Module 9A Part 3 (26-28) Flashcards Preview

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Flashcards in Module 9A Part 3 (26-28) Deck (34):
0

The primary objective of accounting is to measure...

Income

1

Which outlines of SFAC is income determination included in?

5, 6, 8

2

Income is a measure of...

Management's efficiency in combining the factors of production
Into desired goods and services

3

Efficient firms with prospects of increased efficiency (higher profits) have greater access to...

Financial capital at lower costs

4

The cost of capital will be lower for the company with the...

Brighter outlook (lower dividend yields and lower interest rates)

5

The entire process of acquiring factors of production, processing them and selling the resulting goods and services produces...

Revenue

6

The acquisition of raw materials is part of the revenue producing process as is providing...

Warranty protection

7

Under the accrual basis of accounting, revenue is generally recognized at...

The point of sale or as the service is performed

8

Point of sale

When title passes

9

FOB shipping point

When seller ships

10

FOB destination

When buyer receives

11

3 exceptions that exist to the general revenue recognition rule

1 during production

2 point where production is complete

3 point of cash collection

12

Recognition basis/source of GAAP:

point of sale/ASC Topic 605: Accounting method

Transactions approach (sales basis)

13

Recognition basis/source of GAAP:

Point of sale/ASC Topic 605: 2 criteria for use of basis

1 exchange has taken place

2 earnings process is (virtually) complete

14

Recognition basis/source of GAAP:

During production basis/ASC Topic 605: Accounting method

Percentage of completion

15

The completed contract method for construction contracts is not a departure from...

The sale basis

16

Recognition basis/source of GAAP:

During production basis/ASC Topic 605: 3 criteria for use of basis

1 long term construction, property or service contract

2 dependable estimates of extent of progress and cost to complete

3 reasonable assurance of collectibility of contract price

17

Recognition basis/source of GAAP:

During production basis/ASC Topic 605: 3 reasons for departing from sale basis

1 availability of evidence of ultimate proceeds

2 better measure of periodic income

3 avoidance of fluctuations in revenues, expenses and income

18

Recognition basis/source of GAAP:

Completion of production basis/ASC Topic 330: Accounting method

Net realizable value

19

Recognition basis/source of GAAP:

Completion of production basis/ASC Topic 330: 3 Criteria for use of basis

1 immediate marketability at quoted prices

2 Unit interchangeability

3 difficulty of determining costs

20

Recognition basis/source of GAAP:

Completion of production basis/ASC Topic 330: 2 reasons for departing from sale basis

1 known or determinable revenues

2 inability to determine costs and thereby defer expense
recognition until sale

21

Recognition basis/source of GAAP:

Cash collection basis/ASC Topic 605: Accounting method

Installment and cost recovery methods

22

Recognition basis/source of GAAP:

Cash collection basis/ASC Topic 605: criteria for use of basis

Absence of reasonable basis for estimating degree of collectibility

23

Recognition basis/source of GAAP:

Cash collection basis/ASC Topic 605: reason for departing from sale basis

Level of uncertainty of collection of receivable precludes
Recognition of gross profit before cash is received

24

Under accrual accounting expenses are recognized as related revenues are recognized, that is (product) expenses are...

Matched with revenues

25

Expenses are recognized...

As incurred

26

Product costs

Associated with particular sales (cost of sales)

Attach to unit of product and become an expense only when
The unit it is attached to is sold

27

Associating "Cause and effect"

Become expense only when unit attached to it is sold

28

Period costs

Not particularly or conveniently assignable to product

29

Period costs, become expenses due to passage of time by...2

1 immediate recognition if future benefits can't be measure
(Advertising)

2 systematic and rational allocation if benefits are produced in
certain future periods (depreciation)

30

Income is the net effect of...

inflows of revenue and outflows of expense during a period
Of time

31

Cash basis accounting, when does it recognize income?
Expenses?

Recognizes income When cash is received

Recognizes expenses when cash is disbursed

32

Example of how cash basis accounting is subject to manipulation

Cash receipts and expenses can be switched from one year to
another by management

33

Another reason for adopting accrual basis accounting over cash basis is that economic transactions have...

Become more involved and multiperiod