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Accruals

Accrual part of Conceptual Framework

QuestionAnswer
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