Exam 1 Flashcards
(20 cards)
What are the 4 Financial reporting framework objectives
P - redict cash flows, dividend, earnings
Ri - sk assessment
C - ompliance and contracting
C - ompetence and stewardship assessments
What are the assumptions on using the gross and net method?
Gross - Assumes no one will take the discount
Net - Assumes everyone will take the discount
What are the 2 ways of determining allowance for doubtful accounts and what are they looking for?
Aging A/R (balance sheet approach): Looking for ADA balance
% of sale (Income statement approach): Looking for BDE balance
What are the three purposes to lead to treatments for accounting changes?
Change policy: from a mgmt choice, Retrospective
Correct an error: Not from mgmt choice, with information known before, Retrospective
Change estimate: Not from mgmt choice, no information known, Prospective
What are the 4 criteria for classification as current?
1) Consume in normal op cycle
2) Held for trading
3) Realize within 12 months
4) Unrestricted cash/equivalent
What are the line items required for the statement of comprehensive income?
Revenue Op Ex Fin Costs Share of profit from associates Tax Exp
P/L
OCI
TCI
What are the two ways an operating expense can be classified?
By nature: source from
By function: use to
What are the 5 steps in the revenue recognition process?
1) ID contract
2) ID POs
3) Find price
4) Allocate price to POs
5) Recognize revenue with performance
What is the equation for Expected Total Loss stuff?
%incomplete x total expected loss - previous accruals
What happens if production greater or less than normal production?
Above Normal: Adjust rate
Below normal : Keep rate, adjust excess
What is the general recognition principle?
1) Future flows are probable
2) Amounts are reasonably measurable
Definition of an asset
1) Future benefit
2) Entity controls access
3) Transaction occurred in the past
Liability definition
1) Duty to other that requires settlement
2) Obligation is unavoidable
3) Transaction occurred in the past
Definition of revenue
Income arising from normal activities
What are the two ways to measure a multiple deliverable?
1) Relative fair value
2) Residual value method
What happens with non-trade receivables(prom note)?
Record using present value
What are the two inventory systems?
1) Perpetual
2) Periodic
How to calculate costs with the retail method?
1) Estimate margins and determine cost
2) Calc cost of inventory based on 1
3) Calculate COGS: Beg Inv + purchases - end inv = COGS
How is COGS calculated in inventory?
COGAS - end inventory
When do raw materials get written down?
When 1) FG needs written down
2) RM cost is above realizable value
*RM for each product get considered together
