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35 Cards in this Set

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Six Statments of Financial Accounting Concepts
"Objectives of Financial Reporting by Business Enterprises" presents the goals and purposes of accounting

"Qualitative Charachteristics of Accounting Information" examines the charchteristics that make accounting information useful.

"Elements of Financial Statments of Business Enterprises" provides definitions of items in financial statments, such as assets, liabilities, revenues and expenses.

"Recognition and Measurement in Financial Statments of Business Enterprises" sets forth fundamental recognition and measurement criteria and guidance on what information should be formally incorporated into financial statements

"Elements of Financial Statments" Releaces SFAC no 3 and includes not-for-profit organizations

"Using Cash Flow Information and Present Value in Accounting Measurents" provides a framework for using expected future cash flows and present values as a basis for measurement
Basic Objectives begin with
broad concern about information that is useful to investor and creditor decisions
The Basic objectives narrow to
the investor's and creditors interest in the prospect of recieving cash from their investments
The Basic objectives focus on
financial statments that provide information useful in the assesment of porspetive cash flows to the business enterprise
Qualitative charachteristics of accounting
distinguish better information from less useful information for decision making purposes
Two primary qualities that make accounting information useful for decision making
reliablity and revelance
revelance
must be capable of making a difference in a decision, helps users make predictions about the ultimate outcome of events,

must be presented in a timely manner
reliability
faithful representation

verifiable

reasonably free of error and bias
Two secondary qualities
Comparability and Consistency
Comparability
infromation that has been measured and reported in a simliar manner for different enterprises is considered comparable
Consistency
applies the same accounting treatment to similar events
Pro Forma measures are
standard measures that are ajusted for one-time nonrecurring items
Assets
probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events
Liabilities
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets of provide services to other entities in th efuture as a result of past transactions or events
Equity
Residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise the equity is ownership interst.
Investments by Owners
Increases in net assets of a particular enterprise resulting from transfers to it from other entities
Distributions to Owners
Decreases in net assets of a particular enterprise resulting from transferring assets rendering servies or incurring liablities
Comprehensive income
Change in equity of an entity during a period from a transactions and other events from nonowner sources
Revenues
Inflows or other enchancements of assets of an entity or settlement of its liabilities from delivering goods,services, or other activities
Expenses
Outflows or tother using up of assets or incurrences of liabilities
gains
increases in equity from peripheral or incendental transactions of an entiy excepth those tha tresult from revenues or investments by owners
losses
decreases in equity from peripheral or incidentaltransactions of and entity and from all other transactiona and other events except those that result from expenses or distributions to owners
The first group of three elements that describes amounts of resources and claims to resources at a moment in time, these elemets are
assets, liabilities, and equity
The elements that describe transactions, events, and circumstances that affect an enterprise during a period of time
comprehensive income and its components, revenues, expenses, gains, losses, investments to and distributions by owners.
the interaction of moment of time elements that is changed by period of time elements is called
articulation
Four basic assumptions underlie the financial accouting structure
economic entity

going concern

monetary unit

peroidicy
economic entity assumption assumes that
economic activity can be identified with a particular unit of accountability
going concern assumption assumes that
the business will have a long life
monetary unit assumption assumes that
the monetary unit is relevant, simple, universally available, undestandable and useful
peroidicity assumption assumes that
the economic activities of an enterprise can be divided into artificial time periods
There is a tradeoff between ___ and ___ in preparing financial data
relevance; reliability
The four basic principles of accounting are used to record transactions
1) historical cost

2) revenue recogntion

3) matching

4) full disclosure
historical cost principle
requires that most assets and liablities be accounted for and rported on the basis of aquisition price
_____________ continues to be the primary basis for valuation, recording and reporting of _______________ is increasing
historical cost; fair value information
Revenue is generally recognized when
1)realized or realizable
2)when earned