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Accrual part of Conceptual Framework
|Who has access to the internal records of a business?
|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?
|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