BCOR 3010 exam 2023 questions with complete solutions

What is accounting? A language used to communicate financial information- used by stakeholders to make decisions. Financial Accounting the branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders Managerial Accounting accounting used to provide information and analyses to managers inside the organization to assist them in decision making Tax Accounting preparing tax returns and interpreting tax law Examples of financial reporting Annual and quarterly reports · Financial statements · Notes to the financial statements · Management's discussion and analysis · Other filings with the SEC and other regulatory agencies. · Conference calls, press releases, tweets, etc. How does financial reporting facilitate capital allocation? By providing historical financial reports that are timely, consistent and comparable, accounting facilitates an efficient and effective capital allocation process. Investors can make informed decisions regarding in which companies to invest their limited capital resources. GAAP Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities. Importance of financial accounting standards? they require minimum disclosures, and create consistency across companies Accounting standard setters FASB, referred to as GAAP, for U.S. companies, IASB for international companies What is accrual-basis accounting? Accrual accounting depicts the effects of transactions and events in the periods in which they occur, even if the resulting cash receipts and payments occur in a different period. Advantages of accrual-basis accounting Accrual Accounting provides a better depiction of the periodic operating performance of the company. Disadvantages of accrual-basis accounting Disadvantages of Accrual accounting are the judgements in which they are applied, which can be subjective. What are financial statement elements? Elements are items that financial statements are built from: assets, liabilities, equity, revenue, expenses, gains and losses. What is contained in each of the three primary financial statements and the limitations of each? Balance sheet Measured at a point in time, shows sources and uses of funds, liquidity, and solvency, etc. Limitations: Some items are omitted. Many assets are measured at outdated historical costs. Judgments and estimates can significantly affect the amounts reported. What is contained in each of the three primary financial statements and the limitations of each? Income Statement Measured over the reporting period, shows the company's performance Limitations: Doesn't capture the entirety of company performance. Amounts reported are affected by the accounting methods chosen. Judgments and estimates can significantly affect the amounts reported.