Financial Accounting Ch. 1

Neutrality, Completeness, and Free from material error.

Faithful representation requires information to have three characteristics...

GAAP

Generally accepted accounting principles are abbreviated

Relevance

Predictive value and confirmatory value are components of which primary qualitative characteristic? Ex. -Reporting a net income has confirmatory value. -Reporting a growing net income for several consecutive years provide info that has predictive value.

Accountant's ethical conduct and Legislation such as the Sarbanes-Oxley Act.

Provides the most important support for the ethical foundation of accounting?

The conceptual framework

Provides the underlying foundation for FASB's key objectives of financial accounting information...

reasonable understanding of business and economic activities.

The concept of understandability assumes that the users of financial statements should have

FASB Conceptual framework

The foundation upon which financial accounting is built

Decision usefulness

The main priority in the hierarchy of qualitative characteristics of financial reporting information is

Consistency

The qualitative characteristic of using the SAME accounting method each period over time refers to the concept of...

Timeliness

The qualitative characteristic where information is available early enough allowing it to be useful for a decision describes the concept of

TRUE

True or False: Financial information that is immaterial in amount or nature need NOT be reported under GAAP.

1. Prevent conflicts of interest 2. Provide penalties for violators 3. Regulate auditors 4. Require CEO accountability

What is the purpose of the Sarbanes-Oxley Act?

Relevance and Faithful representation.

What primary qualities information should possess to be useful for decision making

Verifiability

When the cost of an item can be traced to objective evidence of a transaction, such as a sales recipt, canceled check, and bank statement, the information has the quality of...