Acct 7012 Ch 1

Front 1

Objectivity Concept

Back 1

Objectivity: financial statement information is supported by independent, unbiased evidence other than someone’ s opinion or imagination.

This concept increases the reliability and verifiability of financial statement information

Front 2

cost principle is also called

Back 2

measurement principle

Front 3

cost principle

Back 3

(=measurement principle)

requires that assets be recorded at the cash amount (or its equivalent) at the time that an asset is acquired.

Front 4

revenue recognition principle

Back 4

revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected.

Front 5

revenue recognition principle - accural or cash basis?

Back 5

revenue recognition principle is part of the accrual basis of accounting (as opposed to the cash basis of accounting)

Front 6

expenses recognition, definition

Back 6

match expenses with related revenues in order to report a company's profitability during a specified time interval.

Front 7

expenses recognition, is also called

Back 7

matching

Front 8

full disclosure principle

Back 8

requires information pertinent to an investing or lending decision to be included in the notes to financial statements or in other financial reports

Front 9

ongoing concern assumption

Back 9

the company will continue on long enough to carry out its objectives and commitments

Front 10

time period assumption

Back 10

allows the accountant to divide up the complex, ongoing activities of a business into periods

Front 11

monetary unit assumption

Back 11

the U.S. dollar is assumed to be constant (no change in purchasing power) over time.

Front 12

economic entity assumption

Back 12

keep the sole proprietor's business transactions separate from the owner's personal transactions even though a sole proprietorship is not legally separate from the owner.

Front 13

The statement of cash flows

Back 13

The statement of cash flows

cash inflows and outflows

from a company’ s

operating, investing, and financing activities.

Front 14

accounting

Back 14

the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses

Front 15

managerial accounting

Back 15

Managerial accounting is the process of identifying, measuring, analyzing, interpreting and communicating information for the pursuit of an organization's goals.

also known as cost accounting

Front 16

Record keeping vs accounting

Back 16

record keeping = book keeping = recording financial events.

accounting is more. also measuring and analyzing events and transactions

Front 17

fraud triangle

Back 17

3 factors typical exist for fraud to occur:

opportunity, rationalization, financial pressure.

focus on prevention. Ex. good records, locks (passwords and physical locks), independent reviews.

Front 18

what is GAAP (what do letters stand for)

Back 18

Generally accepted accounting principles

Front 19

aims of GAAP

Back 19

to make information relevant reliable and comparable

Front 20

what is SEC

Back 20

SEC is legal authority to set GAAP. A government agency.

Front 21

what is FASB

Back 21

Financial Accounting Standards Board

private sector group delegated by SEC to set US Generally accepted accounting principles.

Front 22

The 4 accounting principles

Back 22

measurement (cost) principle

revenue recognition principle

expense recognition principle

full disclosure principle

Front 23

3 types of business entitites

Back 23

sole proprietorship

partnership

corporation

Front 24

retained earnings

Back 24

For month ended

RE start

plus NI

less DIV

= new RE

Front 25

where does common stock on on balance sheet

Back 25

equity.

not under liability

Front 26

non executive employee

Back 26

a non-executive employee is an external information user. similar to labor union.

Uses financial statements to judge fairness of wages etc.