Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Int. Financial Acc.
Financial Accounting Exam 2 (Ch. 3)
| Question | Answer |
|---|---|
| What is financial flexibility? | An entity's ability to respond to unexpected needs (little reliance on borrowing money, low debt load & high cash reserve) |
| What cash flow measures does the BS show? | Liquidity, long-term solvency, financial flexibility |
| What are the limitations of the BS? | 1. Many accounts are listed at historical cost, not market cost 2. Select assets & liabilities aren't depicted on BS (human capital, quality reputation) 3. Many accounts are based on estimates, not set amounts |
| How are accounts like assets & liabilities on the BS ordered & listed? | Assets are reported from high to low liquidity, liabilities are shown from most recent maturity to least recent |
| What is the full disclosure principle? | Requires that the financial statements provide all material & relevant information concerning the entity |
| What disclosures are posted parenthetically on the face of the statements? | Allowance for doubtful accounts, accumulated depreciation, often contra assets that are shown as negative in parenthesis, AND INFORMATION ABOUT COMMON STOCK |
| Which notes are separate, and which are grouped? | Summary of significant policy notes are often grouped, whereas third party transaction notes and subsequent event notes are separate notes |
| What is often included in the summary of significant accounting policy note? | GAAP methods are listed that affect the statements. The biggest examples are depreciation method, inventory valuation, policy of revenue recognition, and what the company considers to be "cash equivalents" |
| What all goes into the subsequent event notes, and are they separate? | Subsequent event notes are separate, and it involves transactions that are expected after the statements are released but cannot be recorded yet. Examples are issuance of debt/equity securities (stock), the sale of assets, and LITIGATIONS |
| What all goes into the third-party transaction notes, & are they separate? | They are separate, and it is transactions that are engaged with foreign entities. It requires disclosure, as the entity could be getting favorited over standard foreign parties (ex. an officer borrowing funds from the entity at a lower rate) |
| What 3 elements are included in disclosures of third-party transactions? | 1. Nature of relationship 2. Description of relationship 3. Amount of transaction & amount due from or to the party |
| What 4 other elements are included in the annual reports besides the financial statements? | 1. Letter to shareholders from CEO 2. Management discussion & analysis 3. Management responsibilities (holds responsibility for annual report) 4. The auditors' report |
| What is included in the letters from management in the annual reports? | One letter states the managements' responsibilities for the statements. The second letter provides an assessment of the effectiveness of internal controls over the reporting process. |
| Even if their usefulness if less than a year, are intangible assets recorded as current assets? | Intangible assets are NEVER recorded as current regardless of their tenure of economic benefit remaining. |
Created by:
user-2059238