ACCT 3110 - Ch 1

Corporation

business provide shares of stock as an ownership interest

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 ___ framework

conceptual

The primary focus of the qualitative characteristics of accounting information is:

decision usefulness

Which of the following are among the basic assumptions underlying U.S. GAAP?

economic entity, going concern, periodicity, monetary unit

Measurement is the process of associating numerical amounts to the ____ reported in financial statements

elements

A code or moral system that provides criteria for evaluating right or wrong is referred to as

ethics

The price that would be received to sell assets or paid to transfer a liability in an orderly transaction between market participants at the measurement date is the

fair value

If the SEC does not agree with a standard issued by the private sector, it can

force a change in the standard

The accrual accounting model is best able to achieve the goal predicting ___ cash flows

future

What accounting principle states that an asset or liability should be recorded at the amount given or received in the exchange transaction?

historical cost

Disclosure refers to the process of

including additional information in the financial statements and notes.

The process of associating numerical amounts to the elements in the financial statements is called

measurement

Specific time period

monthly salary payments to an office employee

Disclosure is the process of including additional pertinent information in

notes to the financial statements and financial statements

The main focus of accounting information is to

provide useful information for decision making.

The primary purpose of financial reporting is to provide useful information for decision making to

providers of capital

The process of admitting information into the financial statements is referred to as

recognition

Recognition refers to the process of

recording information in the basic financial statements.

Expenses are matched to ____ from the same transaction.

revenues

Ethics deals with the ability to distinguish __ from ___

right, wrong

Three primary forms of business organizations

sole proprietorship, partnership, corporation

The IASB's main objective is to develop a single set of global accounting ___ that are high-quality, understandable, and enforceable.

standards

The Accounting Standards Codification is organized into

topics and subtopics

The conceptual framework does not prescribe GAAP. T/F

true

What information regarding an entity's future cash flows are investors and lenders interested in?

uncertainty, timing, amount

Before issuing an Accounting Standards Update, the FASB undertakes a series of information-gathering steps including

written comments, open hearings, deliberations

Which organization is currently the national professional organization for certified professional public accountants

AICPA - American Institute of Certified Public Accountants

Cause and effect relationship

Cost of Goods Sold

The acronym for the private sector organization that sets the accounting standards in the US is the

FASB

established to set the US accounting standards and is the current standard setting body

FASB (Financial Accounting Standards Board)

T/F The FASB Codification project revised and updated US accounting standards with international accounting standards

False

Expense recognition is implemented by which of the following ways?

In the period incurred Systematic and rational allocation. Associating expenses and revenues in a specific period of time. Cause-and-effect relationship.

Select the four criteria used to determine if an item is recognized in the financial statements according to SFAC 5.

Reliability, Relevance, Measurability, Definition

Has the authority to set accounting standards for companies, but it relies on the private sector to do so.

SEC (Securities and Exchange Commission)

Financial Accounting

The field of accounting that focuses on providing information for external decision makers.

According to SFAC 5, the four criteria that must be met for an item to be recognized in the basic financial statements are

The item has relevant attributes that are measurable. The item meets the definition of an element. The information about the item is relevant to decision making. The information about the item is reliable.

According to SFAC 5, the four criteria that must be met for an item to be recognized in the basic financial statements are

The item meets the definition of an element. The item has relevant attributes that are measurable. The information about the item is reliable. The information about the item is relevant to decision making.

What is the purpose of the audit report?

To add credibility to the financial statements.

Which of the following represents the IASB's primary objective?

To develop high quality global standards used to make economic decisions

What is the purpose of the auditor?

To help ensure management has appropriately applied GAAP in preparing the financial statements.

The conceptual framework does not prescribe which of the following?

U.S. GAAP

the AICPA is the national professional organization for certified professional public ___

accountants

What financial reporting model is used by most profit-oriented businesses and not-for-profit entities?

accrual accounting

Which accounting model best meets the primary goal of users of financial reporting

accrual basis

without regard to related revenue in the period incurred

advertising expenditures

A probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events is a(n)

asset