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Accruals
Accrual part of Conceptual Framework
| Question | Answer |
|---|---|
| Who has access to the internal records of a business? | Management |
| The financial report issued by business enterprises is intended for whom? | All external users, Investors and creditors included |
| What are the key components of a financial report? | - Income Statement - Balance sheet - Statement of cash flows - Auditors Opinion - Statement of comprehensive Income - Statement of changes in stockholders equity - Footnote disclosures & Supplementary schedules |
| What is the sole authoritative source for GAAP? | The FASB Codification |
| What is the hierarchy of GAAP? | There is no longer a hierarchy of GAAP |
| If there is a financial reporting practice not included in the codification, is the practice authoritative? | No, the practice is not authoritative if the practice is not included in the codification. |
| Does the Codification changes GAAP? | No, it provides accounting standards in a newly structured electronic form. |
| The codification does not include guidance for non-gaap matter including: | Other comprehensive basis of accounting cash basis income tax basis regulatory accounting principles |
| If guidance for a transaction or event is not specified in the codification then what? | Authoritative GAAP for similar transactions or events should be considered before considering non-authoritative GAAP |
| Does the codification replace or affect guidance issued by GAAP? | No, the codification is provided on a convienence basis |
| What basis of accounting is GAAO and financial statements based on? | Accrual accounting |
| Under the accrual basis of accounting, when are revenues recognized? | When they are earned. |
| Under the accrual basis of accounting, when are expenses recognized? | Whey they are incurred, regardless of the period of cash payment or when the bill is received. |
| Why is the accrual basis of accounting preferred over the cash basis? | Because it reflects a better association of revenues and expenses with the appropriate accounting period. |
| What is an economic transaction or activity? | A transaction or activity that generates revenues or expenses. |
| An accrual account is created when? | When the economic event / activity occurs first. |
| A deferral account is created when? | When the cash event / activity occurs first. |
| What is the formula for Accrual to cash? | ΔCash + ΔOther Assets = Δ Liabilities + Δ Equity , Then isolate cash so... Δ Cash = Δ Liabilities + Δ Equity - Δ Other Assets |
| What is the formula for cash to accrual? | Here we are solvoing for the change in equity so Δ Equity = Δ Assets - Δ Liabilities |
Created by:
jjcnss
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