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89 Cards in this Set
- Front
- Back
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Accounting Principles Board |
Group that issued 31 opinions between 1959 and 1973 |
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SEC |
This groups role in formulating accounting principles is sometimes primary and sometimes secondary |
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FASB |
All members of this 7-member group are remunerated, serve full time, and are independent of any companies of institutions |
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FASB |
This group's mission is to establish and improve standards of financial accounting and reporting that are followed in the U.S. |
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AICPA |
U.S. professional organization that develops and grades the CPA exam |
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CAP |
Group that issued 51 ARBs that dealt with specific accounting problems, but did not provide an overall structure of accounting principles |
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EITF |
The purpose of this group is to issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly |
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GAAP |
The most significant current source of general accepted accounting principles in the U.S. nongovernmental sector |
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FASB |
Appointed by the FAF |
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PCAOB |
Has oversight and enforcement authority and establishes auditing, quality control, and independence standards and rules |
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APB |
Private standard-setting organization from 1959 to 1973, whose mission was to develop an overall conceptual framework. Its official pronouncements were to be based mainly on research studies and be supported by reasons and analysis. issued 31 opinions in its lifetime. |
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ARB |
Fifty-one bulletins from the Committee on Accounting Procedure (CAP) during the years 1939 to 1959, issued to deal with accounting Problems as they arose. Subsequently, the AICPA created it to provide a structured body of accounting principles. |
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Account Standards Updates |
The products of standard-setting included in the FASB Codification. include the background and basis for conclusions for the new pronouncement in a common format, regardless of the form in which such guidance may have been issued. also issued for amendments to the SEC content in the Codification. |
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Assumption |
One of the parts in the third level of the conceptual framework There are four basic assumptions: (1) economic entity, (2) going concern, (3) monetary unit, and (4) periodicity. |
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Comparability |
An enhancing qualitative characteristic of accounting information, which describes information that is measured and reported in a similar manner for different companies. |
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Completeness |
One of the ingredients of the fundamental quality of faithful representation. all the information necessary for faithful representation is provided. |
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Conceptual Framework |
For the accounting profession, a coherent system of objectives and fundamentals established by the FASB, which determine the nature, function, and limits of financial accounting and which lead to consistent accounting standards. |
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Confirmatory Value |
One of the ingredients of the fundamental quality of relevance, it helps to correct prior expectations based on previous evaluations of financial reporting information. |
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Consistency |
An aspect of comparable information, which indicates that a company applied the same accounting treatment to similar events from period to period. A company can change methods, but it must first demonstrate that the newly adopted method is preferable to the old and then must disclose in the financial statements the nature and effect of the accounting change. |
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Expense Recognition Principle |
Accounting principle that dictates that the recognition of expenses is related to net changes in assets and earning revenues, that is, “let the expense follow the revenues.” |
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Fair Value |
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. |
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Faithful Representation |
One of the qualitative characteristics of accounting information. information must be complete, free from error, and neutral. |
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Full Disclosure Principle |
Accounting principle that dictates that in deciding what information to report, companies follow the general practice of providing information that is of sufficient importance to influence the judgment and decisions of an informed user. It recognizes that the nature and amount of information included in financial reports reflects a series of judgmental trade-offs between sufficient detail that makes a difference to users, sufficient condensation to make the information understandable, and the costs and benefits of providing the information. |
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Historical Cost Principle |
An accepted accounting principle that companies account for and report most assets and liabilities on the basis of acquisition price. To the extent that historical cost is free from error and neutral, it contributes to faithful representation. |
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Matching Principle |
Accounting principle that dictates that efforts (expenses) be matched with accomplishment (revenues) whenever it is reasonable and practicable to do so. |
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Neutrality |
One of the ingredients of the fundamental quality of faithful representation, neutrality indicates that a company cannot select information to favor one set of interested parties over another. Unbiased information must be the overriding consideration. |
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Periodicity |
Accounting assumption that implies that a company can divide its economic activities into artificial time periods. These time periods vary, but the most common are monthly, quarterly, and yearly. |
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Predictive Value |
One characteristic of relevant information, indicating that information must help users predict the ultimate outcome of past, present, and future events. |
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Qualitative Characteristics: Relevance and Faithful representation |
Part of the second level of the conceptual framework of accounting; the characteristics of accounting information that distinguish better (more useful) information from inferior (less useful) information for decision-making purposes. |
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Relevance |
One of the qualitative characteristics of accounting information, which describes information capable of making a difference in a decision. information needs have predictive or feedback value and is material. |
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Timeliness |
An enhancing qualitative characteristic of accounting information, indicating that information should be available to decision-makers before it loses its capacity to influence their decisions. |
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Understandability |
An enhancing qualitative characteristic of accounting information that lets reasonably informed users see its significance. |
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Verifiability |
An enhancing qualitative characteristic of accounting information, indicating that similar results will occur when independent third parties (e.g., auditors) measure using the same methods. |
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Economic entity, going concern, monetary unit, periodicity |
Four Basic Assumptions |
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Assets |
Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. |
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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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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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Investments 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 (or equity) in it. Assets are most commonly received as investments by owners, but that which is received may also include services or satisfaction or conversion of liabilities of the enterprise. |
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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. Distributions to owners decrease ownership interests (or equity) in an enterprise. |
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Comprehensive income |
Change in equity (net assets) of an entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. |
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Revenues |
Inflows or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) 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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Expenses |
Outflows or other using up of assets or incurrences of liabilities (or a combination of both) 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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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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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.12 |
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Accrued Expenses |
Expenses incurred but not yet paid or recorded at the statement date |
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Accrued Revenues |
Revenues recognized but not yet received in cash or recorded at the statement date. result from the passing of time (e.g., interest revenue and rent revenue) or from unbilled or uncollected services that a company performed (e.g., commissions and fees). |
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Book Value |
The difference between a depreciable asset's cost and its related accumulated depreciation. Book value of an asset generally differs from its fair value because depreciation is a means of cost allocation, not of valuation. |
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Closing Entry |
Journal entries made at the end of a company's annual accounting period to transfer the balances of temporary accounts to a permanent owners' equity account |
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Adjusting Entry |
Adjustments made at the end of the accounting period to ensure that a company has recorded revenues in the period in which it satisfies the performance obligation and recognized expenses in the period in which it incurs them—in other words, that it has followed the revenue recognition and expense recognition principles. Companies often prepare adjustments after the balance sheet date but date the entries as of the balance sheet date. |
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Reversing Entry |
Journal entries, made at the beginning of the next accounting period, that are the exact opposite of the adjusting entries made in the previous period. |
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Comparability |
Qualitative characteristic being employed when companies in the same industry are using the same accounting principles. |
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Confirmatory Value |
Quality of information that confirms users’ earlier expectations. |
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Consistency |
Imperative for providing comparisons of a company from period to period. |
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Neutrality |
Ignores the economic consequences of a standard or rule. |
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Verifiability |
Requires a high degree of consensus among individuals on a given measurement. |
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Relevance |
Predictive value is an ingredient of this fundamental quality of information. |
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Comparability, Verifiability, Timeliness, and Understandability |
Four qualitative characteristics that are related to both relevance and faithful representation. |
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Materiality |
An item is not recorded because its effect on income would not change a decision. |
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Faithful Representation |
Neutrality is an ingredient of this fundamental quality of accounting information.a |
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Relevance and Faithful Representation |
Two fundamental qualities that make accounting information useful for decision-making purposes. |
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Issuance of interim reports is an example of what enhancing quality of relevance? |
Timeliness |
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Gains, Losses |
Arises from peripheral or incidental transactions. |
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Liabilities |
Obligation to transfer resources arising from a past transaction. |
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Investments by owners, comprehensive income |
Increases ownership interest. |
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Distributions to owners |
Declares and pays cash dividends to owners. |
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Comprehensive Income |
Increases in net assets in a period from nonowner sources. |
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Assets |
Items characterized by service potential or future economic benefit. |
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Comprehensive Income |
Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners. |
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Revenues, Expenses |
Arises from income statement activities that constitute the entity’s ongoing major or central operations. |
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Equity |
Residual interest in the assets of the enterprise after deducting its liabilities. |
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Revenues |
Increases assets during a period through sale of product. |
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Distribution by owners |
Decreases assets during the period by purchasing the company’s own stock. |
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Comprehensive Income |
Includes all changes in equity during the period, except those resulting from investments by owners and distributions to owners. |
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Measurement Principle-Historical Cost |
Fair value changes are not recognized in the accounting records. |
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Full Disclosure Prinicple |
Financial information is presented so that investors will not be misled. |
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Expense Recognition Principle |
Intangible assets are capitalized and amortized over periods benefited. |
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Materiality |
Repair tools are expensed when purchased. |
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Measurement Principle-Fair Value |
Agricultural companies use fair value for purposes of valuing crops. |
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Economic Entity Assumption |
Each enterprise is kept as a unit distinct from its owner or owners. |
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Full Disclosure Principle |
All significant post-balance-sheet events are reported. |
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Revenue Recognition Principle |
Revenue is recorded at point of sale. |
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Full Disclosure Principle |
All important aspects of bond indentures are presented in financial statements. |
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Expense Recognition, Revenue Recognition Principles |
Rationale for accrual accounting. |
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Economic Entity Assumption |
The use of consolidated statements is justified. |
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Periodicity Assumption |
Reporting must be done at defined time intervals. |
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Expense Recognition Principle |
An allowance for doubtful accounts is established. |
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Measurement Principle- Historical Cost |
Goodwill is recorded only at time of purchase. |
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Expense Recognition Principle |
A company charges its sales commission costs to expense. |
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Violates Economic Entity |
The president of Gonzales, Inc. used his expense account to purchase a new Suburban solely for personal use. The following journal entry was made. Miscellaneous Expense 29,000 Cash 29,000 |
