Accounting 201 Flash Cards

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Chapter 1: Environment and Theoretical Structure of Financial Accounting Accounting Principles Board (APB)
The Accounting Principles Board (APB) followed the CAP.

Asset/liability approach
With the asset/liability approach, recognition and measurement of assets and liabilities drives revenue and expense recognition.

Auditors
Auditors express an opinion on the compliance of financial statements with GAAP.

Capital markets
The capital markets provide a mechanism to help our economy allocate resources efficiently.

Certified public accountants (CPAs)
Certified public accountants (CPAs) are licensed by states to provide audit services.

Comparability
Accounting information should be comparable across different companies and over different time periods.

Complete
A depiction is complete if it includes all information necessary for faithful representation.

Conceptual framework
The conceptual framework does not prescribe GAAP. It provides an underlying foundation for accounting standards.

Conservatism
Conservatism is inconsistent with neutrality.

Consistency
Accounting information is consistent if it is measured and reported the same way in each time period.

Corporation
Corporations acquire capital from investors in exchange for ownership interest and from creditors by borrowing.

Cost effectiveness
Information is cost effective only if the benefit of increased decision usefulness exceeds the costs of providing that information.

Economic entity
The economic entity assumption presumes that economic events can be identified specifically with an economic entity.

Emerging Issues Task Force (EITF)
The Emerging Issues Task Force (EITF) identifies financial reporting issues and attempts to resolve them without involving the FASB.

Ethics
Ethics deals with the ability to distinguish right from wrong.

Fair Value
Fair value bases measurements on the price that would be received to sell assets or transfer liabilities in an orderly market transaction.

Financial accounting
The primary focus of financial accounting is on the information needs of investors and creditors.

Free from error
Representational faithfulness is enhanced if information is free from error.

Fulldisclosure principle
The full-disclosure principle requires that any information useful to decision makers be provided in the financial statements, subject to the cost effectiveness constraint.

Going concern assumption
Financial statements of a company presume the business is a going concern.

Historical Cost
Historical cost bases measurements on the amount given or received in the exchange transaction.

Initial market transactions
Initial market transactions involve issuance of stocks and bonds by the corporation.

International Accounting Standards Board (IASB)
The International Accounting Standards Board (IASB) is dedicated to developing a single set of global accounting standards.

International Financial Reporting Standards (IFRSs)
International Financial Reporting Standards are gaining support around the globe.

Matching principle
According to the matching principle, expenses should be recognized in the period in which they produce revenues.

Material
Information is material if it has an effect on decisions.

Monetary unit
The monetary unit assumption states that financial statement elements should be measured in a particular monetary unit (in the United States, the U.S. dollar).

Net operating cash flow
Net operating cash flow is the difference between cash receipts and cash disbursements from providing goods and services.

Net Realizable Value
Net realizable value bases measurements on the amount of cash into which the asset or liability will be converted in the ordinary course of business.

Neutrality
Neutrality implies freedom from bias.

Periodicity assumption
The periodicity assumption allows the life of a company to be divided into artificial time periods to provide timely...
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