Income Statement/Statement of Operations/ Statement of Earnings
- Summarize the profit-generating activities that occurred during a particular reporting
- Many investors and creditors perceive it as the statement most useful for predicting future
ACCOUNTING 321: FINANCIAL REPORTING I- chapters 1,2,3,4,5
Chapter 1 Environment and Theoretical Structure of Financial Accounting
Financial accounting is concerned with providing relevant financial information to various external users
The primary focus
Inventory refers to the assets a company
1. Intend to sell in the normal course of business
2. Has in production for future sale (work in process)
3. Uses currently in the production of goods to be sold (raw materials)
* An important objective i
True/False Questions 1. If a manufacturing company is using activity-based costing for internal purposes only, then organization-sustaining overhead costs should not be allocated to any of the products. Ans: True AACSB: Reflective Thinking AICPA BB: Criti
1. Job-order costing is used in manufacturing companies and process costing is used in
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 1 Level: Easy
2. A flour manufacturer
True/False Questions 1. Within the relevant range, a change in activity results in a change in total variable cost and the per unit fixed cost. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium 2. Th
- Provides relevant financial information to various external users.
- The primary focus is on the information needs of investors and creditors.
Financial Statements includes four parts
1. The balance sheetthe statement of financial p
The first objective of any accounting system is to identify the economic events that can be
expressed in financial terms by the system.
- Economic Event: any event that directly affects the financial position of the company.
- Financial positions includes
*The balance sheet does not portray the market value of the entity.
*The balance sheet does provide information useful for assessing future cash flows, liquidity,
and long-term solvency.
* The balance is a position statement
Liquidity: the period of time
- Help ensure that an income statement reflects the actual accomplishments of a company for the
Recognition Principle requires two criteria be satisfied before revenue can be recognized (recorded)
1. The earning process is judge
The Lower of cost or market (LCM)
- Required by GAAP to valuing inventory.
- A requirement of GAAP in the United States that inventory is recorded at the lower of either
the cost to produce it, the cost to repurchase it or the market value of th