Conceptual Framework, Standards #1 Flashcards
(32 cards)
Restricted Cash
Must be segregated from “regular” cash for reporting purposes because it is not readily available for general use. Classified as current or long-term depending upon the date of availability for disbursement Should be disclosed in notes.
Compensating balances
Should be separately classified as being maintained as a compensating balance. Classified as current or noncurrent based upon the terms of the agreement requiring the compensating balance. Details of the arrangement should be disclosed in the notes.
Cost of Goods Sold Formula
Beg Finished Goods
+Costs of Goods Manufactured
-Ending Finished Goods
=Cost of Goods Sold
Cost of Goods Manufactured Formula
Beg WIP \+Direct Materials Used \+Direct Labor \+Factory Overhead -Ending WIP =Cost of Goods Manufactured
Expense from Cash Basis to Accrual Basis
Payments \+Beg Prepaid \+End Payable -End Prepaid -Beg Payable =Expense
Revenue from Cash Basis to Accrual Basis
Cash Fees Collected \+End AR -Beg AR \+Beg Unearned Fees -End Unearned Fees =Accrual Basis Service Revenue
Present Value
The current measure of an estimated future cash inflow or outflow, discounted at an interest rat for the number of periods between today and the date of the estimated cash outflow
Primary Objective of Accounting
Measure Income
Accrual
Recognition prcedes cash receipt/expenditure
Revenue - earned by not received
Expense - incurred by not paid
Deferral
cash receipt/expenditure precedes recognition
Revenue - cash received but not earned
Expense - cash paid but expense not incurred
Formula to calculate cash paid to suppliers
CGS -Beg Inventory \+End Inventory \+Beg AP -End AP
Operating Activities
Generally include transactions that enter into the determination of net income and include production and delivery of goods and services, interest and dividends received, and payment of interest.
Investing Activities
All transactions related to the making or collecting of loans and the acquiring and disposing of debt, equity instruments, or PP&E
Financing Activities
All transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment, and to obtaining and repaying debt.
Deferred Tax
Generally computed by multiplying the amount of the temporary difference by the current income tax rate.
A deferred tax liability is a credit balance ( a future taxable amount) and a deferred tax asset is a debit balance (a future deductible amount). The liability will be paid (asset will be recovered) in future years.
FASB ASC 740-10-20
Balance Sheet
Financial position at the end of the period
Income Statement
Earnings (loss) for the period
Comprehensive income or loss for the period
Statement of Cash Flows
Cash flows during the period
Statement of Changes in Owners’ Equity and the Statement of Retained Earnings
Investments by and distributions to owners during the period
Cash Inflows from Operating Activities
(a) Cash receipts from sales of goods or services
(b) Cash receipts from interest and dividends on investments in another enterprise
(c) All other cash receipts that are not classified as either investing or financing activities
Cash outflows classified as operating activities
(a) Cash payments to acquire materials for manufacture or goods for resale
(b) Cash payments to other suppliers and employees for goods and services
(c) Cash payments to governments for taxes, duties, other fees, or penalties
(d) Cash payments to lenders and other creditors for interest
(e) All other cash payments that are not classified as investing or financing activities
Cash inflows from investing activities
(a) Cash receipts from collections or sales of loans made by the enterprise and of other debt instruments that are purchased by the enterprise
(b) Cash receipts from sales of equity securities of other enterprises
(c) Cash receipts from the sales of property, plant, and equipment and other productive assets
SFAC 4
indicates that financial reporting by nonbusiness organizations should provide information useful to present and potential resource providers (e.g., creditors, suppliers, employees, donors, taxpayers) and meet seven objectives:
Objective 1: Financial reporting by nonbusiness organizations should provide information that is useful to present and potential resource providers and other users in making rational decisions about the allocation of resources to those organizations.
Objective 2: Financial reporting should provide information to help present and potential resource providers and other users assess the services that a nonbusiness organization provides and its ability to continue to provide those services.
Objective 3: Financial reporting should provide information that is useful to present and potential resource providers and other users in assessing how managers of a nonbusiness organization have discharged their stewardship responsibilities and about other aspects of their performance.
Objective 4: Financial reporting should provide information about the economic resources, obligations, and net resources of an organization and the effects of transactions, events, and circumstances that change resources and interests in those resources.
Objective 5: Financial reporting should provide information about the performance of an organization during a period. Periodic measurement of the changes in the amount and nature of the net resources of a nonbusiness organization and information about the service efforts and accomplishments of an organization together represent the information most useful in assessing its performance.
Objective 6: Financial reporting should provide information about how an organization obtains and spends cash or other liquid resources, about its borrowings and repayment of borrowings, and about other factors that may affect an organization’s liquidity.
Objective 7: Financial reporting should include explanations and interpretations to help users understand financial information provided.
cash basis income is:
higher when accounts receivable decrease.
lower when accrued expenses decrease.
