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