Intermediate Accounting I (Exam 1)
Chapters 1-5||Guaranteed Pass
objective of financial reporting -CORRECT ANSWER provide financial information
about the reporting entity that is useful to present and potential equity investors,
lenders, and other creditors
general-purpose financial statements -CORRECT ANSWER provide financial reporting
information to a wide variety of users
accrual basis accounting -CORRECT ANSWER ensures that a company records
events that change its financial statements in the periods in which it receives or pays
cash
generally accepted accounting principles (GAAP) -CORRECT ANSWER common set of
accounting standards and procedures:
Securities and Exchange Commission (SEC)
American Institute of Certified Public Accountants (AICPA)
Financial Accounting Standards Board (FASB)
Financial Accounting Standards Board -CORRECT ANSWER establish and improve
standards of financial accounting and reporting for the guidance and education of the
public which includes issuers, auditors, and users of financial information
Accounting Standards Updates -CORRECT ANSWER These updates amend the
Accounting Standards Codification, which represents the source of authoritative
accounting standards
Four primary financial statements -CORRECT ANSWER Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Owner's/Stockholders' Equity
Conceptual Framework -CORRECT ANSWER establishes the concepts that underlie
financial reporting.
Relevance (Fundamental Quality) -CORRECT ANSWER accounting information must
be capable of making a difference in a decision. Financial information is capable of
making a difference when it has predictive value, confirmatory value, or both.
Predictive Value -CORRECT ANSWER if it has value as an input to predictive
processes used by investors to form their own expectations about the future
Confirmatory value -CORRECT ANSWER relevant information also helps users confirm
or correct prior expectations
, Faithful Representation (fundamental quality) -CORRECT ANSWER means that the
numbers and descriptions match what really existed or happened
Completeness -CORRECT ANSWER means that all the information that is necessary
for faithful representation is provided
Neutrality -CORRECT ANSWER means that a company cannot select information to
favor one set of interested parties over another. Unbiased information must be the
overriding consideration.
Free from Error -CORRECT ANSWER more accurate (faithful representation) of a
financial item
Comparability (Enhancing Qualities) -CORRECT ANSWER enables users to identify the
real similarities and differences in economic events between companies.
Consistency -CORRECT ANSWER when a company applies the same accounting
treatment to similar events, from period to period.
Verifiability -CORRECT ANSWER occurs when independent measurers, using the
same methods, obtain similar results.
Timeliness -CORRECT ANSWER having information available to decision-makers
before it loses its capacity to influence decisions.
Understandability -CORRECT ANSWER Decision-makers vary widely in the types of
decisions they make, how they make decisions, the information they already possess or
can obtain from other sources, and their ability to process the information.
Assets -CORRECT ANSWER probably future economic benefits obtained or controlled
by a particular entity as a result of past transactions or events
Liabilities -CORRECT ANSWER Probable future sacrifices of economic benefits arising
from present obligations of a particular entity to transfer assets or provide services to
other entities in the future as a result of past transactions or events.
Equity -CORRECT ANSWER Residual interest in the assets of an entity that remains
after deducting its liabilities.
Investments By Owners -CORRECT ANSWER Increases in net assets of a particular
enterprise resulting from transfers to it from other entities of something of value to
obtain or increase ownership interests (or equity) in it.
Chapters 1-5||Guaranteed Pass
objective of financial reporting -CORRECT ANSWER provide financial information
about the reporting entity that is useful to present and potential equity investors,
lenders, and other creditors
general-purpose financial statements -CORRECT ANSWER provide financial reporting
information to a wide variety of users
accrual basis accounting -CORRECT ANSWER ensures that a company records
events that change its financial statements in the periods in which it receives or pays
cash
generally accepted accounting principles (GAAP) -CORRECT ANSWER common set of
accounting standards and procedures:
Securities and Exchange Commission (SEC)
American Institute of Certified Public Accountants (AICPA)
Financial Accounting Standards Board (FASB)
Financial Accounting Standards Board -CORRECT ANSWER establish and improve
standards of financial accounting and reporting for the guidance and education of the
public which includes issuers, auditors, and users of financial information
Accounting Standards Updates -CORRECT ANSWER These updates amend the
Accounting Standards Codification, which represents the source of authoritative
accounting standards
Four primary financial statements -CORRECT ANSWER Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Owner's/Stockholders' Equity
Conceptual Framework -CORRECT ANSWER establishes the concepts that underlie
financial reporting.
Relevance (Fundamental Quality) -CORRECT ANSWER accounting information must
be capable of making a difference in a decision. Financial information is capable of
making a difference when it has predictive value, confirmatory value, or both.
Predictive Value -CORRECT ANSWER if it has value as an input to predictive
processes used by investors to form their own expectations about the future
Confirmatory value -CORRECT ANSWER relevant information also helps users confirm
or correct prior expectations
, Faithful Representation (fundamental quality) -CORRECT ANSWER means that the
numbers and descriptions match what really existed or happened
Completeness -CORRECT ANSWER means that all the information that is necessary
for faithful representation is provided
Neutrality -CORRECT ANSWER means that a company cannot select information to
favor one set of interested parties over another. Unbiased information must be the
overriding consideration.
Free from Error -CORRECT ANSWER more accurate (faithful representation) of a
financial item
Comparability (Enhancing Qualities) -CORRECT ANSWER enables users to identify the
real similarities and differences in economic events between companies.
Consistency -CORRECT ANSWER when a company applies the same accounting
treatment to similar events, from period to period.
Verifiability -CORRECT ANSWER occurs when independent measurers, using the
same methods, obtain similar results.
Timeliness -CORRECT ANSWER having information available to decision-makers
before it loses its capacity to influence decisions.
Understandability -CORRECT ANSWER Decision-makers vary widely in the types of
decisions they make, how they make decisions, the information they already possess or
can obtain from other sources, and their ability to process the information.
Assets -CORRECT ANSWER probably future economic benefits obtained or controlled
by a particular entity as a result of past transactions or events
Liabilities -CORRECT ANSWER Probable future sacrifices of economic benefits arising
from present obligations of a particular entity to transfer assets or provide services to
other entities in the future as a result of past transactions or events.
Equity -CORRECT ANSWER Residual interest in the assets of an entity that remains
after deducting its liabilities.
Investments By Owners -CORRECT ANSWER Increases in net assets of a particular
enterprise resulting from transfers to it from other entities of something of value to
obtain or increase ownership interests (or equity) in it.
