ETSU ACCT 2010 FINAL EXAM REVIEW QUESTIONS AND CORRECT ANSWERS

Purpose of Financial Reporting summarize transactions, give them to external/internal users, make decisions based on summaries Primary users of financial statements internal: executives, mid-level management External: investors, lenders, outside users Rules that govern accounting GAAP SEC Securities and Exchange Commission- enforcement of GAAP- oversees finances FASB Financial Accounting Standards Board- created GAAP Economic Entity Assumption shareholders keep their personal records separate from the records of the corporation Going Concern Assumption The assumption that the company will continue in operation for the foreseeable future. Monetary Unit Assumption financial statement elements should be measured in a particular monetary unit Time Period Assumption Assumption that an organization's activities can be divided into specific time periods such as months, quarters, or years. Cost Principle A principle that states that acquired assets and services should be recorded at their actual cost. Revenue Recognition Principle The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied. Expense Recognition Principle Match expenses with revenues in the period when the company makes efforts to generate those revenues (matching principal) Full Disclosure Principle Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users.