Financial Accounting - ANSWER-involves identifying, recording and
communicating the operational results and status of organization. (i.e.
income statement, statement of changes in equity, balance sheet, and
statement of cash flows)
Do not for profit organizations have to prepare financial statements? -
ANSWER-Yes- they also have stakeholders and managers that have an
interest in financial reporting
Should the preparation and presentation of financial accounting data be
regulated? - ANSWER-Yes, it is important to have financial reporting that is
accurate and based on reliable data.
Monetary unit - ANSWER-in the US, the unit is the US dollar, unadjusted for
inflation and deflation
,Historical costs - ANSWER-Requires most assets to be valued at acquisition
(historical) costs rather than fair market (current) value
Revenue recognition - ANSWER-Revenues must be recognized in the period
in which they are realizable and earned
SEC - ANSWER-has legal authority to regulate the form and content of
financial statements
GAAP- applies only to financial accounting statements - ANSWER-The
conventions that have evolved from the pronouncements and rulings of the
implementing organizations constitute a set of guidelines for the preparation
of financial accounting statements
Does GAAP remain static over time? - ANSWER-no, because business
practices are continuously evolving, so GAAP also has to adapt accordingly.
Assumptions - ANSWER-accounting entity, going concern, periodicity, and
monetary unit
, Accounting entity - ANSWER-the specific entity for which the statements
apply can be defined
Transaction - ANSWER-is an exchange of goods (including cash) or services
from one individual or business to another
unique activity - ANSWER-once a transaction is identified, it must be
recorded or posted to an account
chart of accounts - ANSWER-assign numeric identifiers to individual accounts
Double entry system - ANSWER-journal entries are always posted twice
Going concern - ANSWER-it is assumed that the entity will have an indefinite
lifetime rather than be liquidated in the near future
Expense matching - ANSWER-Expenses must be matched (in time) to the
related revenues
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