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9 Cards in this Set

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What is the primary focus of Financial Accounting?
The Primary focus of financial accounting is on the information needs of investors and creditors.
What are Generally Accepted Accounting Principles?
Often Abbreviated as GAAP - are a dynamic set of both broad and specific guidelines that companies should follow when measuring and reporting financial information.
What are the organization has the power and resposibility of setting accounting and reporting standards (principles) in the US and Phlippines?
Commission has the power and responsibility for setting acctg and reporting standards (principles) for companies whose securities are publicly traded, but always has delageted the responsibility, not the power, to the private sector - FASB in US, PFASB in Phils.
How do auditors contribute to the decision usefulness of financial statements?
Verifying that they are represented fairly in confirmity with GAAP. The auditors opinion as to the fairness of the financial statements is espressed in the audit report.
What are the 2 primary decision-specific qualities that make acctg information useful?
Relevance and Reliability.
What are the ingredients of Relevance?
1. Predictive value and/or Feedback value. - the information helps predict future events and confirms prior expectations.
2. timeliness - the information must be available before the decision is made.
What are the ingredients of reliability?
1. Verifiability - a concensus among different measures
2. Rep'l. Faithfulness - agreement between measure and a real-world phenomenon that the measure is supposed to represents
3. Neutrality - the information does not favor any particular group of companies nor influence behavior in any specific way.
What are the 4 basic assumptions underlying GAAP?
1. Economic Entity Assumptions
2. Going Concern
3. Periodicity
4. Monetary Unit
What are the 4 kew broad accounting principles that guide acctg practice?
1. Historical Cost
2. Realization
3. Matching
4. Full-Disclosure