Test #1

Front 1

Qualitative Characteristics (Second Level)

Back 1

-

Front 2

Fundamental Qualities

Back 2

-

Front 3

Relevance (pertains to the decision at hand)

Back 3

-

Front 4

Predicative Value

Back 4

information helps users make predictions about future events and/or transactions

Front 5

Confirmatory Value

Back 5

information confirms or corrects prior expectations

Front 6

Materiality

Back 6

the threshold for recognition/disclosure; relates to the importance or significance or an amount

Front 7

Faithful Representation (information can be relied upon to reflect what really happened or existed)

Back 7

-

Front 8

Completeness

Back 8

information is complete and includes all necessary facts

Front 9

Neutrality

Back 9

information is free from bias

Front 10

Free from error

Back 10

information is accurate

Front 11

Enhancing Qualities

Back 11

-

Front 12

Comparability

Back 12

Accounting methods/measurements are similar from company to company and from period to period within a company (ie. consistent)

Front 13

Verifiability

Back 13

others can reach the same conclusions or observe the same results; role of the external auditors

Front 14

Timeliness

Back 14

information must be timely to be relevant

Front 15

Understandability

Back 15

information is classified, characterized, and presented clearly/concisely such that a reasonably informed user can see its significance

Front 16

Basic Elements (Balance Sheet)

Back 16

-

Front 17

Assets

Back 17

probable future resources owned/controlled by a company as a result of past events

Front 18

Liabilities

Back 18

probable future sacrifices of a resource resulting from a present obligation related to past events

Front 19

Equity

Back 19

what is left for owners after resources cover sacrifices; known as the "residual" interest

Front 20

Basic Elements (Income Statement)

Back 20

-

Front 21

Revenues & Expenses

Back 21

accrual based inflows/outflows from primary business operations; often do not equal changes in cash flow

Front 22

Gains and Losses

Back 22

accrual based inflows/outflows from incident/peripheral transactions

Front 23

PCAOB

Back 23

Public Company Accounting Oversight Board- created by Sarbanes-Oxley (post Enron) to have oversight and enforcement authority and establishes auditing, quality control, and independence standards/rules.

Front 24

Deferrals

Back 24

Prepaid Expenses, Unearned Revenues

Front 25

Accruals (Cash flow after recognized on I/S)

Back 25

Accrued Expenses, Accrued Revenue

Front 26

Recognition and Measurement Concepts

Back 26

-

Front 27

Economic Entity Assumption

Back 27

all business transactions can be associated with one or more economic unit for financial reporting

Front 28

Going Concern Assumption

Back 28

all businesses will continue to operate indefinitely

Front 29

Monetary Unit Assumption

Back 29

all financial information is reported in US dollars and not adjusted for inflation

Front 30

Periodicity Assumption

Back 30

business activity can be divided into artificial time periods for financial reporting purposes; the SEC requires annual an quarterly reports

Front 31

Revenue Recognition Principle

Back 31

recognize revenue when it is realized or realizable and earned.

Front 32

Expense Recognition Principle

Back 32

recognize expenses in the same period as the revenue they helped generate

Front 33

Practical rules for expense matching

Back 33

-

Front 34

Direct Association

Back 34

direct link between expense and revenue; expense in period of sale. ( COGS, Sales Commission, Warranty)

Front 35

Rational and systematic allocation

Back 35

some link between expense and revenue; expense when incurred. (Utilities, Rent, Wages, Taxes)

Front 36

Expense Immediately

Back 36

no determinable link between expense and revenue; expense immediately. (Advertising, R&D)

Front 37

Other Comprehensive Income

Back 37

non owner changes in equity that bypass the income statement. Must be displayed as: a second income statement, a combined statement of comprehensive income, as part of the statement of stockholders equity.

Front 38

Liquidity

Back 38

Time it takes to convert a non-cash asset into cash or realize its benefit >>short-term measure.

Front 39

Solvency

Back 39

ability to meet debt obligations as they come due >> long-term measure

Front 40

Financial Flexibility

Back 40

Relates to debt vs. equity mix in the capital structure

Front 41

NRV (Net Realizable Value)

Back 41

The net amount of receivables the company expects to actually collect. This is the amount that A/R is valued on the balance sheet. It is = A/R - Allowance for Bad Debt

Front 42

Assignment (Loan)

Back 42

the owner of the accounts receivable borrows cash by writing a promissory note designating the accounts receivable as collateral.

Front 43

Factoring (Sale)

Back 43

these transfers of accounts and notes receivable may be without recourse or with recourse.