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52 Cards in this Set

  • Front
  • Back

Liability



Obligation to transfer cash or other resources as a result of a past transaction.

Distribution to owners

Dividends paid by a corporation to its shareholders.

Revenue

Inflow of an asset from providing a good or service.

Assets, liabilities and equity

The financial position of a company.

Comprehensive income

Increase in equity during a period from nonowner transactions.

Gain

Increase in equity from peripheral or incidental transaction.

Loss

Sale of an asset used in the operations of a business for less than the asset’s book value.

Equity

The owners’ residual interest in the assets of a company.

Asset

An item owned by the company representing probable future benefits.

Net income

Revenues plus gains less expenses and losses.

Investment by owner

An owner’s contribution of cash to a corporation in exchange for ownership shares of stock.

Expense

Outflow of an asset related to the production of revenue.

Predictive value

Information is useful in predicting the future.

Relevance

Pertinent to the decision at hand.

Timeliness

Information is available prior to the decision.

Distribution to owners

Decreases in equity resulting from transfers to owners.

Confirmatory value

Information confirms expectations.

Understandability

Users understand the information in the context of the decision being made.

Gain

Results if an asset is sold for more than its book value.

Faithful representation

Agreement between a measure and the phenomenon it purports to represent.

Comprehensive income

The change in equity from nonowner transactions.

Materiality

Concerns the relative size of an item and its effect on decisions.

Comparability

Important for making interfirm comparisons.

Neutrality

The absence of bias.

Recognition

The process of admitting information into financial statements.

Consistency

Applying the same accounting practices over time.

Cost effectiveness

Requires consideration of the costs and value of information.

Verifiability

Implies consensus among different measurers.

Identify the concept. Jim Marley is the sole owner of Marley’s Appliances. Jim borrowed $100,000 to buy a new home to be used as his personal residence. This liability was not recorded in the records of Marley’s Appliances.

Materiality

Identify the concept. Apple Inc. distributes an annual report to its shareholders.

The economic entity assumption

Identify the concept. Hewlett-Packard Corporation depreciates machinery and equipment over their useful lives.

The periodicity assumption

Identify the concept. Crosby Company lists land on its balance sheet at $120,000, its original purchase price, even though the land has a current fair value of $200,000.

The historical cost (original transaction value) principle

Identify the concept.Honeywell Corporation records revenue when products are delivered to customers, even though the cash has not yet been received.

The realization (revenue recognition) principle

Identify the concept. Liquidation values are not normally reported in financial statements even though many companies do go out of business.

The going concern assumption

Identify the concept.IBM Corporation, a multibillion dollar company, purchased some small tools at a cost of $800. Even though the tools will be used for a number of years, the company recorded the purchase as an expense.

Expense recognition (also the going concern assumption)

The primary objective of financial reporting is to provide information:

Useful to capital providers.

Statements of Financial Accounting Concepts issued by the FASB:

Identify the conceptual framework within which accounting standards are developed.

In general, revenue is recognized when:

A good or service has been delivered to a customer

In depreciating the cost of an asset, accountants are most concerned with:

Recognizing expense in the appropriate period.

The primary objective of the matching principle is to:

Record expenses in the period that related revenues are recognized.

T/F The separate entity assumption states that, in the absence of contrary evidence, all entities will survive indefinitely.

False

The primary focus for financial accounting information is to provide information useful for:

Investors and creditors.

Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. Porite's practice is an example of:

Accrual accounting.

The FASB issues accounting standards in the form of:

Accounting Standards Updates.

Which of the following was the first private-sector entity that set accounting standards in the United States?

Committee on Accounting Procedure.

Accounting standard-setting has been characterized as:

A political process.

Independent auditors express an opinion on the:

Fairness of financial statements.

Temporary accounts would not include:


Salaries payable.Depreciation expense.Supplies expense.Cost of goods sold.

Salaries payable.

The purpose of closing entries is to transfer:

Balances in temporary accounts to a permanent account.

The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year:

Plus net income, minus dividends.

Recording revenue that is earned, but not yet collected, is an example of:

An accrued receivable transaction.

Prepayments occur when:

Cash flow precedes expense recognition.