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what are the fundamental assumtions of US GAAP
- Entity Assumptions-econcomic acctivited can be accounted for when an identifiable set of activities (eg a separate corporations, division, etcC)
- Goging concern assumptions-for financila accounting, its is presumed that the entity will continue to operate in the foreseeable future
- Monetary unit assumption-it assumed that money is the appropriate basis for which to meashure economic activity
- Periodicity Assumption-economic activity can be divided ino meaningful time periods
- Historical cost principal-as a general rule, financial information is accounted for and based on cost, not current market value
- Revenue recognition principle-as a general rule revenue should be recognized when it is ralized or realizable.
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According FASB conceptual framwork,what are the fundamental charcteristics of usfull financial information?
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According FASB conceptual framwork, Both of thes charcteristics must be meet for financial information to be usefull?
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When is Financial Informaiton relevant?
financial information is relevant when it is capable of making a difference in the decision made by the users
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According FASB conceptual framwork, to be relevant financial information must have what
- predictive value
- Confirming value
- Materiality
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when does informaion have Confirming Value?
when it provides feedback about evaluations previously made by users.
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when does informaion have predicitive value?
when it can be used by users to predict future outcomes
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when is information material?
when its omission our mistatment affects the decisions made by the users
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According FASB conceptual framwork, what characteristics must be maximized for information to be faithful represented (reliable)?
- completeness
- Neutrality - free fromerrors and bais
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Per FASB statment of financial accounting what are the elements of present value (or econcomic value) measurement used to establish the value of assets or liabilities using cash flow information?
- Remember the mnemonic UVOTE
- U-the price of bearing Uncertainty
- V-Expectations about timing Variations of future cash flows
- O-Other factors (eg liquidity issues and market imperfections
- T-Time value of money (the risk free rate of interest)
- E-Estimate fo future cash flows
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According FASB and ISAB conceptual framwork, what are the enhancing qualitative charcterisics of usfull information that is relevant and faithfully represented
- Timeliness
- Understandability
- Comparability
- Verifiability
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When assets/equipment is valued at below hitorical cost,and the company is ending operations, what is the approriate mesurment basis?
Net Realizable value.
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how should property plant and equipment be messured on companies balance sheet?
Historical Cost
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how should inventory be messuraed on a companies balance sheet?
Inventory
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How should accounts receviables be messured in a companies balancesheet?
Net realizable vlaue
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How should marketable securities be value on a compnies balancesheet
Current Market Value
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how should longterm debt be valued on a compnies balancesheet
Present Value of Future Cash flows
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when is revenues and gans realized
revenue is realized when assets are exchnaged for cash or cliams to cash
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when is revenue earned
when the entitiy has substatially accomplished what it must do to be entitled to the nenefuts represented by the revenue
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what comprises a full set of financial statments?
- Statmennt of financial positions (balance sheet)
- statement of earnings (income statment)
- Statement of Comprehensive Incom
- Statement of cash flow
- Statement of change in owners equity
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What information is included in a general purpose financial report ?
- info about the resource of the enity,
- info aout the cliams against thhe entity
- infor about how effectivly and efficiently the entity's governing board has discharged its responsibility to use the entity's resourcces
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According to the FASB conceptual framework the process of recording an item in the financial statments is what
Recognition
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According FASB conceptual framwork, the primary users of the financial statments are?
- investors
- creditors
- lenders
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what is the single source of authoritative nongovernmental US GAAP
The FASB Accounting Standards Codification
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