Accounting Acronyms
Sole proprietorships, partnerships, and corporations are all required to follow
GAAP
The Securities and Exchange commission is the legal rule making body for the (public/private) sector
Public
Financial report users need information about....
1. Profits
2. Assets
3. Liabilities and Owner's Equity
4. Changes in assets and claims against the assets
5. Names of creditors
1, 2, 3, and 4
This is what GAAP stands for
Generally Accepted Accounting Principles
Under the ____________________ basis of accounting, income is recorded in the period in which it is earned.
Accrual
The accounting board that is the primary representative of the private sector is the
FASB
The act that was passed by the U.S. Congress in reaction to the "accounting scandals" of public companies is called the _________ act.
Sarbanes-Oxley
The financial statement that provides information about cash received from major sources during the period and the uses made of that cash is called the
Statement of Cash Flows
When GAAP principles and IRS federal income tax requirements conflict, which statement is true:
1. companies must follow both GAAP and IRS requirements, even if it means maintaining two sets of accounting records
2. companies must follow GAAP principles over IRS requirements
3. companies must follow IRS requirements over GAAP principles
1. companies must follow both GAAP and IRS requirements, even if it means maintaining two sets of accounting records
IASBs' conceptual framework is based on four levels of concepts, two of which are known as
1. basic accounting principles
2. internal revenue principles
3. federal tax principles
4. qualitative characteristics
1 and 4
The AICPA, American Institute of Certified Public Accountants, is the (state, national, or international) organization of certified public accountants.
National
Federal securities law requires publicly held companies to release financial reports. If there is a likelihood of a lawsuit and the ruling could impact the financial bottom line, the corporation should.......
disclose the existence of the lawsuits
Financial report users need information about...
1. Profits
2. Assets
3. Liabilities and Owner's Equity
4. Changes in assets and in the claims against the assets
1, 2, 3, and 4
Under the ___________ principle, revenue is recognized when it is both earned and realized.
Revenue Recognition
Because of the modifying constraint of ____________________, if uncertainty exists, assets are understated rather than overstated.
Conservatism
The legal rule making body for the public sector is the
Securities and Exchange Commission (SEC)
While GAAP itself is not government-regulated, it exists because of the combined efforts of government and business. The use of GAAP is not mandatory for all businesses, but SEC requires publicly traded and regulated companies to follow GAAP for the purpose of financial reporting.
True or False
True
The separate economic entity assumption assumes that:
1. financial events are meaningful only when they can be expressed in economic terms.
2. the business will continue to operate indefinitely.
3. the financial statements of a business reflect the affairs of the business—not the affairs of the owners.
4. a business's life can be separated into time periods with income being reported within one economic time period.
3. the financial statements of a business reflect the affairs of the business—not the affairs of the owners.
The ___________ requires that revenue must be matched against expired costs incurred in earning the revenue.
Matching Principle
The ____________________ assumption, which assumes that a firm will continue to operate indefinitely, permits carrying forward a portion of the cost of assets that will be used in future periods .
Going Concern
The IASB was formed to develop accounting standards that are adopted to provide consistency in pubic companies throughout the (state, country, or world).
World
SEC reporting involves compiling and presenting financial and business information, reports, and disclosures to the Securities and Exchange Commission (SEC) to provide transparency to __________.
Investors and the General Public
The qualitative characteristics of financial reports include which of the following
1. relevance
2. neutrality
3. confirmatory value
4. revenue recognition
5. going concern
6. conservatism
1, 2, and 3
The ________ principle states that a company or business must account for and record all assets at the original cost or purchase price on their balance sheet.
Historical Cost
The assumption that the activities of a business can separated into time periods with revenues and expenses being assigned on a logical basis to those periods is known as the ____________________ assumption.
Periodicity of Income