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AC 391 Ch 1-4

TermDefinition
generally accepted accounting principles GAAP
research, discussion paper, exposure draft, standard process used in establishing accounting standards by accounting standard-setters
any accounting guidance included in FASB Codification GAAP is comprised of
it is used when there is no standard or interpretation related to the reporting issues under consideration the authoritative status of the conceptual framework is as follows
reporting to capital providers the objective of financial reporting places most emphasis on
external users, particularly equity investors and creditors general-purpose financial statements are prepared primarily for
accounting standards can have detrimental impacts on the wealth levels of the providers of financial information economic consequences of accounting standard-setting means
expectation gap what the public thinks accountants should do and what accountants think they can do
comparability quality of information that permits users to identify similarities in and differences between two sets of economic phenomena
timeliness having information available to users before it loses its capacity to influence decisions
predictive value information about an economic phenomenon that has value as an input to the processes used by capital
relevance information that is capable of making a difference in the decisions of users in their capacity as capital providers
neutrality absence of bias intended to attain a predetermined result or to induce a particular behavior
faithful representation quality of information that assures users that information represents the economic phenomena that it purports to represent
confirmatory value information about an economic phenomenon that corrects past or present expectations based on previous evaluations
free from error the extent to which information is accurate in representing the economic substance of a transaction
completeness includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent
understandability quality of information that allows users to comprehend its meaning
income statement interest revenue
balance sheet cash
income statement sales revenue
balance sheet accounts receivable
income statement sales returns and allowances
balance sheet prepaid insurance
balance sheet allowance for doubtful accounts
income statement sales discounts
balance sheet land, equipment, and buildings
income statement cost of goods sold
balance sheet accumulated depreciation
balance sheet notes receivable
income statement selling expenses
balance sheet accounts payable
balance sheet bonds payable
income statement administrative and general expenses
balance sheet accrued liabilities
income statement interest expense
balance sheet notes payable
income statement loss from earthquake damage
balance sheet common stock
balance sheet retained earnings
the identification, measurement, and communication of financial information about economic entities to interested parties essential characteristics of accounting
To provide disclosure required by generally accepted accounting principles What is the purpose of information presented in notes to the financial statements?
promotes productivity, encourages innovation, and provides an efficient and liquid market for buying and selling securities An effective process of capital allocation is critical to a healthy economy, which
entity perspective Companies viewed as separate and distinct from their owners.
decision-usefulness ability to generate net cash inflows and management’s ability to protect and enhance the capital providers’ investments
Balance Sheet Income Statement Statement of Stockholders’ Equity Statement of Cash Flows Note Disclosure list of financial statements
Securities and Exchange Commission (SEC). American Institute of Certified Public Accountants (AICPA). Financial Accounting Standards Board (FASB). parties involved in standard-setting
topics are identified and placed on the board’s agenda. The first step taken in the establishment of a typical FASB statement is
to provide in one place all the authoritative literature related to a particular topic The FASB’s primary goal in developing the Codification is
financial reporting challenges Nonfinancial measurements. Forward-looking information. Soft assets. Timeliness. Understandability.
IASB and IOSCO. The major key players on the international side are the:
International Financial Reporting Standards, International Accounting Standards, and international accounting interpretations. IFRS is comprised of:
The IASB structure is quite similar to the FASB’s, except the IASB has a larger number of board members. Which of the following statements is true?
International Financial Reporting Standards. IFRS stands for:
To develop a coherent set of standards and rules. To solve new and emerging practical problems need for conceptual framework
true true or false? A conceptual framework underlying financial accounting is important because it can lead to consistent standards and it prescribes the nature, function, and limits of financial accounting and financial statements.
false true or false? A conceptual framework underlying financial accounting is necessary because future accounting practice problems can be solved by reference to the conceptual framework and a formal standard-setting body will not be necessary.
Basic Objectives Second Level = Qualitative Characteristics and Elements Third Level = Recognition, Measurement, and Disclosure Concepts. First Level of conceptual framework
Qualitative Characteristics and Elements Second Level of conceptual framework
Recognition, Measurement, and Disclosure Concepts. Third Level of conceptual framework
The objectives and concepts for use in developing standards of financial accounting and reporting. What are the Statements of Financial Accounting Concepts intended to establish?
The needs of the users of the information. According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on?
material Information is ________ if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information.
Assets Liabilities Equity moment in time
Investment by owners Distribution to owners Comprehensive income Revenue Expenses Gains Losses period of time
A decrease in a liability from primary operations. According to the FASB conceptual framework, an entity’s revenue may result from
Economic Entity company keeps its activity separate from its owners and other businesses
Going Concern company to last long enough to fulfill objectives and commitments
Monetary Unit money is the common denominator
Periodicity company can divide its economic activities into time periods
Historical cost provides a reliable benchmark for measuring historical trends
Fair value information may be more useful than historical cost
Revenue Recognition requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied
Expense Recognition “Let the expense follow the revenues.”
Full Disclosure providing information that is of sufficient importance to influence the judgment and decisions of an informed user
Cost Constraint cost of providing information must be weighed against the benefits that can be derived from using it.
IFRS does not allow use of fair value as a measurement basis. Which of the following statements about the IASB and FASB conceptual frameworks is not correct?
Under IFRS, there are the same number of financial statement elements as in GAAP. Which of the following statements is false?
Should the role of financial reporting focus on internal decision-making as well as providing information to assist users in decision-making? The issues that the FASB and IASB must address in developing a common conceptual framework include all of the following except:
accounting information systems Collects and processes transaction data. Disseminates the financial information to interested parties.
account shows the effect of transactions on a given asset, liability, equity, revenue, or expense account
External events between an entity and its environment.
Internal events event occurring entirely within an entity.
General Journal a chronological record of transactions. Journal Entries are recorded in the journal.
Posting Transferring amounts from journal to ledger.
to identify the type of account involved, and to determine whether a debit or a credit is required purpose of transaction analysis
Trial Balance A list of each account and its balance; used to prove equality of debit and credit balances.
Revenues are recorded in the period in which services are performed
Expenses are recognized in the period in which they are incurred
unearned revenues. Receipt of cash before the services are performed is recorded as a liability called
accrued revenues. Revenues recorded for services performed but cash has yet to be received at the statement date are
accrual-based accounting recognize revenue when the performance obligation is satisfied and expenses in the period incurred, without regard to the time of receipt or payment of cash.
cash-based accounting record revenue only when they receive cash, and record expenses only when they disperse cash.
have a cost that does not exceed the benefits. be transparent. provide a suitable starting point. Information in a company’s first IFRS statements must:
None of the above. The transition date is the date:
recast previously issued financial statements in accordance with IFRS. When converting to IFRS, a company must:
Created by: pace_sauce