Intermediate Accounting Exam 1

Front 1

What is the objective for financial accounting?

Back 1

Provide information about the reporting entity that is useful to present and potential investors, lenders, and other creditors

Front 2

Which financial statement is for a single date in time?

Back 2

Balance Sheet

Front 3

Which government agency is required to oversee company's financial statements on the stock exchange?

Back 3

The SEC. Securities and Exchanges Commission

Front 4

GAAP

Back 4

Standards of accounting that are generally practiced and accepted for financial statements

Front 5

AICPA's

Back 5

American institute of CPAs, national professional organization establishing the accounting principles

Front 6

FASB

Back 6

Financial Accounting Standards Board; the wheat committee's creation to establish and improve standards of accounting

Front 7

FASB Codification

Back 7

Goal is to provide all the authoritative literature related to a particular topic; one level of GAAP, considerably authoritative

Front 8

International Financial Reporting Standards

Back 8

Adopted to make it easier to compare Us and foreign companies, as US companies can raise capital in foreign markets

Front 9

Fundamental Qualities

Back 9

Relevance and Faithful representation

Front 10

Relevance

Back 10

Accounting info must be capable of making a difference in a decision

Front 11

Predictive Value

Back 11

Input to predict processes used by investors to form their own expectations about the future

Front 12

Confirmatory Value

Back 12

Relevant info confirms or corrects prior expectations

Front 13

Materiality

Back 13

Info is material if omitting it or misstating it could influence decisions

Front 14

Faithful Represntation

Back 14

Numbers and descriptions match what really existed

Front 15

Completeness

Back 15

All info that is necessary for faithful rep is provided

Front 16

Neutrality

Back 16

Company didn't select info to favor one set of interested parties over another

Front 17

Free from Error

Back 17

No errors, faithful rep

Front 18

Comparability

Back 18

Measured and reported in the same manner

Front 19

Verifiability

Back 19

Independent measures, using same methods, obtain similar results

Front 20

Timeliness

Back 20

Info available to decision-makers before it loses capacity to influence decisions

Front 21

Understandability

Back 21

Quality of info that lets reasonably informed users see its significance

Front 22

Economic Entity

Back 22

Company keeps its activity separate from its owners and other businesses

Front 23

Going Concern

Back 23

Company to last long enough to fulfill objectives and commitments

Front 24

Monetary unit

Back 24

Money is the common demominator

Front 25

Periodicity

Back 25

Company can divide economic activities into time periods

Front 26

Measurement Principle

Back 26

Historical Cost and Fair Value principles

Historical provides relative benchmark for measuring trends, fair value may be more useful

Front 27

Revenue Recognition

Back 27

Companies recognize revenue in the accounting period that the obligation is satisifed

Front 28

Expense Recognition

Back 28

following revenue recognition

Front 29

Full Disclosure

Back 29

Providing info that is sufficient importance to influence the judgement and decisions on an informed user

Front 30

Cost Constraint

Back 30

Cost of providing info must be weighed against benefits derived from using it

Front 31

What accounts are closed at the end of an accounting period?

Back 31

Dividends, Revenues and expenses

Front 32

What is true about accrual based accounting?

Back 32

Revenues are recognized in the period the performance obligation is satisfied, regardless of the time period the cash is received.

Front 33

If unearned revenue is an adjusting entry, how is it written?

Back 33

Debit unearned revenue, and credit service revenue.

Front 34

What is the accounting cycle in order?

Back 34

Journal entries, posting, trial balance, income statement, retained earnings, balance sheet

Front 35

Permanent accounts

Back 35

Real accounts, such as assets and liabilites

Front 36

Temporary accounts

Back 36

nominal accounts, closed at the end of accounting periods

Front 37

Depreciation

Back 37

the calculated value of building, machinery that is used over time

Front 38

What Contra Accounts?

Back 38

Accounts that decreased assets, such as accumulated depreciation, allowance for doubtful accounts, sales returns, sales discounts

Front 39

Prepaid expenses

Back 39

Expenses paid in cash before they are used or consumed

Ex: insurance

Front 40

Unearned Revenues

Back 40

Cash received before services are performed

Ex: Cover pay for lawyer

Front 41

Accrued Revenues

Back 41

Revenues for services performed but not yet received in cash or recorded

Front 42

Accrued Expenses

Back 42

Expenses incurred but not yet paid in cash or recorded

Front 43

Accrued interest formula

Back 43

Face value of note x interest rate x time in terms of one year (1/12) = interest

Front 44

Gains

Back 44

Increases in equity from peripheral or incidental transactions

Sale of investment

Front 45

Loss

Back 45

Decreases in equity from peripheral or incidental transactions

Front 46

Intermediate Components

Back 46

Operation section, Nonoperating section, income tax, Discontinued operations, noncontrolling interest, Earnings Per share

Front 47

Comprehensive Income

Back 47

All changes in equity during a period except those resulting from investments by owners and distributions to owners.

Front 48

Earnings Per Share formula

Back 48

Net income - preferred stock dividends divided by weighted average # of shares