Intermediate Accounting I (Exam 1) Chapters 1-5 with Complete Solutions!

objective of financial reporting - ANSWER-provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors general-purpose financial statements - ANSWER-provide financial reporting information to a wide variety of users accrual basis accounting - ANSWER-ensures that a company records events that change its financial statements in the periods in which it receives or pays cash generally accepted accounting principles (GAAP) - ANSWER-common set of accounting standards and procedures: Securities and Exchange Commission (SEC) American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Financial Accounting Standards Board - ANSWER-establish and improve standards of financial accounting and reporting for the guidance and education of the public which includes issuers, auditors, and users of financial information Accounting Standards Updates - ANSWER-These updates amend the Accounting Standards Codification, which represents the source of authoritative accounting standards Four primary financial statements - ANSWER-Balance Sheet Income Statement Statement of Cash Flows Statement of Owner's/Stockholders' Equity Conceptual Framework - ANSWER-establishes the concepts that underlie financial reporting. Relevance (Fundamental Quality) - ANSWER-accounting information must be capable of making a difference in a decision. Financial information is capable of making a difference when it has predictive value, confirmatory value, or both. Predictive Value - ANSWER-if it has value as an input to predictive processes used by investors to form their own expectations about the future Confirmatory value - ANSWER-relevant information also helps users confirm or correct prior expectations Faithful Representation (fundamental quality) - ANSWER-means that the numbers and descriptions match what really existed or happened Completeness - ANSWER-means that all the information that is necessary for faithful repres