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Flashcards in Finacial Statements - US Deck (20)
1

A full set of FS for a period show what 5 things?

1. financial positions at the end of the period
2. earnings for the period
3. comprehensive income for the period
4. cash flows during the period
5. investments by and distributions to owners during the period

2

What is the characteristic of General Purpose FS?

they are directed toward the common interests of various users and are feasible only because of users of financial information have similar needs

3

What is articulation of FS?

FS interrelate, or articulate, because they reflect different aspects of the same transactions or other events affecting the entity

4

What is classification and aggregation of FS?

Classification facilitates analysis by grouping items with essentially similar characteristics and separating items with essentially different characteristics.
FS involve the need to simplify, condense and aggregate info

5

What is the usefulness of FS?

FS individually and collectively contribute to meeting the objectives of financial reporting. Each FS provides a different kinds of info and various kinds of info cannot be combined into a smaller number of FS without unduly complicating the info

6

Name 4 characteristics of FS as identified in SFAC 5?

1. general purpose
2. usefulness
3. classification and aggregation
4. articulation

7

Guidance for recognizing revenue and gains are based on what 2 things?

1. realized or realizable
2. earned

8

Guidance for recognizing expenses and losses are based on what 2 things?

1. consumption of benefit - in revenue-earning activities
2. loss or lack of benefit - when it becomes evident that previously recognized future economic benefits of assets have been reduced or eliminated or that liabilities have been incurred or increased, without associated economic benefits.

9

Per SFAC 6, revenues are

inflows of assets or settlements of liabilities, or both, during a period as a result of an entity's major or primary operations

10

Per SFAC 5, what are the 5 different attributes used to measure assets and liabilities?

1. historical cost
2. current cost (replacement cost)
3. current market value
4. net realizable value
5. present value of future cash flows

11

What are the 2 formats for the income statement?

1. single step
2. multiple step

12

What is the single step format of the income statement?

Simple and relatively straightforward presentation whereby all revenues and gains are combined at the top of the statement. From this, a total amount of all expense and losses is deducted to render a net income figure

13

What is the multiple step format of the income statement?

Typical format is where the COGS is deduced from revenues to yield gross profit, selling and administrative expenses are then deducted to yield operating income, other income and expense items are then added and deducted to yield net income

14

What are the 3 formats of the balance sheet?

1. account form
2. report form
3. financial position form

15

What is the financial position form format of the balance sheet?

shows the net working capital (deducting current liabilities from current assets), adds noncurrent assets, deducts noncurrent liabilities and finally nets to the stockholder's equity

16

What is the account form format of the balance sheet?

assets are on the left side of the page and the liabilities and equity are on the right side of the page

17

What is the report form format of the balance sheet?

Assets at the top of the statement and the equity at the bottom of the statement

18

Name some accounting policy disclosures

1. disclosures encompass important judgments as to appropriateness of principles relating to recognition or revenue and allocation of asset costs to current and future periods
2. encompasses principles and methods that involve the selection from among existing acceptable alternatives
3. principles and method peculiar to the industry are disclosed
4. unusual or innovative application of GAAP

19

Give some examples of accounting principles or methods for which disclosure is frequently made.

1. depreciation methods
2. consolidation basis
3. interperiod tax allocation
4. inventory pricing
5. revenue recognition methods

20

AU-C 800.07 of the GAAS defines a comprehensive basis of accounting other than GAAP as what 4 things?

1. a basis of accounting that the reporting entity uses to comply with the requirements or financial reporting provisions of a governmental regulatory agency to whose jurisdiction the entity is subject. ex: insurance companies use rules of state insurance commission
2. a basis of accounting that the reporting entity uses or expects to use to file its income tax return for the period covered by the FS
3. the cash receipts and disbursements basis of accounting and modifications of the cash basis having substantial support, such as recording depreciation on fixed assets or accruing income taxes
4. a definite set of criteria having substantial support is applied to all material items appearing in FS, such as the price-level basis of accounting