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Income Statement
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Income Statement
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CURT'S CRAFTS
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A) True
B) False
B) False
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Premises
The transparency notion is that information provided in the financial statements and the notes accompanying them should provide a clear and accurate picture of the financial affairs of the company. The key to this idea is that of disclosure
All information that might affect the user's interpretation of the profitability and financial condition of a business should be disclosed
In a few limited cases the unusual operating characteristics of an industry, usually based on risk, special accounting principles, and procedures have been developed. These may not conform completely to GAAP for other industries
If alternative treatments of items are of equal validity, the alternative resulting in lowest profit should be used
The concept that revenues and the costs incurred in earning those revenues should be recorded in the appropriate accounting periods
With regards to revenue, it takes place only when cash, a financial claim, or other consideration is received for the sale of goods or services
Revenue is recognized when it has been earned and realized
It is assumed that only those items and events that can be measured in monetary terms are included in the financial statements. An inherent part of this assumption is that the monetary unit is stable. Thus assets purchased one year may be combined in the accounts with those purchased in other years even though the dollars used in each year actually may have different purchasing power
These are necessary characteristics that must be present in financial statements if they are to be credible
This is the concept that a business is separate from its owner or owners and the financial statements reflect the affairs of the business, not those of the owner
A basic framework developed by the FASB to provide conceptual guidelines for financial accounting and statements. The most important features are statements of qualitative features of statements, basic assumptions underlying statements, basic accounting principles, and modifying constraints
This is the governmental sector, represented in the accounting rulemaking process by the Securities and Exchange Commission
In some cases where an accounting item is deemed too small to affect a user’s decisions, the “required” accounting may be ignored
If accounting concepts suggest a particular accounting treatment for an item but it appears that the theoretically correct treatment would require an unreasonable amount of work, the accountant may analyze the benefits and costs of the preferred treatment to see if the benefit gained from its adoption is justified by the cost
The assumption that a business will continue to operate indefinitely
The principle that requires assets to be recorded at their cost at the time they are acquired and that, generally, long-term assets remain at historical costs in the asset accounts
The concept that information in financial statements cannot be selected or presented in a way to favor one set of interested parties over another
The idea that economic activities of an entity can be divided logically and identified with specific time periods, such as the year or quarter
This is the nongovernmental sector of society. In an accounting context it is the business sector, represented in the accounting rule-making process by the Financial Accounting Standards Board
Responses
Conceptual framework
Conservatism constraint
Cost-benefit test
Full disclosure principle
Going concern assumption
Historical cost basis principle
Industry practice constraint
Matching principle
Materiality constraint
Monetary unit assumption
Neutrality characteristic
Periodicity of income
Private sector
Public sector
Qualitative characteristic
Realization
Revenue recognition principle
Separate economic entity assumption
Transparency
Correct Answer
Premises
Responses
The transparency notion is that information provided in the financial statements and the notes accompanying them should provide a clear and accurate picture of the financial affairs of the company. The key to this idea is that of disclosure
All information that might affect the user's interpretation of the profitability and financial condition of a business should be disclosed
In a few limited cases the unusual operating characteristics of an industry, usually based on risk, special accounting principles, and procedures have been developed. These may not conform completely to GAAP for other industries
If alternative treatments of items are of equal validity, the alternative resulting in lowest profit should be used
The concept that revenues and the costs incurred in earning those revenues should be recorded in the appropriate accounting periods
With regards to revenue, it takes place only when cash, a financial claim, or other consideration is received for the sale of goods or services
Revenue is recognized when it has been earned and realized
It is assumed that only those items and events that can be measured in monetary terms are included in the financial statements. An inherent part of this assumption is that the monetary unit is stable. Thus assets purchased one year may be combined in the accounts with those purchased in other years even though the dollars used in each year actually may have different purchasing power
These are necessary characteristics that must be present in financial statements if they are to be credible
This is the concept that a business is separate from its owner or owners and the financial statements reflect the affairs of the business, not those of the owner
A basic framework developed by the FASB to provide conceptual guidelines for financial accounting and statements. The most important features are statements of qualitative features of statements, basic assumptions underlying statements, basic accounting principles, and modifying constraints
This is the governmental sector, represented in the accounting rulemaking process by the Securities and Exchange Commission
In some cases where an accounting item is deemed too small to affect a user’s decisions, the “required” accounting may be ignored
If accounting concepts suggest a particular accounting treatment for an item but it appears that the theoretically correct treatment would require an unreasonable amount of work, the accountant may analyze the benefits and costs of the preferred treatment to see if the benefit gained from its adoption is justified by the cost
The assumption that a business will continue to operate indefinitely
The principle that requires assets to be recorded at their cost at the time they are acquired and that, generally, long-term assets remain at historical costs in the asset accounts
The concept that information in financial statements cannot be selected or presented in a way to favor one set of interested parties over another
The idea that economic activities of an entity can be divided logically and identified with specific time periods, such as the year or quarter
This is the nongovernmental sector of society. In an accounting context it is the business sector, represented in the accounting rule-making process by the Financial Accounting Standards Board
Premises
The transparency notion is that information provided in the financial statements and the notes accompanying them should provide a clear and accurate picture of the financial affairs of the company. The key to this idea is that of disclosure
All information that might affect the user's interpretation of the profitability and financial condition of a business should be disclosed
In a few limited cases the unusual operating characteristics of an industry, usually based on risk, special accounting principles, and procedures have been developed. These may not conform completely to GAAP for other industries
If alternative treatments of items are of equal validity, the alternative resulting in lowest profit should be used
The concept that revenues and the costs incurred in earning those revenues should be recorded in the appropriate accounting periods
With regards to revenue, it takes place only when cash, a financial claim, or other consideration is received for the sale of goods or services
Revenue is recognized when it has been earned and realized
It is assumed that only those items and events that can be measured in monetary terms are included in the financial statements. An inherent part of this assumption is that the monetary unit is stable. Thus assets purchased one year may be combined in the accounts with those purchased in other years even though the dollars used in each year actually may have different purchasing power
These are necessary characteristics that must be present in financial statements if they are to be credible
This is the concept that a business is separate from its owner or owners and the financial statements reflect the affairs of the business, not those of the owner
A basic framework developed by the FASB to provide conceptual guidelines for financial accounting and statements. The most important features are statements of qualitative features of statements, basic assumptions underlying statements, basic accounting principles, and modifying constraints
This is the governmental sector, represented in the accounting rulemaking process by the Securities and Exchange Commission
In some cases where an accounting item is deemed too small to affect a user’s decisions, the “required” accounting may be ignored
If accounting concepts suggest a particular accounting treatment for an item but it appears that the theoretically correct treatment would require an unreasonable amount of work, the accountant may analyze the benefits and costs of the preferred treatment to see if the benefit gained from its adoption is justified by the cost
The assumption that a business will continue to operate indefinitely
The principle that requires assets to be recorded at their cost at the time they are acquired and that, generally, long-term assets remain at historical costs in the asset accounts
The concept that information in financial statements cannot be selected or presented in a way to favor one set of interested parties over another
The idea that economic activities of an entity can be divided logically and identified with specific time periods, such as the year or quarter
This is the nongovernmental sector of society. In an accounting context it is the business sector, represented in the accounting rule-making process by the Financial Accounting Standards Board
Responses
A) True
B) False
B) False
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A) Information is reasonably free of error and bias to be comparable.
B) Financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies.
C) Financial results of one period should closely resemble the financial results of a previous period.
D) The financial reports reflect what really happened during a time period.
E) All of the above
F) C) and D)
F) C) and D)
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A) the value of money is not stable.
B) the idea that expressing financial facts and events is meaningful only when they can be expressed in monetary terms.
C) the business will continue to operate indefinitely.
D) revenues and expenses of a business can be separated into separate time periods.
E) A) and B)
F) B) and D)
F) B) and D)
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Unless there is evidence to the contrary...View Answer
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Unless there is evidence to the contrary...
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A) The Financial Accounting Standards Board is an independent organization.
B) The Securities and Exchange Commission (SEC) issues the Statements of Financial Accounting Standards.
C) An act of law gave the SEC the authority to determine the form and content of accounting reports filed by companies under its jurisdiction.
D) Statements issued by the Financial Accounting Standards Board (FASB) are binding on the members of the American Institute of Certified Public Accountants (AICPA) .
E) A) and D)
F) None of the above
F) None of the above
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Premises
Information that helps the statement user confirm fulfillment or no fulfillment of prior expectations or decisions is said to have this qualitative characteristic.
This qualitative characteristic means simply that the information should be dependable; such information is verifiable, is a faithful representation of the company's financial affairs, and is reasonably free of error and bias.
This qualitative characteristic means that accounting information is capable of making a difference in a decision by the report user.
If an entity uses the same accounting treatment for similar events and data from period to period, this qualitative characteristic is being met.
If information is relevant, it will have this qualitative characteristic and enable statement users in making predictions about the meaning and ultimate outcome of events giving rise to the information.
This qualitative characteristic is indicated when independent measurers obtain similar results.
Information that is presented soon enough after events are reported to be useful in decision making would meet this qualitative characteristic.
This is the concept that data shown in the financial reports reflect what really happened.
Often referred to as objectivity; it is the idea that the financial statements are not prepared in a way to favor one group of users (management, owners, creditors, employees, etc.) over other groups.
When the financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies, it meets this qualitative characteristic.
Responses
Comparability
Consistency
Feedback value
Neutrality
Predictive value
Relevance
Reliability
Representational faithfulness
Timeliness
Verifiability
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Premises
Responses
Information that helps the statement user confirm fulfillment or no fulfillment of prior expectations or decisions is said to have this qualitative characteristic.
This qualitative characteristic means simply that the information should be dependable; such information is verifiable, is a faithful representation of the company's financial affairs, and is reasonably free of error and bias.
This qualitative characteristic means that accounting information is capable of making a difference in a decision by the report user.
If an entity uses the same accounting treatment for similar events and data from period to period, this qualitative characteristic is being met.
If information is relevant, it will have this qualitative characteristic and enable statement users in making predictions about the meaning and ultimate outcome of events giving rise to the information.
This qualitative characteristic is indicated when independent measurers obtain similar results.
Information that is presented soon enough after events are reported to be useful in decision making would meet this qualitative characteristic.
This is the concept that data shown in the financial reports reflect what really happened.
Often referred to as objectivity; it is the idea that the financial statements are not prepared in a way to favor one group of users (management, owners, creditors, employees, etc.) over other groups.
When the financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies, it meets this qualitative characteristic.
Premises
Information that helps the statement user confirm fulfillment or no fulfillment of prior expectations or decisions is said to have this qualitative characteristic.
This qualitative characteristic means simply that the information should be dependable; such information is verifiable, is a faithful representation of the company's financial affairs, and is reasonably free of error and bias.
This qualitative characteristic means that accounting information is capable of making a difference in a decision by the report user.
If an entity uses the same accounting treatment for similar events and data from period to period, this qualitative characteristic is being met.
If information is relevant, it will have this qualitative characteristic and enable statement users in making predictions about the meaning and ultimate outcome of events giving rise to the information.
This qualitative characteristic is indicated when independent measurers obtain similar results.
Information that is presented soon enough after events are reported to be useful in decision making would meet this qualitative characteristic.
This is the concept that data shown in the financial reports reflect what really happened.
Often referred to as objectivity; it is the idea that the financial statements are not prepared in a way to favor one group of users (management, owners, creditors, employees, etc.) over other groups.
When the financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies, it meets this qualitative characteristic.
Responses
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Investors and creditors expect...View Answer
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Investors and creditors expect...
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A) True
B) False
B) False
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A) True
B) False
B) False
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A) the significance of an item of financial data in relation to other financial data.
B) whether the increased cost of complying with an accounting principle is justified by the benefit that would result.
C) existing accounting practices that have evolved based on the amount of debt that would be incurred by the business.
D) the idea that "when in doubt, take the conservative action."
E) C) and D)
F) All of the above
F) All of the above
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A) A large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years.
B) The Equipment account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.
C) An owner lists the full cost of his or her personal automobile, which is occasionally used for business purposes, on the company's balance sheet.
D) A company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the Land account to $60,000.
E) A) and B)
F) All of the above
F) All of the above
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