Ch. 1 - Financial Accounting and Accounting Standards
A common set of accounting standards and procedures
What are generally accepted accounting principles (GAAP)?
This represents the pervasive criterion of accounting information according to the conceptual framework
What is decision-usefulness?
The "left" side of an account
What is Debit?
This type of Income Statement implies that no type of revenue or expense has priority over another
What is a Single-Step Income Statement?
The perspective that companies are viewed as separate and distinct from their owners
What is the Entity Perspective?
These include investors, creditors, and government agencies
Who are the users of financial reports?
A company issuing its annual financial reports within one month of the end of the year is an example of this enhancing quality of accounting information
What is timeliness?
An expense paid in cash before it is used
What is a prepaid expense?
Inflows of assets stemming from activities that constitute a company’s ongoing major or central operations
What are Revenues?
The national professional organization of practicing certified public accountants; an important contributor to the development of GAAP
What is the AICPA?
To provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors
What is the objective of financial reporting?
These represent the two fundamental qualities of useful accounting information
What are Relevance and Faithful Representation?
Cash is received before revenue is recognized under this type of adjusting entry
What is a deferral? (specifically: unearned revenue)
This type of Income Statement separates operating transactions from non-operating transactions
This list of accounts helps identify whether debits and credits are equal
What is the trial balance?
These two organizations were predecessors to the FASB
What are the Committee on Accounting Procedures (CAP) and the Accounting Principles Board (APB)?
This enhancing quality is present when a company applies the same accounting treatment to similar events from period to period
What is consistency?
With this type of adjusting entry, revenues and expenses are recognized prior to the disbursement or receipt of cash.
What is an accrual?
Reported when a company eliminates the results of operations of a component of the business, representing a strategic shift
What are Discontinued Operations?
These basic elements of financial statements arise from peripheral or incidental transactions
What are Gains and Losses?
The governmental body that has a mandate to establish accounting standards for enterprises under its jurisdiction
What is the SEC?
Proponents of this type of valuation method contend that it is more verifiable, as compared to other alternatives
What is historical cost?
These entries reduce the balance of nominal accounts to zero so that they may be used in the next period
What are closing entries?
The gains and losses that bypass net income but affect stockholders’ equity
What is Other Comprehensive Income?
Probable future economic benefit obtained as a result of past transactions or events
What is an Asset?