Macro Vocabulary

Which of the following models is best in helping predict future cash flows?

Accrual accounting

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

accrual accounting

Who serves as an independent intermediary to help ensure that management has appropriately applied GAAP in preparing the financial statements?

auditors

Claire's revenues are greater than her expenses. Claire has net _________ for the period.

income

Labor unions and creditors are examples of ___________ users of financial information. (Enter only one word.)

internal

Jody's expenses exceed her revenues for the period. Jody has a net __________ for the period. (Enter only one word.)

loss

It is the responsibility of

management

The difference between revenue and expenses when expenses are greater is called

net loss

Auditors examine financial statements to express a professional, independent __________ on the financial statements. (Enter one word per blank)

opinion

According to the conceptual framework, for accounting information to be relevant, what qualities must it possess? (Select all that apply.)

predictive value confirmatory value

Faithful representation exists when

there is agreement between a measure or description and the phenomenon it purports to represent.

Which of the following are enhancing characteristics of financial information? (Select all that apply.)

timeliness comparability

Information is ___________ if different independent measures would reach consensus about whether it is representationally faithful.

verifiable

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

Accrual basis

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

Corporate management

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

False

True or false: The primary function of financial accounting is to provide useful financial information to users who are internal to the business.

False

Which of the following is a financial statement provided to investors?

Statement of shareholders' equity

What is the purpose of the auditor?

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

What classification would the following auditor opinion receive?: "In our opinion, the consolidated financial statements listed in the accompanying index present fairly . . . in conformity with U.S. GAAP."

a clean opinion

An enhancing qualitative characteristic of accounting information that allows users to better understand similarities and differences in the financial reports across different companies is called

comparability

The qualitative characteristic of using the same accounting method each period over time refers to the concept of ___________. (Enter one word per blank.)

consistency

External users of a company's financial information include (Select all that apply.)

credit-rating agencies labor unions banks

Labor unions and creditors are examples of ___________ users of financial information. (Enter only one word.)

external

To be useful for decision making, information should possess the fundamental decision-specific qualities of (Select all that apply.)

faithful representation relevance

Faithful representation requires that information be (Select all that apply.)

free from error neutral complete

The accrual accounting model is best able to achieve the goal of predicting __________ cash flows.

future

The accrual accounting model is best able to achieve the goal of predicting ___________ cash flows.

future

The characteristic that a new accounting standard should not favor one group of companies over others or achieve a particular social outcome is an example of

neutral

Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?

neutrality

The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of

relevance and faithful representation.

The two fundamental characteristics of financial information are

relevance and faithful representation.

For accounting information to be _________, it must possess predictive value and/or confirmatory value. (Enter only one word.)

relevant

Which are the financial statements most frequently provided to external users? (Select all that apply.)

statement of cash flows balance sheet income statement statement of shareholders' equity

Which of the following are external users of financial information?

suppliers investors creditors government agencies