Chapter7Outline - CHAPTER REVIEW GAAP 1. (S.O. 1) Generally...

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CHAPTER REVIEW GAAP 1. (S.O. 1) Generally accepted accounting principles (GAAP) are a set of standards and rules that are recognized as a general guide for financial reporting purposes. These principles must have "substantial authoritative support." 2. The Financial Accounting Standards Board (FASB) has developed a conceptual framework to serve as a basis for resolving accounting and reporting problems. This framework consists of the following: a. Objectives of financial reporting. b. Qualitative characteristics of accounting information. c. Elements of financial statements. d. Operating guidelines (assumptions, principles, and constraints). Objectives of Financial Reporting 3. (S.O. 2) The objectives of financial reporting are to provide information that is useful in (a) making investment and credit decisions; (b) assessing future cash flows; and (c) identifying the economic resources (assets), the claims to those resources (liabilities), and the changes in those resources and claims. Qualitative Characteristics 4. (S.O. 3) The accounting alternative selected or policy adopted should be one that generates the most useful financial information for decision making. To be useful, information should possess the following qualitative characteristics: a. Relevance. The information must be capable of making a difference in a decision. Relevant information has either predictive or feedback value; and is also timely. b. Reliability. The information should be free of error and bias and be dependable. c. Comparability. The information should be comparable with accounting information about other enterprises. d. Consistency . The same accounting principles and methods should be used from year to year within a company. Elements of Financial Statements 5. The elements of financial statements are a set of definitions of the basic terms used in accounting. These elements include such terms as assets, liabilities, equity, revenues, and expenses. 6.
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Chapter7Outline - CHAPTER REVIEW GAAP 1. (S.O. 1) Generally...

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