Accounting Quiz over Handout
Terms
undefined, object
copy deck
- What is the underlying theory of financial accounting known as?
- the Conceptual Framework
- What is the conceptual framework
- A body of doctrine that provides the basis for GAAP
- In a sense, the conceptual framework has
- developed and evolved over the years as the accounting profession has evolved
- What happened with the conceptual framework as we know it?
- It was codified by the Financial Accounting Standards Board beginning in the late 1970's.
- What are the series of documents that form the basis for everything covered in Accounting 221 called?
- FASB Statements of Financial Accounting Concepts
- The conceptual framework can be broken down into these sections:
-
Objectives of Financial Reporting
Qualitative Characteristics of
Accounting Information
Elements of Financial Statements
Recognition and Measurement Criteria - Recognition and Measurement Criteria can further be broken down into what parts?
-
Assumptions
Principles
Constraints - What is the primary objective of financial reporting?
- To provide information that is useful to external decision makers in the assessment of future cash flows. In other words, to provide information useful for decision-making
- The qualitative characteristics of accounting information are broken into two groups:
- Primary and Secondary
- What are the Primary Characteristics of accounting information
-
Relevance-must be available before it loses its relevance
Reliability-Information must be free from error and basis - What makes information relevant?
-
it must be
a. timely
b. predictive value
c. feedback value - Define timely
- relevant inforamtion must be available before it loses its relevance
- Define predictive value
- Information must aid users ability to assess and predict the outcome(s) of events
- Define feedback value
- Information must aid users in their assessment of previous outcomes
- What components make information reliable?
-
They must have
a. validity
b. verifability
c. neutrality - Define validity
- Information must measure the economic event that it says it measures
- Define verifiability
- Information must be able to be confirmed as being accurate
- Define neutrality
- information must be unbiased
- What characteristics make up secondary characteristics?
-
1. Comparability-Information can be compared to information from other businesses.
2. Consistency-Information can be compared across time periods - What do the elements of financial statements define?
- What items are included in a full set of financial statements
- What are the elements on a balance sheet
-
assets
liabilities
equities - Define assets
- Economic resources used by a business in the production of revenue
- Define liabilities
- Obligations of a business to provide assets or services sometime in the future
- Define equities
- Owner's residual interest in a business
- What are the 2 types of equities?
-
a. Contributed Capital (Common Stock)
b. Retained Earnings - Define Contributed Capital (Common Stock)
- Portion of assets contributed to a business by its owners
- Define retained earnings
- Portion of assets resulting from the operations of a business that are retained in the business
- Give an example of retained earnings
- Distributions (Dividends)
- Define distributions (dividends)
- Transfers of wealth from a business to its owners