Chapter 11 Financial Accounting Flashcards Preview

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Flashcards in Chapter 11 Financial Accounting Deck (40):
1

Continuing Operations

Income from day to day normal business activities

2

What 3 things does Continuing Operations include?

Revenues and operating expenses
Gains and losses
Income tax expense

3

Discontinued Operations

Company sells a segment of the business

4

How is Discontinued Operations recorded?

Reported beneath income from continuing operations

5

Extraordinary Items

Gains and losses that are both infrequent and unusual

6

What do Extraordinary Items include?

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

7

What do Extraordinary Items NOT include?

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

8

How are Extraordinary Items recorded?

Reported after continuing operations net of income taxes

9

Cumulative Effect of Change in Accounting Method

Change from one Accounting method to another

10

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

FIFO to LIFO
Straight Line depreciation to double declining balance

11

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

To compare year to year statements

12

How is Cumulative Effect of Change in Accounting Method reported?

Reported in special section usually after Extraordinary Items

13

How is Earning Per Share (EPS) recorded?

Recorded for each element of net income

14

Comprehensive Income

Change in stockholders equity from all non owner transactions

15

What is the Federal Corporate Income Tax Rate?

21%

16

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

Reported on income statement
Based on current year earnings

17

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

Current liability on the balance sheet
Amount to be paid to government

18

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

Reports results of operations
Based on accrual Accounting

19

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

Filed with IRS to determine taxes owed
Based on tax laws

20

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

Straight line for accounting purposes
Accelerated for tax purposes

21

Deferred Taxes

When corporations use different methods for accounting and taxes

22

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

Income tax payable

23

The result of deferred taxes is what?

A deferred tax liability or asset

24

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

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

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