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36 Cards in this Set

  • Front
  • Back
Identify the major financial statements and other means of financial reporting.
1. balance sheet
2. Income statement
3. Statement of cash flows
4. Statement of owner's equity
Other than that things such as the president's letter and supplementary schedules, prospectuses, reports filed with governemt agencies, news releases, management's forecasts, and descriptions of a company's social or environmental impact.
Explain how accounting assists in the efficient use of scarce resources.
Accounting provides reliable, relevant, and timely information to managers, investors, and creditors to allow resource allocation to the most efficient enterprises. Accounting also provides measurements of efficiency (profitability) and financial soundness.
Describe some of the challenges facing accounting.
Financial reports fail to provide 1. some key performance measures widely used by management
2. Forward looking information needed by investors and creditors
3. Sufficient information on a company's soft assets (intangibles)
4. Real time financial information.
Identify the objectives of financial reporting.
The objectives of financial reporting are to provide information that is
1. Useful in investment and credit decisions
2. Useful in assessing cash flow prospects
and, 3. About enterprise resources, claims to those resources, and changes in them.
Explain the need for accounting standards.
The accounting profession has attempted to develop a set of standards that is generally accepted and universally practiced. Without this set of standards, each company would have to develop its own standards. Readers of financial statements would have to familiarize themselves with every company's peculiar accounting and reporting practices. As a result, it would be almost impossible to prepare statements that could be compared.
Identify the major policy-setting bodies and their role in the standard-setting process.
The securities and exchange commission (SEC) is a federal agency that has the broad powers to prescribe, in whatever detail it desires, the accounting standards to be employed by companies that fall within its jurisdiction, The American Institute of Certified Public Accountants (AICPA) issued standards through its Committee on Accounting Procedure and Accounting Principles Board. The Financial Accounting Standards Board (FASB) establishes and improces standards of financial accounting and reporting for the guidance and education of the public.
Explain the meaning of generally accepted principles (GAAP) and the role of the codification for GAAP.
GAAP are those principles that have substantial authoritative support, such as FASB Standards, Interpretations, and Staff Positions, APB Opinions and Interpretations, AICPA Accounting Research Bulletins, and other authoritative pronouncements. All these documents and others are now classified in one document referred to as the Codification. The purpose of the Codification is to simplify user access to all authoritative US GAAP. The Codification changes the way GAAP is documented, presented, and updated.
Describe the impact of user groups on the rule-making process.
User groups may want particular economic events accounted for or reported in a particular way, and they fight hard to get what they want. They especially target the FASB to influence changes in existing GAAP and in the development of new rules. Because of the accelerated rate of change and the increased complexity of our economy, these pressures have been multiplying. GAAP is as much a product of political action as it is of careful logic or empirical findings. The IASB is working with the FASB towards international convergence of GAAP.
Understand issues related to ethics and financial accounting
Financial accountants are called on for moral discernment and ethical decision making. Decisions sometimes are difficult because a public consensus has not emerged to formulate a comprehensive ethical system that provides guidelines in making ethical judgements.
APB major purposes
Accounting Principles Board- 1. advance the written expression of accounting principles, 2. determine appropriate practices, and 3. narrow the areas of differenc and inconsistency. To do this they had to develop an overall conceptual framework and to research individual issues before the AICPA issued pronouncements.
Accounting Research Bulletins
issued by the Committee on Accountin Procedure (CAP) issued 51 research bulletins which dealth with a variety of accounting problems. This failed and the Accounting Principles Board was created.
Acrual Basis Accounting
Ensures that company records events that change its financial statements in the periods in which the events occur, rather than only in the preiods in which it receives or pays cash. Recognizes revenues when it earns them rather than when cash is recieved.
AICPA
American Institute of Certified Public Accountants-national professiion organization of practicing CPA's contributes to the development of GAAP.
APB Opinions
AICPA made official pronouncements called APB Opinions intended to be based mainly on research studies and be supported by reason and analysis.
Auditing Standards Board
AICPA created it and the Sarbanes xley Act requires the Public ACccounting Oversight Board to oversee the develoipment of auditing standards.
CAP
Committee on Accounting Procedure- 1939 AICPA appointed it and it was composed of 18-21 ppl failed.
EITF
Emerging Issues Task Force- Comprised of CPA firms and financial statement preparerers. Purpose is to reach a consensus on how to account for new and unusual financial transactions that may potentiallhy create differing financial reporting practices. Such as pension plan terminations, revenue from barter transactions.They help the FASB by resolcing issues quickly so there aren't financial cricies and scandals.
Expectations Gap
What the public thinks accountants SHOULD do and what accountants think they CAN do.
FASB Staff positions
Provide interpretive guidance and also minor amendments to standards and interpretations. They are used in place of technical bulletins.
Financial Accounting
The process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties.
FASB
Financial Accounting Standards Board-Establishes and improves standards of financial accounting and reporting for the guidance and education of the public. Better than the APB because smaller, full time positions, greater autonomy, increased independence, broader representation
The Codification
Financial Accounting Standards board Accounting Standards Codification-Goal was to provide in one place all the authoritative literature related to a particular topic to simplify user access. It is a major reconstructuring of accounting and reporting standards. It changes the way GAAP is documented, presented, and updated.
CRS
Accounting Standards Board Codification Research System-online real-time database that provides easy access to the Codification. CRS provides a topically organized structure, subdivided into topic, subtopics, and paragraphs using a numerical index system.
Financial Reporting
examples are financial statements, presidents letter supplementaryu schedules,news reports, environmental involvement, ect.
Financial Statements
1. Balance Sheet
2. Income STatement
3. Statement of Cash Flows
4. Statement of owner's equity
GAAP
Generally Accepted Accounting Principles-The attempt to develop a set of standards that are generally accepted and universally practiced.
IASB
International Accounting Standards Board-Works with GAAP to try and get international same ways.
iGAAP
used internationally
interpretations
the FASB uses these to modify or extend existing standards. They have the same authority and require the same votes for passage as standards.
Objectives of financial reporting
assist investors in decisions regarding investment, credit, and similar decisions. Assist investers in assessing the amounts, timing, and uncertainty of prospective cash receipts. Clearly portrays economicc resources of an enterprise and the claims to those resources.
PCAOB
Public Company Accounting Oversight Board-has oversight and enforcement authority and establishes, auditing, quality control, and independence standards and rules.
Sarbanes Oxley Act
2002 increases the resources for the SEC to combact fraud and curb poor reporting practices.
SEC
Securities and Exchange Commission-federal agency to Help develop and standardise information presented to stockholders. Relies on the FASB to develop accounting standards. SEC requires registrants to adhere to GAAP
Standards Statement
Standards are issued by the FASB and are considered generally accepted Accounting Principles. For a new one you have to have the support of 3 of 5 FASB board members.
Statement of Financial Accounting Concepts
Sets forth fundamental objectives and concepts the board uses indeceloping future standards of financial accounting and reportign. DOES NOT ESTABLISH GAAP
Wheat Committee
APB failed and the leaders appoinmted a study group on Establishment of Accounting Principles they examined prginization and operation of the APB and determined necessary changes to obtain better results.