ACNT 2303 Chapter 1 preview

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

False

True or false: The FASB Codification project revised and updated U.S. accounting standards with international accounting standards.

False

_______ 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.

element

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

Financial accounting is chiefly concerned with providing information to various __________ users.

external

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

-Uncertainty -timing -amount

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

-economic entity -monetary unit -going concern -periodicity

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 is the process of including additional pertinent information in

-notes to the financial statements -financial statements

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

-open hearings -written comments -deliberations

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

-relevance -reliability -definition -measurability

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 information about the item is reliable -the item meets the definition of an element -the information about the item is relevant to decision making

The IASB's main objective is to develop a single set of standards that have what characteristics?

-understandable -enforceable -high-quality

The FASB recently issued a standard that requires companies recognize revenue

-when goods or services are transferred to customers -for the amount the company expects to be entitle to receive -at a point in time or over a period of time

The AICPA is the national professional organization for certified professional public _____

Accountants

Match the expense recognition approaches with the most appropriate accounting event, to satisfy proper matching of revenues with expenses: Cause-and-effect relationship, specific time period, without regard to related revenue in the period incurred.

Cause-and-effect relationship-->Cost of goods sold Specific time period--> Monthly salary payments to an office employee Without regard to related revenue in the period incurred--> Advertising expenditures

The _____ 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

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 was the purpose of the FASB accounting standards codification project?

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

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

Reorganize all relevant accounting pronouncements in U.S. GAPP>

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

Revenue/expense approach

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

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

The AICPA

Which of the following provides and underlaying structure for the development of accounting standards?

The Conceptual Framework

Which of the following represent(s) an important objective of the IASB?

To develop high quality global standards

What is the purpose of the auditor?

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

True or false: In the United States, sole proprietorships and partnerships outnumber corporations.

True

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

Expenses are _____ to revenues from the same transaction.

matched

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

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

accrual

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

accrual accounting

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

accrual accounting

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

accrual accounting

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

accrual basis

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

accrue basis

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

assets

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

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

auditors

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

The FASB Accounting Standards _____ organizes all relevant accounting pronouncements in a searchable, online database.

codification

The FASB Accounting Standards _______ organizes all relevant accounting pronouncements in a searchable, online database.

codification

The full-disclosure principle requires that financial reports should include any information that could affect the decisions made by external users, within the constraint that the benefits of that information should exceed the _____ of providing the information.

costs

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

decision usefulness

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

_____ _____ bases measurements on the price that would be received in an orderly market transaction.

fair value

In addition to issuing accounting standards, the FASB has formulated a conceptual _____ to provide an underlying theoretical and conceptual structure for accounting standards.

framework

Any information useful to decision makers should be provided in the financial statements, subject to the cost effectiveness constraint. This describes which accounting principle?

full-disclosure principle

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

future

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

historical cost

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 revenue/expense approach focuses on the income statement because it relies on which accounting principles?

matching revenue recognition

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

measurement

Auditors examine financial statements to express a professional, independent _____ on the financial statements.

opinion

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 or recording an item into the basic financial statements is referred to as

recognition

Recognition refers to the process of

recording information in the basic financial statements.

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

revenues, and expenses

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

A recently issued FASB standard requires that companies recognize revenue when goods or services are _____ to customers for the amount the company expects to be entitled to receive in exchange for those goods or services.

transferred