ACC 300: EXAM 1 QUESTIONS WITH VERIFIED
SOLUTIONS
Primary Purpose of Financial Accounting
To provide financial information that meets the needs of external users such as investors and
creditors through financial statements and related disclosure notes.
Objective of Financial Accounting
To provide information to investors and creditors to help them make investment and credit
decisions and predict future cash flows.
Conceptual Framework
Deals with theoretical and conceptual issues and provides an underlying structure for current and
future accounting and reporting standards.
Objective of Conceptual Framework
To provide financial information that is useful to capital providers.
Primary Qualities of Conceptual Framework
- Relevance
- Faithful Representation
Component of Relevance
- Predictive Value
- Confirmatory Value
- Materiality
Component of Faithful Representation
- Completeness
- Neutrality
- Free from Error
Enhancing Qualities
- Comparability
- Verifiability
- Timeliness
- Understandability
Financial Statements
- Balance Sheet
- Income Statement
, - Statement of Shareholders' Equity
- Statement of Cash Flowsx
Balance Sheet
- A financial statement that reports assets, liabilities, and owner's equity on a specific date ("as
of" or "at").
- Provides us with the basic accounting equation (A = L + SE)
Income Statement
A financial statement that reports a company's revenues and expenses and resulting net income
or net loss for a specific period of time ("for year ended").
Statement of Shareholders' Equity
Statement disclosing the source of changes in the shareholders' equity accounts (common stock,
retained earnings) ("for year ended")
Statement of Cash Flows
Change statement summarizing the transactions that caused cash to change during the period.
("for year ended")
Revenues
Inflows or other enhancements of assets of an entity or settlements of its liabilities during a
period from delivering or producing goods, rendering services, or other activities that constitute
the entity's ongoing major or central operations. (Generated from normal business operations)
Gains
Increases in equity from peripheral or incidental transactions of an entity (Generated outside of
normal business operations)
Expenses
Outflows or other using up of assets or incurrences of liabilities (or a combination of both)
during a period from delivering or producing goods, rendering services, or carrying out other
activities that constitute the entity's ongoing major or central operations.
Losses
Decreases in assets or increases in liabilities from peripheral transactions (Money lost outside of
business operations)
Assets
Probable future economic benefits obtained or controlled by a company as a result of past
transactions or events
Liabilities
SOLUTIONS
Primary Purpose of Financial Accounting
To provide financial information that meets the needs of external users such as investors and
creditors through financial statements and related disclosure notes.
Objective of Financial Accounting
To provide information to investors and creditors to help them make investment and credit
decisions and predict future cash flows.
Conceptual Framework
Deals with theoretical and conceptual issues and provides an underlying structure for current and
future accounting and reporting standards.
Objective of Conceptual Framework
To provide financial information that is useful to capital providers.
Primary Qualities of Conceptual Framework
- Relevance
- Faithful Representation
Component of Relevance
- Predictive Value
- Confirmatory Value
- Materiality
Component of Faithful Representation
- Completeness
- Neutrality
- Free from Error
Enhancing Qualities
- Comparability
- Verifiability
- Timeliness
- Understandability
Financial Statements
- Balance Sheet
- Income Statement
, - Statement of Shareholders' Equity
- Statement of Cash Flowsx
Balance Sheet
- A financial statement that reports assets, liabilities, and owner's equity on a specific date ("as
of" or "at").
- Provides us with the basic accounting equation (A = L + SE)
Income Statement
A financial statement that reports a company's revenues and expenses and resulting net income
or net loss for a specific period of time ("for year ended").
Statement of Shareholders' Equity
Statement disclosing the source of changes in the shareholders' equity accounts (common stock,
retained earnings) ("for year ended")
Statement of Cash Flows
Change statement summarizing the transactions that caused cash to change during the period.
("for year ended")
Revenues
Inflows or other enhancements of assets of an entity or settlements of its liabilities during a
period from delivering or producing goods, rendering services, or other activities that constitute
the entity's ongoing major or central operations. (Generated from normal business operations)
Gains
Increases in equity from peripheral or incidental transactions of an entity (Generated outside of
normal business operations)
Expenses
Outflows or other using up of assets or incurrences of liabilities (or a combination of both)
during a period from delivering or producing goods, rendering services, or carrying out other
activities that constitute the entity's ongoing major or central operations.
Losses
Decreases in assets or increases in liabilities from peripheral transactions (Money lost outside of
business operations)
Assets
Probable future economic benefits obtained or controlled by a company as a result of past
transactions or events
Liabilities
