VERIFIED INTERMEDIATE ACCOUNTING(CHAPTER 1)

VERIFIED INTERMEDIATE ACCOUNTING(CHAPTER 1) Accounting - CORRECT ANSWER -The essential charecteristics of ___________ are (1) the identification, measurement, and communication of financial information about (2) economic entities to (3) interested parties Financial accounting - CORRECT ANSWER -Is the process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties Managerial accounting - CORRECT ANSWER -Is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaluate a company's operation Financial statements - CORRECT ANSWER -are the principal means through which a company communicates its financial information to those outside it Financial statements - CORRECT ANSWER -Most frequently provided are (1) the balance sheet (2) the income statement (3) the statement of cash flows, and (4) the statement of owners or stockholders equity Financial information - CORRECT ANSWER -Allows investors, creditors to compare the income and assets employed by companies such as IBM, McDonald, Micorosoft, ford. Because these users can asses the relative return and risks associates with investment opportunities, they channel resources more effectively. Capital Allocation - CORRECT ANSWER -An effective process of capital allocation is critical to a health economy. It promotes productivity, encourages innovation, and provides an efficient and liquid market for buying and selling securities and obtaining and granting credit. Objective of financial reporting - CORRECT ANSWER -to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in decision about providing resources to the entity General purpose financial statements - CORRECT ANSWER -provide financial reporting information to a wide variety of users. Provide these at the least cost the most useful information possible Entity Perspective - CORRECT ANSWER -Companies are viewed as separate and distinct from their owners (present shareholders) using this perspective Decision Usefulness - CORRECT ANSWER -Investors are interested in financial reporting because it provides information that is useful for making decisions. When these decisions, investors are interested in assessing (1) the companys ability to generate cash inflows and (2) managements ability to protect and enhance the capital providers investment Accrual basis - CORRECT ANSWER -ensures that a company records events that change its financial statements in the periods in which they occur, rather than in only the periods that they receive the cash general purpose financial statements - CORRECT ANSWER -Users expect these statements to present fairly, clearly, and completely the companies financial operations GAAP - CORRECT ANSWER -The term "generally accepted" means either that an authoritative accounting rule making body has established a principle of reporting in a given area or that over time a given practice has been accepted as appropriate because of universal application 3 orgs instrumental in development of GAAP - CORRECT ANSWER -1. Securities and Exchange commission (SEC) 2. American Institute of Certified Public Accountants (AICPA) 3. Financial Accounting Standards board (FASB)