BUS321 CH1- Environment and Theoretical Structure of Financial Accounting

____________accounting is chiefly concerned with providing information to external users.

Financial

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

elements

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

asset

Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events are referred to as ________.

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 ________ framework.

conceptual

Expense recognition often matches _______ and _______ that arise from the same transaction.

expenses revenues

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

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.

Expense recognition is implemented by which of the following ways?

in the period incurred, systematic and rational allocation, cause-and-effect relationship, associating expenses and revenues in a specific period of time

Disclosure refers to the process of

including additional information in the financial statements and notes.

True or false: Financial accounting is primarily concerned with providing financial information to external users.

True

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

ethics

Matching cost of goods sold with the revenues generated during the period is an example of which approach to expense recognition?

Cause-and-effect relationship

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate management

What are the three primary forms of business organizations?

Corporation, sole proprietorship, partnership

The primary role of financial accounting is to provide useful financial information to users who are ______ to the business enterprise.

External

The _____________ (acronym) was established to set U.S. accounting standards and is the current standard setting body.

FASB

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

FASB

True or false: Cash basis accounting is the required accounting method for most profit-oriented companies.

False

The private sector organization that is currently responsible for setting accounting standards in the United States is the

Financial Accounting Standards Board.

What level of the fair value hierarchy includes quoted market prices in active markets for identical assets and liabilities?

Level 1

What level of the fair value hierarchy includes inputs other than quoted prices that are observable for the asset or liability?

Level 2

What is the primary function of financial accounting?

Provide useful information to users external to the business.

The legal authority to set accounting and reporting standards for companies whose securities are publicly traded lies with the __________ (abbreviation).

SEC.

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

The AICPA (American Institute of Certified Public Accountants)

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 information about the item is reliable. the information about the item is relevant to decision making. the item has relevant attributes that are measurable.

The AICPA is the national professional organization for certified professional public _____________.

accountants

The financial reporting model used by the majority of profit oriented companies is ______________ accounting.

accrual

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

amount uncertainty timing

The overriding objective in the hierarchy of qualitative characteristics of financial reporting information is

decision usefulness

The process of including additional pertinent information in the financial statements and accompanying notes is referred to as ___________.

disclosure

Measuring assets and liabilities based on their original transaction value is an example of

historical cost

The principle stating that asset and liability measurements should be based on the amount given or received in the original transaction is referred to as the ________ ________ principle.

historical cost.

It is the responsibility of ____________ to apply Generally Accepted Accounting Principles in preparation of the company's financial statements.

management

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

measurement

Before issuing an Accounting Standards Update, the FASB undertakes a series of information-gathering steps including ________, ___________, and _____________.

open hearings written comments deliberations

The primary forms of business organization in the United States are the sole proprietorship, the ___________ , and the corporation.

partnership

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

The process of admitting or recording an item into the basic 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 matching

An emphasis is placed on proper income statement item recognition under what approach under US GAAP?

revenue/expense approach

Expenses are matched to ________ from the same transaction.

revenues

Ethics deals with the ability to distinguish _________ from _________.

right from wrong

The Accounting Standards Codification is organized into ___________ and __________.

topics and subtopics

True or false: The FASB considers written comments from interested parties before issuing an Accounting Standards Update.

true

True or false: The conceptual framework does not prescribe GAAP.

true

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

Reliability Measurability Definition Relevance

What was the purpose of the FASB Accounting Standards Codification project?

Reorganize all relevant accounting pronouncements in U.S. GAAP.