Int. Accounting (Ch. 2)

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  1. 3 parts of "Conceptual Framework." (LFA)
    • 1. It's like a "constitution
    • 2. It's a foundation to build on
    • 3. It assists the FASB
  2. SFAC that involves recognition and measurement in financial statements of business enterprises.
  3. SFAC that involves the elements of financial statements.
  4. SFAC #6 replaced SFAC #...
  5. SFAC #8 was issued jointly by... and...
  6. SFAC that involves the objective of general purpose financial reporting and qualitative characteristics of useful financial information.
  7. SFAC replaced SFAC #... and #...
    1, 2
  8. To provide information useful to present and potential investors, lenders, and other creditors in making decisions about providing resources to the entity.
    Objective of general-purpose financial reporting
  9. What does the objective of general-purpose financial reporting assume?
    That the user has reasonable knowledge of business.
  10. What are the 2 "fundamental qualities"?
    • 1. Relevance
    • 2. Faithful representation
  11. Which SFAC represents the 2 fundamental qualities?
  12. Information that is capable of making a difference in a decision.
  13. 3 parts of relevance. (PCM)
    • 1. Predictive value
    • 2. Confirmatory value
    • 3. Materiality
  14. When the numbers reflect what actually happened, it's called...
    faithful representation
  15. 3 parts of faithful representation. (CNF)
    • 1. Completeness
    • 2. Neutrality
    • 3. Free from error
  16. 4 enhancing qualities. (CVTU)
    • 1. Comparability 
    • 2. Verifiability
    • 3. Timeliness
    • 4. Understandability
  17. Enhancing quality that involves companies recording and reporting information in a similar manner.
  18. Enhancing quality that involves independent people using the same methods to arrive at similar conclusions.
  19. Enhancing quality that involves information being available before it loses relevance.
  20. Enhancing quality that involves reasonably informed users being able to comprehend the information that is clearly classified and presented.
  21. In SFAC #6 there is no distinction between... and... or... and...
    revenues, gains, expenses, losses
  22. All changes in equity during the period except those resulting from investments by owners and distributions to owners.
    Comprehensive income
  23. According to SFAC #5, to be recognized in financial statements, an item should... (MBB)
    • 1. Meet definition of basic element
    • 2. Be measurable
    • 3. Be relevant/reliable
  24. 4 basic assumptions. (EGMP)
    • 1. Economic entity
    • 2. Going concern
    • 3. Monetary unit
    • 4. Periodicity
  25. In the economic entity assumption, activities of the entity are separate from the...
  26. In the going concern assumption, a business is assumed to operate...
  27. In the monetary unit assumption, economic activities of an entity are measured in...
  28. What does the monetary unit assumption disregard?
  29. In the... assumption, the life of an entity can be divided into artificial time periods for the purpose of financial reporting
  30. The... assumption is the justification for AJEs
  31. 5 basic principles. (HFREF)
    • 1. Historical cost
    • 2. Fair value
    • 3. Revenue recognition
    • 4. Expense recognition
    • 5. Full disclosure
  32. According to the historical cost principle, assets and liabilities should be accounted for at at...
    purchase price.
  33. Which basic principle is the most objective and verifiable?
    Historical cost principle
  34. According to the... principle, we use the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
    Fair value
  35. One criticism of the fair value principle.
    It increases subjectivity
  36. 3 pros of the fair value principle. (RBI)
    • 1. Relevant info about cash flows
    • 2. Better insight on assets/liabilities
    • 3. IFRS uses it more than GAAP
  37. The revenue recognition principle is an OLD...
    revenue standard
  38. The 2 measurement principles. (HF)
    • 1. Historical cost
    • 2. Fair value
  39. The revenue recognition principle involves revenue being recognized when... or... and...
    realized, realizable, earned
  40. The process of converting noncash resources and rights into money.
  41. The process of formally recording in the financial statements.
  42. The expense recognition principle is also known as the... principle.
  43. In the expense recognition principle, you must match the... to the...
    expense, related revenue
  44. The expense recognition principle uses... and... allocation.
    systematic, rational
  45. Under the expense recognition principle, the expense is...
  46. A product cost is also an... cost.
  47. A... cost is an inventoriable cost.
  48. Type of costs associated with buying or making a product.
    Product cost
  49. With a product cost, you expense it when...
    goods are sold.
  50. With a period cost, you expense it when...
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Int. Accounting (Ch. 2)
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