Chapter 11 Financial Accounting Flashcards

(40 cards)

1
Q

Continuing Operations

A

Income from day to day normal business activities

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2
Q

What 3 things does Continuing Operations include?

A

Revenues and operating expenses
Gains and losses
Income tax expense

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3
Q

Discontinued Operations

A

Company sells a segment of the business

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4
Q

How is Discontinued Operations recorded?

A

Reported beneath income from continuing operations

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5
Q

Extraordinary Items

A

Gains and losses that are both infrequent and unusual

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6
Q

What do Extraordinary Items include?

A

Include losses from natural disasters and expropriation of assets by foreign governments

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7
Q

What do Extraordinary Items NOT include?

A

Does not include gains and losses from lawsuits, restructuring or sale of Plant Assets

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8
Q

How are Extraordinary Items recorded?

A

Reported after continuing operations net of income taxes

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9
Q

Cumulative Effect of Change in Accounting Method

A

Change from one Accounting method to another

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10
Q

What are 2 examples of Cumulative Effect of Change in Accounting Method?

A

FIFO to LIFO

Straight Line depreciation to double declining balance

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11
Q

What does Cumulative Effect of Change in Accounting Method make difficult?

A

To compare year to year statements

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12
Q

How is Cumulative Effect of Change in Accounting Method reported?

A

Reported in special section usually after Extraordinary Items

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13
Q

How is Earning Per Share (EPS) recorded?

A

Recorded for each element of net income

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14
Q

Comprehensive Income

A

Change in stockholders equity from all non owner transactions

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15
Q

What is the Federal Corporate Income Tax Rate?

A

21%

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16
Q

For corporate income tax expense what are 2 characteristics of income tax expense?

A

Reported on income statement

Based on current year earnings

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17
Q

For corporate income tax expense what are 2 characteristics of income tax payable?

A

Current liability on the balance sheet

Amount to be paid to government

18
Q

What are the differences between Accounting income and taxable income in terms of the income statement?

A

Reports results of operations

Based on accrual Accounting

19
Q

What are the differences between Accounting income and taxable income in terms of the income tax return?

A

Filed with IRS to determine taxes owed

Based on tax laws

20
Q

What are the differences between Accounting income and taxable income in terms of depreciation common difference?

A

Straight line for accounting purposes

Accelerated for tax purposes

21
Q

Deferred Taxes

A

When corporations use different methods for accounting and taxes

22
Q

In terms of deferred taxes income tax expense does not equal…

A

Income tax payable

23
Q

The result of deferred taxes is what?

A

A deferred tax liability or asset

24
Q

When income tax payable is greater than income tax expense it is what in terms of deferred taxes?

A

Deferred tax liability

25
When income tax payable is less than income tax expense it is what in terms of deferred taxes?
Deferred tax asset
26
Prior Period Adjustments
Correction of an accounting error from a previous period
27
What is adjusted during prior period of adjustments?
Beginning retained earnings is adjusted for the amount of the error
28
Managements Responsibility
Internal controls over financial reporting in accordance with GAAP
29
What are 2 responsibilities that management has to fulfill in order to stay in accordance with GAAP?
Standard for preparing financial statements | -Designed to produce relevant and reliable information for investors and creditors
30
Who do companies hire to perform their auditors report?
Certified Public Accountants (CPAs)
31
When a Certified Public Accountant (CPAs) perform an examination it is called----
External audit
32
CPAs have to be what?
Independent of the company they are auditing
33
What are the 4 types of audit reports?
Unqualified Qualified Adverse Disclaimer
34
Unqualified audit report
Clean opinion, statements are fairly presented
35
Qualified Audit Report
Except for opinion, statements are reliable except for one or more Items
36
Adverse Audit Report
Statements are unreliable and not in according with GAAP
37
Disclaimer Audit Report
No opinion, auditor was unable to form an opinion
38
Sustainability Reporting
A process for publicly disclosing an organizations economic, environmental and social performance
39
What are 4 benefits of Sustainability Reporting?
Better Reputation Meeting the expectations of employees Improved access to capital Increased efficiency and waste reduction
40
What are 2 costs of Sustainability Reporting?
Greater transparency | Expensive