MHA 706 Mod 2 - Income Statement and Statement of Changes in Equity Questions and Answers Rated A+

MHA 706 Mod 2 - Income Statement and
Statement of Changes in Equity

What is financial accounting? - answer Identify, record, and communicates operational
results and status of organization.

What is the difference between finance and accounting? - answer Accounting -
Emphasis on recording transaction

Finance - records transaction and analyze data

What are the 4 most important financial accounting information? - answer- Income
Statement
- Statement of changes in equity
- Balance sheet
- Statement of cash flows

Does not-for-profit need to prepare financial statements? - answer Yes - They must
report in the IRS Form 990

What is the SEC? - answer- Securities and Exchange Commission
- Legal authority to regulate the form and content of financial statements

What organizations does the SEC rely on for Financial standards? (3) - answer-
Financial Accounting Standards Board (FASB)
- Industry Committees of the American Institute of Certified Public Accountants (AICPA)
- Principles and Practices Board of the Healthcare Financial Management Association
(HFMA)

What is Generally Accepted Accounting Principles (GAAP)? - answer- Conventions /
Rulings that evolved from the three standardization organization
- Guidelines for the preparation of financial accounting statements
- Only applies to financial accounting statements (external and not for internal)
- Remains dynamic

What are the 4 ASSUMPTIONS in the Generally Accepted Accounting Principles? -
answer- Accounting entity: statements is meant for the specific company and not for
other people
- Going concern: assumed that entity will have indefinite lifetime. Not liquidated in the
near future
- Periodically: the time period applicable to the statements can be defined