Mechanics

Question 0

Qualified opinion

Answer 0

Exceptions to accting principles

Question 1

Unqualified opinion

Answer 1

Clean opinion; statements free from material omissions and errors

Question 2

Adverse opinion

Answer 2

Statements not presented fairly or materially nonconforming to accting standards

Question 3

Disclaimer of opinion

Answer 3

Unable to form opinion

Question 4

Income statement

Answer 4

Summarizes events over a period in terms of revenues, expenses, and other income

How much company makes

Question 5

Statement of comprehensive income

Answer 5

Reports all changes in equity except for shareholder transactions

Question 6

Balance sheet

Answer 6

Point in time in terms of assets, liabilities, and owner’s equity

What company owns, owes, and is owed

Question 7

Assets =

Answer 7

Liabilities + owners equity

Question 8

Cash flow statement

Answer 8

Reconciles beginning and ending cash balance in terms of operating cash flows, investing cash flows, and financing cash flows

How money is spent

Question 9

Statement of changes in owner’s equity

Answer 9

Amount and sources if changes in shareholders’ equity over the period

Question 10

Supplemental sources of information for auditing

Answer 10

Quarterly, semi-annual reports
Proxy statements
Corporate reports or press releases
Economic, industry data

Question 11

Asset accounts

Answer 11

Cash & equivalents
Accts Receivable 
Inventory
Financial Assets (marketable secs)
Prepaid Expenses
Property, Plant & Equipment (+ accum depreciation)
Investment in affiliates
Deferred tax assets
Intangible assets

Question 12

Liability accounts

Answer 12

Accts payable, trade payables 
Financial liabilities (ST notes payable)
Unearned revenue 
Income taxes payable
LT debt
Deferred tax liabilities

Question 13

Owner’s equity accounts

Answer 13

Capital (par value of common stock)
Additional paid-in capital
Retained earnings
Other comprehensive income

Question 14

Revenue

Answer 14

Sales
Gains
Investment income (interest and dividend)

Question 15

Expenses

Answer 15

Cost of a Goods Sold
Selling, general and administrative
Depreciation/amortization
Tax expense
Interest expense
Losses

Question 16

Basic accounting equation

Answer 16

Assets = liabilities + owners’ equity

Question 17

Expanded accounting equation

Answer 17

Assets = 
liabilities 
\+ contributed capital 
\+ beginning retained earnings 
\+ revenue 
- expenses 
- dividends

Question 18

Double-entry accounting

Answer 18

To keep accting equation in balance, a transaction must be recorded in at least two accounts

Question 19

Accrual accounting

Answer 19

Revenue is recorded when firm earns it and expenses are recorded as firm incurs them, regardless if whether or not cash has been paid.

Question 20

Accrual accounting categories

Answer 20

Unearned revenue
Accrued revenue
Prepaid expenses
Accrued expenses

Question 21

Unearned revenue

Answer 21

Firm receives cash before providing good or service.

+ cash (asset), + unearned rev (liability)

Question 22

Accrued revenue

Answer 22

Firm provides good or service before receiving cash payment

+ revenue, + accts receivable

Question 23

Prepaid expenses

Answer 23

Firm pays cash ahead of time for anticipated expense

• cash, + prepaid expense (asset)

Question 24

Accrued expenses

Answer 24

Firm owes cash for expenses incurred

+ expenses, + liability for accrued expenses

Question 25

Owner’s equity =

Answer 25

Contributed capital + retained earnings

Question 26

Financial statement analysis framework

Answer 26

1. Purpose and context
2. Collect data
3. Process data
4. Analyze/interpret data
5. Develop conclusions/recs
6. Follow up

Question 27

Ending retained earnings =

Answer 27

Beginning retained earnings
+ net income
- dividends

Question 28

IFRS Qualitative Characteristics

Answer 28

Relevance

Faithful representation

Question 29

IFRS recognition of items

Answer 29

Recognize an item if future economic benefit is probable and value or cost can be measured reliably

Question 30

IFRS required reporting elements

Answer 30

Assets
Liabilities
Equity
Income
Expenses

Question 31

IFRS fundamental principles

Answer 31

Fair presentation
Going concern
Accrual basis
Consistency 
Materiality

Question 32

IFRS required financial statements

Answer 32

Balance sheet
Income statement 
Comprehensive income
Change in equity
Cash flow statement
Accting policies and notes

Question 33

IFRS - characteristics that’s enhance qualitative characteristics

Answer 33

Timeliness
Comparability
Verifiability
Understandability