ACC 400 Exam 1

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  1. Conceptual Framework
    A coherent system of objectives that provides structure in the development of GAAP and that describes the nature and function of financial reporting.

    It guides standard-setting.

    The foundation but NOT  the rules.
  2. Decision uselfulness
    Information helps capital providers make decisions.
  3. Relevance
    Information that makes a difference in decisions.
  4. Reliability
    Verifiable; objective; neutral
  5. What are the fundamental Qualitative Characteristics of Relevance?
    Predictive Value

    Confirmatory Value

    Materiality
  6. What are the fundamental Qualitative Characteristics of Faithful Representation?
    Completeness

    Neutrality

    Free from material error
  7. Predictive Value
    Ability to predict future cash flows
  8. Confirmatory Value
    Information to confirm or dis conform prior expectations.
  9. Materiality
    Affects the decision of the user.
  10. Completeness
    Includes all required information to understand what's going on.
  11. Neutrality
    Free from bias
  12. Free from material error
    No errors or omissions in presenting information
  13. What are the enhancing characteristics of the primary qualitative characteristics?
    • Comparability
    • Verifiability
    • Timeliness
    • Understandability
  14. Comparability (including consistency)
    • Relates to two or more
    • same company overtime
  15. Verifiability
    (objective) Different users would reach same conclusions.
  16. Timeliness
    Information is available early enough to be useful in making a decision.
  17. Understandability
    Information is comprehensible to those with a reasonable understanding of business.
  18. Constraint on Financial Reporting
    Cost Effectiveness
  19. Cost effectiveness
    Do the benefits of financial reporting outweigh the costs?

    Costs can be incurred by firms, users, and the greater economy.
  20. Economic Entity
    • Activity defined with economic unit.
    • Separate from the lives of the owners.
  21. Going Concern
    Assumption that a company will have an indefinite life.
  22. Periodicity
    Divide time into reporting periods.
  23. Monetary Unit
    Select a currency.
  24. Measurement principle
    (used in accrual accounting) Mixed measurement model

    • 1. Historical cost - P,P,E
    • 2. Fair Value - investments
    • 3. Present Value - notes receivable
  25. Full Disclosure Principle
    (used in accrual accounting) All information necessary for user to understand the full financial picture.
  26. Industry Practices
    (constraints) - unique practices
  27. Conservatism
    (constraints) When in doubt error on the side of understating assets and net income.
  28. Revenue recognition
    • (used in accrual accounting) Earning Process is Complete
    • Reasonable certainty as to the collectability of receivables.
  29. Expense recognition
    • Based on a cause and effect relationship between revenue and expense events. (Sell a product 1. COGM 2. Cost to sell product.)
    • By systematic and rational allocation to specific time periods (Depreciation; Amortization)
    • In the period incurred, without regard to related revenues (advertising, expenses incurred for future benefits)
  30. Role of Nevada State Board of Accountancy
    Provide a host of services beyond the licensing and regulations of CPAs.

Card Set Information

Author:
shesddeevl
ID:
316909
Filename:
ACC 400 Exam 1
Updated:
2016-03-07 01:11:36
Tags:
Accounting
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Description:
Chapter 1, 2, 7A, and 7B
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