorded?
in the period in which they are earned
When are expenses recorded?
recognized in the period in which they are incurred
What are needed to ensure that the revenue recognition and matching principles are followed?
adjusting entries
What are the 2 types of deferrals/prepayments?
prepaid expense or unearned revenue
What are the 2 types of accruals?
accrued assets/ revenue and accrued liabilities/expenses
What are the 5 types of adjusting entries?
1.) prepaid expense
2.) unearned revenue
3.) accrued assets/revenues
4.) accrued liabilities/expenses
5.) accounting estimates
What is a prepaid expense and what accounts are affected?
company incurs a cost and debits an asset acvcount to show service or benefit and they expire through time with use or consumption;
asset decreasing and expense account increases
What will be overstated/understated if an adjusting entry for a prepaid expense is not made?
assets wil be overstated and expenses will be understated
What is unearned revenues?
receipt of cahsh that is recorded as a liability because the revenue has not been earned
What does an adjusting entry in unearned revenues result in?
decrease in liabilities and an increase in the revenue account
What will be understated/overstated if an adjusting entry for unearned revenues is not made?
revenue would be understated and liabilities would be overstated
what is the diffrence between accruals and prepayments?
accruals have no original entry
what is accrued revenue?
revenue recrded before cash recepit
If accrued revenue is not recorded will acconts be overstated or understated?
all accounts affected will be understated
what is an accrued expense?
expense recorded before cash payment
what is the formula to calculate interest?
Principal X time X interest
if an adjusting entry for accrued expenses will the entrys be overstated or understated?
all accounts affected will be understated
What is the journal entry dealing with depreciaition?
depreciation exp (debit)
Accumulated depreciation (credit)
what is the journal entry dealing with doubtful accounts?
bad debt expense (debit)
allowance for doubtful accounts (credit)
What 3 financial statements are prepared directly from the adjusted trial balance?
1.) income statement
2.) statement of retained earnings
3.) balance sheet
what shows the balance of all accounts, after adjusting entries, at the end of the accounting period?
adjusted trial balnce
why are closing entries done?
to get the ledger ready for the next accounting period
what does the closing process close out?
revenues expenses and divideneds
what are the 4 steos to the closing process?
1.) close out revenues to income summary
2.) close out expenses to income summary
3.) close out income summary to retained earnings
4.) close out divideneds to retained earnings
what is income summary?
a closing account used in closing process (temporary account)
what is the list of accounts and their balances after the closing process?
post-closing trial balance
what are the three accounts in the post closing trial balance?
assets liabilities and equity
What is an asset?
business owns it
What is a liability?
obligation to an outsider
What is equity?
owner claims and residual interest
What is investments by owners?
issuing stock (increase equity)
What is distribution to owners?
diviended (decrease equity)
what is comprehensive income?
a non traditional change in equity (foreign currency exchange)
What is revenue?
main source of earnings
what are expenses?
immediate cost of gathering revenue
What are gains?
incidental transactions that increase equity
What are losses?
incidental transactions that decrease equity