Intermediate Accounting 2 Flashcards

Terms Definitions
lessor
owner
American Accounting Association
AAA
(Nominal/real) accounts are periodically closed
Nominal
GAAP
The guidelines, procedures, and practices that a company is required to use in recording and reporting its accounting information in its audited financial statements
Conservatism
when alternative accounting valuations are equally possible, the accountant should select the one that is least likely to overstate assets and income in the current period
Q1: EITF
Emerging Issues Task Force
Q:1 FASB
Financial Accounting Standards Board
POSTING
Theprocess of transferring the essential facts and figures from the book of original entry to the ledger accounts
trading
debt securities bough and held primarily for sale in the near term to generate income on shot-term price differences
True
True or False: Managerial accounting is the information accumulation, processing, and communication system designed to meet the decision-making information needs of internal users
Reliable
Information that is reasonably free from error and bias and faithfully represents what it purports to represent
what is AcSec
accounting standards executive committee
Q3: Sarbanes-Oxley
Sarbanes-Oxley refers to Public Company Accounting Reform and Investor Protection Act of 2002 passed by the Congress as a reaction to the fiancial reporting irregularities in Enron, WorldCom and others.
Revenues
Inflows or other enchancements of assets of an entity or settlement of its liabilities from delivering goods,services, or other activities
What orgnizations were instrumental in the development of GAAP?
SEC
AICPA
FASB
GASB
Work Sheet Columns
-Trial Balance Columns
-Adjustment Columns
-Adjusted Trial Balance
-Income Statment and Balance sheet Columns
-Income Taxes and Net Income
held-to-maturity
debt securities that the company has the positive intent and ability to hold to maturity
Codification
One place for all the authoritative literature related to a particular topic
Form S-1 (registration statements)Form 10-K (annual reports)Form 10-Q (quarterly reports)Form 8-K (disclosures of significant events)Proxy statements (e.g., Form DEF 14A)Insider holdings and trading activity (e.g., Forms 3, 4, & 5)
SEC reporting requirements:
Equity
Residual interest in the assets - liabilities.
Assets, Liabilities, and Equity
Balance Sheet contains what?
leveraged lease
third party, long term creditor provides nonrecourse financing for a lease agreement between a lessor and lessee
Q3: Regulation S-X
Regulation S-X contains the requirements fro the form, content, and number of finanicial statements to be included with SEC filings.
gains
increases in equity from peripheral or incendental transactions of an entiy excepth those tha tresult from revenues or investments by owners
Three inventory accounts
Work in Process
Raw Materials
Finished Goods
TRANSACTION
an EXTERNAL event involving a transfer between two or more entities
Expenses
Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations
1) Financial (more external)2) Managerial (internal)
Two branches of Accounting:
First Level: Objectives
The pervasive criterion of accounting information is decision usefulness.
Investment by owners OR comprehensive income
Increases ownership interest
Relevant
Informations is what if it has the potential to make a difference in a decsion
capital leases
formulated as leases, but in reality are installment purchases
Revenue is generally recognized when
1)realized or realizable2)when earned
Qualitative charachteristics of accounting
distinguish better information from less useful information for decision making purposes
Define Financial Accounting
preparation of financial reports on the company for use by both internal and external parties.
Revenues received in cash and recorded as liabilities before they are earned are called ______.
unearned revenues
Public Company Accounting Oversight Board
Oversee and enforce the accounting/auditing practices
Financial Accounting Standards Board (FASB)
Standards, interpretations, and staff positions- t Its mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, which includes issuers, auditors, and users of financial information
Comprehensive income
Increases in net asset in a period from non-owner sources (Increase in assets - liabilties + owner dis -owner invest)
Predictive Value
if it can be used to correctly forecast the outcome of some event(s) of a firm
shareholders' equity is broken down into 2 components
1) Share Capital2) Reserves
The Basic objectives focus on
financial statments that provide information useful in the assesment of porspetive cash flows to the business enterprise
There is a tradeoff between ___ and ___ in preparing financial data
relevance; reliability
What does "generally accepted" mean?
an authortative accounting rule making body has established a principle of reporting in a given area or that over time a given practice has been accepted as appropriate b/c of its universal application.
a list of accounts and their balances at a given time
trial balance
Double declining balance method
accelerated method- 2 divided by life to get rate, declining balance is book value- salvage value is disregarded in calculation except cannot depreciate beyond that limit
Objectives of financial reporting
to provide information that is: useful to those making investment and credit decisions, helpful to present and potential investors, creditors, and other users in assessing timing and uncertainty of cash flows
1) Assets2) Liabilites3) Equity4) Comprehensive Income5) Revenues6) Expenses7) Gains and Losses
Seven Elements of a Financial Statement:
unguaranteed residual value
- the lessor still expects to receive the residual value, even though the lessee is not required to pay it.
what is FASB's mission?
to establish and improve standards of financial accounting and reporting
Q2: CAP
The CAP, est. in the 1930's, was the frist financial accounting and reporting standard setting group. It was an AICPA committee.
Q3: 10-K
The 10-K is the annual report to be filed with the SEC.
what is sarbanes-oxley act?
a law which increases the resources for the SEC to combat fraud and curb poor reporting practices.
Prepaid expenses expire with _____________ or through ___________.
passage of time; use and consumption
one motivation for investing in securities
earn a high rate of return
Conceptual framework has how many levels?
Three. First Level: Objectives Second Level: Qualitative Characteristics Second Level: Financial Statement Elements Third Level: Recognition and measurements of financial reporting
What were the major purposes of the APB?
determine appropriate practices, advance the written expression of accounting principles and narrow the area of difference and inconsistency in practice
Q3: Rule 203
Rule of 203 of teh AICPA Code of Professional Ethics prohibits AICPA memebers from expressing an opinion that file
Trial balances may balance even when
1) a transaction is not journalized

2) correct journal entry is not posted

3) journal entry is posted twice

4) incorrect accounts are used in journalizing or posting

5) offsetting errors are made in recording the amount of the transaction
initial direct costs for operating leases
recorded as assets and amortized over the term of the lease
what is the statement of other comprehensive income called for IFRS
Statement of Recognized Income and Expenses
what are the three types of FASB pronouncements?
1 standards, interpretations, and staff positions
2 financial accounting concepts
3 emerging issues task force statements
IFRS treatment of assets that include land and buildings
record separately unless the land is immaterial
what is rule 203 of aicpa's code of professional conduct?
members are prohibited from expressing an unqualified opinion on financial statements that contain material departure from GAAP.
The purpose of an adjusted trial balance is to
show the effects of all financial events that have occurred during the accounting period
what is the benefit of classifying a lease as operating
no liability on the balance sheet (also no asset)
what is catagory C in house of GAAP
1 FASB emerging issue task force
2 AICPA AcSEC practice bulletins
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