• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

Card Range To Study



Play button


Play button




Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

53 Cards in this Set

  • Front
  • Back
primary objective of financial accounting?
to convey relevant financial information to external users and decision makers
define net operating cash flows
the difference between cash receipts and disbursements from providing goods and services
why is net operating cash flows a poor indicator of future operating cash flows?
a cash receipt is not always from revenue; a disbursement is not always an expense
why should all companies follow GAAP?
so that everything is standard and easy to compare; produces complete and precise info
what is the purpose of FASB's conceptual framework project?
to define fair value and provide improved guidelines about how to measure it
what are the components of relevant information?
info that is important to investors and creditors in helping asses the amounts, timing, and uncertainty of future cash flows
what are the components of faithful representation?
completeness, neutrality, and free from material error
explain: the benefits of accounting information must exceed the costs
the benefits of financial statements must exceed the costs to produce them
obligation to transfer cash or other resources as a result of a past transaction
dividends paid by a corporation to its shareholders
distribution to owners
inflow of an asset from providing a good or service
the financial position of a company
assets, liabilities, equity (balance sheet)
increase in equity during a period from non-owner transactions
comprehensive income
increase in equity from peripheral or incidental transaction
sale of an asset used in the operations of a business for less than the asset's book value
the owners' residual interest in the assets of a company
an item owned by the company representing probably future benefits
revenue plus gains less expenses and losses
net income
an owners' contribution of cash to a corporation in exchange for ownership shares of stock
investment by owners
outflow of an asset related to the production of revenue
predictive value
information is useful in predicting the future
pertinent to the decision at hand
information is available prior to the decision
distribution to owners
decreases in equity resulting from transfers to owners
confirmatory value
information confirms expectation
users understand the information in the context of the decision being made
result 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 non-owner transactions
concerns the relative size of an item and its effect on decisions
important for making inter firm comparisons
the absence of bias
the process of admitting information into financial statements
applying the same accounting practices over time
cost effectiveness
requires consideration of the costs and value of information
implies consensus among different measures
matching principle
record expenses in the period the related revenue is recognized
the life of an enterprise can be divided into artificial time periods
historical cost principle
the original transaction value upon acquisition
realization principle
criteria usually satisfied at point of sale
going concern assumption
the entity will continue indefinitely
monetary unity assumption
a common denominator is the dollar
economic entity assumption
the enterprise is separate from its owners and other entities
full-disclosure principle
all information that could affect decisions should be reported
Jim Marley is the sole owner of X. He borrowed $X to buy a new home for his personal residence. this liability was not recorded in the records of the company.
economic entity assumption
X Co. Inc. distributes an annual report to its shareholders
periodicity assumption
X depreciates machinery and equipment over their useful lives
matching principle and going concern assumption
what are the 4 key broad accounting principles?
historical cost, realization, matching, full-disclosure
2 important reasons to base the valuation of assets and liabilities at their historic cost
objective and verifiable
4 basic assumptions
economic entity assumption, going concern assumption, periodicity assumption, and monetary unit assumption
describe the two criteria that must be satisfied before revenue can be recognized
the earnings process is judged to be complete; there is reasonable certainty as to the collectibility of cash
4 different approaches to implementing the matching principle
(1) direct cause and effect (COGS) (2) association with specific timer period (salaries) (3) systematic rational allocation (prepaid rent) (4) in the period incurred (advertising)
inputs companies should use when determining fair value
(1) quoted market prices in active markets (2) inputs other than quoted prices (3) unobservable inputs that reflect the entity's own assumptions