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51 Cards in this Set
- Front
- Back
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Financial accounting |
the process that culminates in the preparation of financial reports on enterprise for use by both internal and external parties. |
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What is the objective of financial reporting? |
To provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors. |
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What two things are investors interested in assessing? |
1. The company's ability to generate net cash inflows 2. Management's ability to protect an enhance the capital providers' investments |
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Whats the purpose of the SEC? |
to help develop and standardize financial information presented to stockholders |
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What's the purpose of the AICPA? |
Important contributor in the development of GAAP |
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What's the purpose of FASB? |
1. Accounting Standards updates 2. Financial Accounting Concepts FASB codification is sweet |
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What are some financial reporting challenges? |
1. Non-financial measurements, Forward looking information, soft assets, timeliness, understandability |
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What is more rules based, GAAP or IFRS? |
GAAP |
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How are FASB and GAAP related when it comes to user groups? |
User groups often pressure the FASB to influence GAAP |
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How are the codification and GAAP similar to one another? |
The codification works to omit any redundancies within GAAP? |
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An online database that changes as the principles are updated... |
CRS |
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What is the entity perspective? |
Companies are viewed as seperate and distinct from their owners (present shareholders) using this perspective |
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What is the proprietary perspective? |
financial reporting should be focused only on the needs of shareholders |
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What's the connection between the Wheat Committee and the APB? |
The wheat committee ultimately led to the replacement of the APB |
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What is capital allocation? |
the process of determining how and at what cost money is allocated among competing interests |
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What is the first step taken in the establishment of a typical FASB statement? |
Topics are identified and placed on the board's agenda |
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What are the 2 fundemental qualities of accounting? |
Relevance and Faithful Representation |
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What are the ingrediants of relevance? |
Predictive value, confirmatory value, materiality(includes quantitative and qualitative characteristics) |
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What are the ingrediants of faithful representation? |
completeness, neutrality, free from error |
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What are the 4 enhancing qualities? |
Comparability, Verifiability, Timeliness, Understandability |
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What are assets? |
Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events |
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What are liabilities? |
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. |
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What is equity? |
Residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest |
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What is investment by owners? |
Increases in net assets of a particular enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests in it. |
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What are distributions to owners? |
Decreases in net assets of a particular enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners. |
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What is comprehensive income? |
Change in equity (net assets) of an entity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distribution to owners. |
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What are revenues? |
Inflows or other enhancements of assets of an entity or settlement of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations. |
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What are expenses? |
Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations. |
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What are gains? |
Increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from revenues or investments by owners |
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What are losses? |
Decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from expenses or distributions to owners. |
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What are the 4 basic assumptions of accounting? |
1. Economic Entity 2. Going Concern 3. Monetary unit 4. Periodicity |
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What is the economic entity assumption? |
the company keeps its activity separate and distinct from its owners and any other business unit |
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What is the Going Concern assumption? |
The company will have a long life |
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What is the monetary unit assumption? |
money is the most effective means of expressing to interested parties changes in capital and exchanges of goods and services |
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What is the periodicity assumption? |
a company can divide its economic activities into artificial time periods |
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What are the 4 principles of accounting? |
1. Measurement 2. Revenue Recognition 3. Expense Recognition 4. Full Disclosure |
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What's included in measurement principle? |
Historical and Fair value cost |
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What is historical cost? |
report the asset/liability on the basis of the acquisition price. Advantage because its verifiable |
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What is fair value? |
The price that would be received to sell an asset at the current date based on the market. |
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What is the revenue recognition principle? |
Recognize revenue in the accounting period in which the performance obligation is satisfied |
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What is the expense recognition principle? |
match expenses with revenues |
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What is the full disclosure principle? |
The nature and amount of information included in financial reports reflects a series of judgemental tradeoffs |
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T or F. Extraoridinary items are not reported on income statement under IFRS |
TRUE |
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T or F. IFRS provides the same options for reporting comprehensive income as GAAP |
TRUE |
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What is an advantage of the nature of expense method? |
It is simple to apply because allocations of expense to different functions are not necessary |
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Is the non-controlling interest section of the income statement required under GAAP and IFRS? |
Yep |
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What is solvency? |
The ability of a company to pay its debts as they mature |
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True or False. The presentation formats required by IFRS and GAAP for the balance sheet are similar |
False |
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How are current assets under IFRS generally listed? |
In the reverse order of their expected conversion to cash |
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True or false. Companies that use IFRS may report non-current assets before current assets on the statement of financial position |
TRUE |
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A company purchased a tract of land and expects to build in 5 years. During the 5 years before construction, the land will be idle. Under IFRS, the land should be reported as ........ |
a long term investment |
