WALL STREET PREP; ACCOUNTING CRASH
COURSE EXAM WITH QUESTIONS AND WELL
VERIFIED ANSWERS
An Overview of FASB
Established in 1973 as an independent body to carry out the function of
codifying accounting standards on the behalf of the SEC
Composed of seven full-time members appointed for five years by the
Financial Account Foundation (FAF)
Decisions are influenced by:
International Financial Reporting Standards (IFRS)
Over 100 countries, including the EU, UK, Canada, Australia, and
Russia, have adopted a unified set of international accounting standards
(IFRS)
1
,Although we have seen unprecedented convergence over the last few years
between US GAAP and IFRS, some differences remain Assumption 1:
Accounting Entity
A company is considered a separate "living" enterprise, apart from its owners
In other words, a corporation is a "fictional" being
Assumption 2: Going Concern
A company is considered a "going concern" for the foreseeable future; it is assumed
to remain in existence indefinitely
Assumption 3: Measurement
Financial statements can only show measurable activities of a corporation such as
its quantifiable resources, its liability, amount of taxes it is facing, etc.
Assumption 4: Periodicity
Companies are required to file annual and interim reports
In the US, quarterly and annual financial reports are required
2
,An accounting year (fiscal year) is frequently aligned with the calendar year
What is Accounting?
Accounting is the language of business; it is a standard set of rules for
measuring a company's financial performance.
Assessing a company's financial performance is important for:
The firm's officers (managers and employees)
Investors
Lenders
General public
Standard financial statements serve as a "yardstick" of communicating
financial performance to the general public.
Why is Accounting Important?
Enables managers to make corporate decisions
Enables the general public to make investment decisions
Who Uses Accounting?
3
, Used by a variety of organizations - from the federal government to non-profit
organizations to small businesses to corporations
We will discuss accounting rules as they pertain to publicly-traded companies
Accounting Regulations
Accounting attempts to standardize financial information and follows rules and
regulations
These rules are called Generally Accepted Accounting Principles
(GAAP)
In the US, the Securities and Exchange Commision (SEC) authorizes the
Financial Accounting Standards Board (FASB) to determine accounting
rules
GAAP comes from the Statements of Financial Accounting Standards (SFAS)
issued by the FASB
An Overview of the SEC
A US federal agency established by the US Congress in 1934
4
COURSE EXAM WITH QUESTIONS AND WELL
VERIFIED ANSWERS
An Overview of FASB
Established in 1973 as an independent body to carry out the function of
codifying accounting standards on the behalf of the SEC
Composed of seven full-time members appointed for five years by the
Financial Account Foundation (FAF)
Decisions are influenced by:
International Financial Reporting Standards (IFRS)
Over 100 countries, including the EU, UK, Canada, Australia, and
Russia, have adopted a unified set of international accounting standards
(IFRS)
1
,Although we have seen unprecedented convergence over the last few years
between US GAAP and IFRS, some differences remain Assumption 1:
Accounting Entity
A company is considered a separate "living" enterprise, apart from its owners
In other words, a corporation is a "fictional" being
Assumption 2: Going Concern
A company is considered a "going concern" for the foreseeable future; it is assumed
to remain in existence indefinitely
Assumption 3: Measurement
Financial statements can only show measurable activities of a corporation such as
its quantifiable resources, its liability, amount of taxes it is facing, etc.
Assumption 4: Periodicity
Companies are required to file annual and interim reports
In the US, quarterly and annual financial reports are required
2
,An accounting year (fiscal year) is frequently aligned with the calendar year
What is Accounting?
Accounting is the language of business; it is a standard set of rules for
measuring a company's financial performance.
Assessing a company's financial performance is important for:
The firm's officers (managers and employees)
Investors
Lenders
General public
Standard financial statements serve as a "yardstick" of communicating
financial performance to the general public.
Why is Accounting Important?
Enables managers to make corporate decisions
Enables the general public to make investment decisions
Who Uses Accounting?
3
, Used by a variety of organizations - from the federal government to non-profit
organizations to small businesses to corporations
We will discuss accounting rules as they pertain to publicly-traded companies
Accounting Regulations
Accounting attempts to standardize financial information and follows rules and
regulations
These rules are called Generally Accepted Accounting Principles
(GAAP)
In the US, the Securities and Exchange Commision (SEC) authorizes the
Financial Accounting Standards Board (FASB) to determine accounting
rules
GAAP comes from the Statements of Financial Accounting Standards (SFAS)
issued by the FASB
An Overview of the SEC
A US federal agency established by the US Congress in 1934
4
