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85 Cards in this Set
- Front
- Back
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FASB steps |
1. Topics are identified and placed on the board agendas 2. Discussion memorandum is released of the findings and analysis 3. Public hearing is conducted 4. Exposure draft is released that expresses the tentative rule 5. After hearing final feedback they issue a final standard which becomes GAAP |
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What are the four primary financial statements? |
1. Income statement 2. Statement of stockholders equity 3. Balance sheet 4. Statement of cash flows |
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What is GAAP? |
Generally Accepted Accounting Principles Sec regulates it |
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What is IFRA? |
It was developed by IASB and the adoption of IFRS would let US companies compare with foreign companies more easier. More principle based than US GAAP |
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What do journal entries do? |
Keep track of company transactions Debits must equal credits |
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What is the difference between perpetual vs periodic inventory system? |
Perpetual - keeps continuous count of inventory balances Periodic- you have to physically count inventory *perpetual systems are much better |
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What is the SEC? |
Securities and Exchange Commission - which has broad powers to prescribe, in whatever detail they desire, the accounting standards to employ for all companies |
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According to US GAAP, what are some of the elements that are included on an income statement? |
1. EPS 2. For the year ended, December 31, 20xx 3. Company name |
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The accounting standards codification (ASC) provided a significant benefit to accountants. Which best describes that benefit? |
The ASC contains all current GAAP |
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What are the four steps for one fiscal period? |
1. Make journal entries 2. Post entries 3. Create financial statements 4. Make closing entries |
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FASB and IASB are currently working together to do what? |
Converge US GAAP and IFRS |
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A statement of retained earnings in good form will include which of the following elements? |
Net income |
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What is the formula to calculate EPS? |
Net income / common stock outstanding |
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The balance in the income summary account before it is closed should equal which value? |
Net income for the period |
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Which of the following is the purpose of adjusting entires? |
To match revenues and expenses in the current period |
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If your balances don’t equal on the balance sheet, what could you adjust to make it equal (assuming all your inputs are correct) |
Most times,. You will be off the remaining balance (net income) amount on the income state. Add that balance to your retained earnings on the B/S and you should balance |
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Balance sheets prepared using International Financial Reporting Standards often: |
Report long-term assets and liabilities before current assets and liabilities |
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In a statement of cash flows, International Financial Reporting Standards allow companies to report interest paid as: |
Either an operating or a financing cash flows |
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Which of the following characteristics does not describe an asset? 1. Probable future economic benefits 2. Controlled by an entity 3. Required a receipt of cash 4. Result of a past transaction |
Requires the receipt of cash |
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The international accounting standards board : |
Promotes the use of high-quality, understandable global accounting standards |
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Financial statements generally include all of the following except: |
Federal income tax return |
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The underlying assumption that presumes a company will continue indefinitely is: |
Going concern |
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Of the following, the most important objective for financial reporting is to provide information useful for: |
Making decisions |
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Which of the following adjusting entries causes a decrease in assets? |
Recording depreciation expense |
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A prepaid expense is an expense: |
Paid but not yet incurred |
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Permanent accounts do not include : |
Interest expense |
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In the double-entry system, debit means: |
Left |
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Cost of goods sold is : |
An expense account |
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If the required adjusting entry for depreciation expense is omitted: |
Assets will be overstated and income overstated |
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The claxton company manufactures children’s toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold its automobile parts division. The division qualifies as a component of the entity according to GAAP. How should claxton report the sale In it’s income statement? |
Report the income or loss from operations of the division in discontinued operations |
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Most real world income statements are presented using which format? |
Multiple step |
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Which of the following is not true about EPS? |
It must be reported on operating income |
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Financial statements that report changes over time include: |
Statement of cash flows, income statement, and statement of shareholders equity |
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Earnings per share should be reported for each of the following income statement captions except: |
Operating income |
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What is the formula to calculate return on equity? (ROE) |
ROE = ROA (return on assets) x equity multiplier |
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In a statement of cash flows, what is the formula to report net cash outflows from investing activities: |
Sale of equipment - cost of furniture purchased for cash - purchase of stock of another corporation as an investment |
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Operating cash flows would not include : |
Dividends paid |
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For the statement of cash flows, investments in treasury bills with very short maturity period would be normally included as: |
Cash equivalents |
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Cash flows from investing do not include cash flows from: |
The purchase of a corporations own securities |
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Recognizing expected losses immediately, but deferring expected gains, is an example of: |
Conservatism |
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The qualitative characteristic that means there is a agreement between a measure and a real world phenomenon is: |
Representational faithfulness |
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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 |
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When the amount of revenue collected in advance decreases during an accounting period: |
Accrual basis revenues exceed cash collections from customers |
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Mary Parker co invested $15,000 in ABC corporation and received common stock in exchange. Mary Parker co journal entry to record this transaction would include a: |
Debit to investments |
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A list of the general ledger accounts and their balances at a particular date is a: |
Trial balance |
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The closing process involves: |
Transferring revenue and expense balances to retained earnings |
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Financial statement users typically begin their assessment of permanent earnings with: |
Income from continuing operations |
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A change in accounting principle that is implemented using the retrospective approach includes: |
Restating financial statements for all periods presented as if the new standard had been used in those periods |
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Financial statements that report changes over time include: |
Statement of cash flows, income statement, and statement of stockholders equity |
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A change is accounting principle that is implemented using the modified retrospective approach includes: |
Applying the new standard to the adoption period only, and recording the cumulative adjustment for prior periods to the current periods beginning balance of retained earnings |
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What is the equation a company will use to report operating income? |
Sales rev-COGS-operating expenses |
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Which of the following best explains why the taxes on discontinued operations are reported separately from taxes on continuing operations? |
The taxes on discontinued operations are not expected to recur in the future years |
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Which of the following items would not be included as a cash flow operating activities in a statement of cash flows |
Purchase of equipment |
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Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows? |
Loss on sale of equipment |
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In the operating activities section of the statement of cash flows, we start with net income: |
In the indirect method |
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For the statement of cash flows, investments in treasury bills with very short maturity period would normally be included as: |
Cash equivalents |
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The FASB issues accounting standards in the form of: |
Accounting standards updates |
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A constraint on qualitative characteristics of accounting information is: |
Cost-effectiveness |
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Regarding convergence of accounting standards, the FASB and IASB: |
Are not likely to achieve full convergence of accounting standards in the near future |
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The FASBs conceptual frameworks qualitative characteristics of accounting information include: |
Relevance |
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Which of the following has the statutory authority to set accounting standards in the United States? |
SEC |
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The purpose of closing entries is to transfer: |
Balances in temporary accounts to a permanent account |
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The reason we post journal entries is to: |
Reflect the information in journal entries in ledger accounts |
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The accounting processing cycle: |
Is the process used to identify, analyze, record, and summarize transactions and prepare financial statements |
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The difference between single step and multiple step income statement is primarily an issue of: |
Presentation |
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In comparing the direct method with the indirect method of preparing the statement of cash flows: |
Only operating activities are presented differently |
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Current assets minus current liabilities equals: |
Working capital |
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The underlying assumption that assumes that the life of a company can be divided into artificial time period is: |
Periodicity |
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FASB issues accounting standards in the form of: |
Accounting standards update |
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Revenue typically should not be recognized until: |
The seller has transferred goods or services to a customer |
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Net income equals: |
Revenues minus expenses |
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What is considered to be the most important number in accounting? |
EPS |
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The basic equation for calculating EPS is: |
Net income-preferred dividends/weighted average common shares outstanding |
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Operating activities |
Cash flows connected with the daily operations and net income |
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Operating activities |
Cash flows connected with the daily operations and net income |
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Investing activities |
Cash flows connected with buying and selling PPE and other long term assets |
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Financing activities |
Cash connected with borrowing and repaying loans, selling stock, and paying dividends |
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A chronological record of all economic events affecting a firm is provided by a: |
Journal |
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Accruals occur when cash flows: |
Occur after revenue or expense recognition |
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Which of the following is not a characteristic of the balance sheet? |
The balance sheet reports the change in financial position |
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Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows? |
Loss on the sale of equipment |
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The basis used to classify assets as current or long-term is: |
Usually one year, because the operating cycle typically is less than one year |
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A company’s liquidity most often refers to: |
The ability of a company to covert its assets to cash to pay its current obligations |
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Which of the following is true regarding equity? |
It represents the owners residual interest in the assets of the business |
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The FASBs conceptual frameworks qualitative characteristics of accounting information include: |
Relevance |
