ACT-210 Chapter 1 SmartBook
Recognition refers to the process of
recording information in the basic financial statements
Which of the following is a financial statement provided to investors?
Statement of shareholders' equity
Which of the following models is best in helping predict future cash flows?
Accrual Accounting
Which financial reporting model is used by most profit-oriented businesses and not-for-profit entities
Accrual accounting
Which of the following forms of business provide shares of stock as an ownership interest?
Corporation
Labor unions and creditors are examples of _____ users of financial information
External/outside
The process of providing information to external users if referred to as ______
Financial Accounting
Which of the following are providers of financial information?
Households, companies, schools
The _____ has the authority to set accounting standards for companies, but has delegated the task to the private sector
SEC
The legal authority to set accounting and reporting standards for companies whose securities are publicly traded lies with the ___
SEC
The financial reporting model used by the majority of profit oriented comapnies is ___ accounting
accrual
Who serves as an independent intermediary to help ensure that management has appropriately applied GAAP in preparing the financial statements
auditors
A code or moral system that provides criteria for evaluating right and wrong is referred to as
ethics
A code or moral system that provides criteria for evaluating right or wrong is referred to as ____
ethics
the accrual accounting model is best able to achieve the goal of predicting ____ cash flows
future
Which of the following are among the basic assumptions underlying US GAAP
going concern monetary unit periodicity economic entity
the main focus of accounting information is to
provide useful information for decision making
What information regarding an entity's future cash flows are investors and lenders interested in?
timing, amount, uncertainty
What is the purpose of the audit report?
to add credibility to the financial statements
What is the purpose of the auditor
to help ensure management has appropriately applied GAAP in preparing the financial statements
Which accounting model best meets the primary goal of users of financial reporting
Accrual basis
the conceptual framework does not prescribe which of the following
US GAAP
A probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events is a
asset
What element of the financial statements is described by the following definition? "Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions."
assets
The "Accounting Constitution", a coherent system of interrelated objectives and fundamentals that lead to consistent standards and that prescribe the nature, function, and limits of financial accounting and reporting is referred to as the
conceptual
In developing standards, the FASB considers the
economic transactions that standards will address, and concerns and opinions of constituents
If the SEC does not agree with a standard issued by the private sector, it can
force a change in the standard
The primary purpose of financial reporting is to provide useful information for decision making to
providers of capital
Financial reporting is the process of
providing information to outside users
the process of admitting information into the financial statements is referred to as
recognition
The revenue/expense approach focuses on the income statement because it relies on which accounting principles?
revenue recognition and matching
True of False: Both profit-oriented companies and not-for-profit companies are providers of financial information
true
True or False: Financial Accounting is primarily concerned with providing financial information to external users
true
True or False: The FASB considers written comments from interested parties before issuing an Accounting Standards Update
true
Which are the financial statements most frequently provided to external users?
balance sheet, income statement, statement of shareholders' equity, statement of cash flows
Financial accounting is chiefly concerned with providing information to various ___ users
external/outside
The four basic accounting assumptions
identify the denomination in which reporting occurs identify the frequency of reporting assume the entity will continue to exist identify the entity being reported on
An emphasis is placed on proper income statement item recognition under what approach under US GAAP
revenue/expense approach
Which fo the following is a financial statement provided to investors?
statement of shareholder's equity
True or false: the conceptual framework does not prescribe GAAP
true
the overriding objective in the hierarchy of qualitative characteristics of financial reporting information is
decision usefulness
What are the three primary forms of business organizations?
corporation, sole proprietorship, and partnership
Before issuing an Accounting Standards Update, the FASB undertakes a series of information-gathering steps including
deliberations, open hearings, written comments
External users of a company's financial information include
Banks, labor unions, and credit-rating agencies