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Acct 3001 > Midterm 1 > Flashcards

Midterm 1 Flashcards

1
Q

GAAP is the term used to indicate the whole body of ____ authoritative literature.

A

FASB

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2
Q

The primary governmental body that has influence over the FASB is the ____.

A

SEC

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3
Q

Process for establishing accounting standards

A

Research, discussion paper, exposure draft, standard.

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4
Q

GAAP is comprised of any guidance included in the _______.

A

FASB Codification

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5
Q

When does the conceptual framework have authority?

A

when there is no standard or interpretation related to the reporting issues.

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6
Q

The objective of financial reporting places most emphasis on ______.

A

reporting to capital providers

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7
Q

General purpose financial statements are prepared primarily for _____.

A

External users

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8
Q

Accounting standards can have detrimental impacts on the wealth levels of the _______.

A

Providers of financial information

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9
Q

Expectation gap

A

what the public thinks accountants SHOULD do and what accountants think they CAN do

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10
Q

FASB should consider ______ when making rules.

A

improvement in reporting, international convergence and simplification of literature

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11
Q

The ____________ requires members to prepare financial statements in accordance with GAAP.

A

AICPA’s Code of Professional Conduct

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12
Q

Capital Allocation

A

determining how and at what cost money is allocated among competing interests

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13
Q

The PCAOB was established by the _____.

A

SOX act

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14
Q

What are the 4 enhancing qualities?

A

Verifiability, Understandability, Comparability, Timeliness (VUCT)

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15
Q

What are the 2 Fundamental Qualities?

A

Relevance and Faithful Representation

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16
Q

What are the ingredients to relevance?

A

Predictive value, confirmatory value, materiality

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17
Q

What are the 3 ingredients to faithful representation?

A

completeness, neutrality, free from error

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18
Q

What are the 4 basic assumptions?

A

Economic entity, going concern, monetary unit, periodicity (EGMP)

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19
Q

What are the 4 principles of accounting to record and report transactions?

A

Measurement, revenue recognition, expense recognition and full disclosure (MREF)

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20
Q

The measurement principle is comprised of _______.

A

Historical cost and Fair value

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21
Q

What is the cost constraint?

A

weigh the cost of providing information against the benefits derived from using it

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22
Q

What is completeness?

A

all information necessary for faithful representation is provided

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23
Q

What is neutrality?

A

company cannot select information to favor one set of interested parties over another (faithful rep)

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24
Q

What is free from error?

A

accurate (faithful rep)

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25
What is comparability?
measured and reported in similar manner for different companies; consistency (enhancing)
26
What is verifiability?
when independent measurers use same methods and obtain similar results (enhancing)
27
What is timeliness?
having information before it loses capacity to influence decisions.
28
What is understandability?
quality of information that lets reasonably informed users see significance.
29
Asset
probable future economic benefit obtained by entity
30
Liability
probable future sacrifices of economic benefit
31
Equity
residual interest in assets of entity after deducting liabilities
32
Investments by owners
increase in net assets (equity)
33
Distributions to owners
decrease in net assets (equity) from transferring asset
34
Comprehensive income
change in equity (net assets) from nonowner sources
35
Reveues
inflows or enhancements of assets
36
Expenses
outflows or using up of assets or incurrence of liabilities
37
Gains
increases in equity from peripheral/incidental transactions
38
Losses
decreases in equity from peripheral/incidental transactions
39
Economic Entity Assumption
company keeps activity away from its owners and any other business unit
40
Going concern assumption
company will have a long life
41
Historical cost principle would have limited usefulness if the _______ assumption didn't exist.
going concern
42
Monetary unit assumption
money is basis for accounting
43
Periodicity assumption
company can divide economic activities into artificial time periods
44
Trade off between timeliness and free from error is ______ assumption.
Periodicity
45
The measurement principle is made up of
historical cost and fair value
46
Revenue recognition principle
requires companies to recognize revenue in the period where performance obligation is satisfied
47
expense recognition principle
let expenses follow revenues. Matching expenses and revenues
48
Full disclosure principle
provide info. of sufficient importance to influence decisions
49
real account
asset, liability, equity account. Appear on balance sheet
50
nominal accounts
revenue, expense, dividend accounts (all but dividend appear on income statement)
51
What is the only nominal account that isnt on the income statement?
dividends
52
What types of accounts have normal debit balances?
assets and expenses
53
what types of accounts have normal credit balances?
Liabilities, Equity, and revenue
54
Expanded accounting equation
A=L+Common Stock+RE-Div+Rev-Exp
55
What are the 4 steps to posting?
Ledger, Journal, Ledger, Journal
56
What are the 2 types of adjusting entries?
Deferrals and Accruals
57
What are the two types of deferrals?
Prepaid expenses and unearned revenues
58
What are the two types of accruals?
Accrued revenues and accrued expenses
59
How to journalize a prepaid expense used up?
Credit the asset, debit the expense
60
How to journalize unearned revenues used?
Debit the liability, credit the revenue
61
How to journalize accrued revenues
debit accounts receivable and credit service revenue
62
how to journalize accrued interest realized
debit interest expense and credit interest payable
63
What is in Stockholders Equity category for accounts?
Common stock - dividends + revenues - expenses
64
What types of accounts have closing entries?
Revenues, expenses
65
In closing entries, where does Net Income go?
to retained earnings, then allocated to dividends
66
earnings management
planned timing of revenues, expenses, gains and losses
67
What are the sections of the Income Statement
Operating, non-operating, income tax, discontinued operations, non-controlling interest, EPS
68
current operating performance approach
only regular revenues and expenses affect future earning power, not unusual/infrequent gains/losses.
69
Earnings Per Share Formula
(Net Income - Dividends) / Weighted Avg Common Shares Outstanding
70
Does changing accounting principle warrant changing PY statements?
Yes
71
Comprehensive income
all changes to equity NOT from investments/distributions by/to owners
72
Liquidity
amount of time expected until an asset is realized/converted to cash or until liability has to be paid
73
Solvency
ability of company to pay debts as they mature
74
current assets
cash, short term investments, receivables, inventory, prepaid expenses
75
What are the three types of short-term investments?
held to maturity, trading, available for sale
76
Long-Term Investments
securities, land held for speculation, special funds, investments in subsidiaries
77
Examples of intangible assets?
goodwill, trademarks, copyrights
78
FASB Codification
Topics, subtopics, sections, paragraph
79
FASB pronouncements that are primary source of GAAP
standards, interpretations, staff positions
80
The SEC thinks accounting standards should come from the
private sector
81
GAAP includes over ____ documents
2,000
82
The APB was replaced by
FASB

Acct 3001 (1 decks)

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