Int. ACCT 1 - UARK – Rowe Exam
1 2026/2027 (Graded A+)
Who is the primary user of financial accounting information? - External Parties (investors &
creditors)
What are the problems that financial accounting seeks to solve? - It reduces information asymmetry
(parties have differing info) and the problem of adverse selection
Which entities currently establish U.S. accounting standards? - FASB
Which entities have enforcement authority of accounting standards for public companies? - SEC
What is GAAP? - Generally Accepted Accounting Principles
Why do we need a conceptual framework in accounting? - Develops a coherent set of standards and
rules and solves new and emerging practical problems.
What makes accounting information useful? - Relevance and Faithful representation
What is the conceptual framework for financial reporting and how do the items in the framework
relate to GAAP (particularly the GAAP that we have learned)? - 1. Identify boundaries of reporting
2. Select transactions
3. How recognized & measured
4. How summarized & reported
"Moment in time" - Assets, liabilities
"period of time" - investment by owner, distribution to owners, comprehensive income, revenue,
expenses, gains, and losses.
What are the qualitative characteristics that make financial information useful, how do these apply
to areas we have learned? - Relevance:
- (predictive value, confirmatory value, and materiality)
Faithful Representation:
- (completeness, neutrality, and free from error)
What is the normal account balance (debit or credit) for common accounts? - Assets- Debit
Liabilities- Credit
SHE- Credit
What are the primary purposes of adjusting entries? - - Recording internal transactions
- Accruals: - Accrued revenue/accrued expenses
Deferrals - cash before recognition
Prepaid expenses
Unearned Revenue
, Accrual - recognition before cash
Accrued Revenue
Accrued expenses
ex. utilities, billed services
How to record a write off - allowance for doubtful accounts
accounts receivable
What is the trial balance? - a list of accounts and their balances at a given time
What are the major elements/categories of the income statement, and what comprise each
element? - Operating, Nonoperating, other
Operating Section - Revenues: inflow/outflow from ongoing major or central operations
Expenses: Outflow or using up of ongoing major or central operations
Non-Operating section: - Gains
Losses
Other section - -Income taxes on income from continuing operations
-Discontinued operations: gains/losses from disposition (net tax)
-Noncontrolling interest
-Earnings per share
How do you account for changes in estimates? - Prospective adjustment: accounted for starting the
period of change, not an error
What items appear in the retained earnings statement? - - Net Income
- Dividends
- Changes in principle
- Prior period adjustments
How do you calculate earnings per share? - net income - preferred dividends / weighted average
common shares outstanding
What items are included in comprehensive income? - - All changes in equity except those resulting
from investment by owner and distribution to owners include:
o Net income
o Other comprehensive income: gain/loss that bypass NI but affect SHE
What are the major elements/categories of the balance sheet, and what comprise each element? - -
Assets
- Liabilities
- SHE
How do you classify assets as current or noncurrent? - - Current: expected to convert to cash, sell, or
consume in < one year.
In what order are current assets presented in the balance sheet? - In the order of liquidity
1 2026/2027 (Graded A+)
Who is the primary user of financial accounting information? - External Parties (investors &
creditors)
What are the problems that financial accounting seeks to solve? - It reduces information asymmetry
(parties have differing info) and the problem of adverse selection
Which entities currently establish U.S. accounting standards? - FASB
Which entities have enforcement authority of accounting standards for public companies? - SEC
What is GAAP? - Generally Accepted Accounting Principles
Why do we need a conceptual framework in accounting? - Develops a coherent set of standards and
rules and solves new and emerging practical problems.
What makes accounting information useful? - Relevance and Faithful representation
What is the conceptual framework for financial reporting and how do the items in the framework
relate to GAAP (particularly the GAAP that we have learned)? - 1. Identify boundaries of reporting
2. Select transactions
3. How recognized & measured
4. How summarized & reported
"Moment in time" - Assets, liabilities
"period of time" - investment by owner, distribution to owners, comprehensive income, revenue,
expenses, gains, and losses.
What are the qualitative characteristics that make financial information useful, how do these apply
to areas we have learned? - Relevance:
- (predictive value, confirmatory value, and materiality)
Faithful Representation:
- (completeness, neutrality, and free from error)
What is the normal account balance (debit or credit) for common accounts? - Assets- Debit
Liabilities- Credit
SHE- Credit
What are the primary purposes of adjusting entries? - - Recording internal transactions
- Accruals: - Accrued revenue/accrued expenses
Deferrals - cash before recognition
Prepaid expenses
Unearned Revenue
, Accrual - recognition before cash
Accrued Revenue
Accrued expenses
ex. utilities, billed services
How to record a write off - allowance for doubtful accounts
accounts receivable
What is the trial balance? - a list of accounts and their balances at a given time
What are the major elements/categories of the income statement, and what comprise each
element? - Operating, Nonoperating, other
Operating Section - Revenues: inflow/outflow from ongoing major or central operations
Expenses: Outflow or using up of ongoing major or central operations
Non-Operating section: - Gains
Losses
Other section - -Income taxes on income from continuing operations
-Discontinued operations: gains/losses from disposition (net tax)
-Noncontrolling interest
-Earnings per share
How do you account for changes in estimates? - Prospective adjustment: accounted for starting the
period of change, not an error
What items appear in the retained earnings statement? - - Net Income
- Dividends
- Changes in principle
- Prior period adjustments
How do you calculate earnings per share? - net income - preferred dividends / weighted average
common shares outstanding
What items are included in comprehensive income? - - All changes in equity except those resulting
from investment by owner and distribution to owners include:
o Net income
o Other comprehensive income: gain/loss that bypass NI but affect SHE
What are the major elements/categories of the balance sheet, and what comprise each element? - -
Assets
- Liabilities
- SHE
How do you classify assets as current or noncurrent? - - Current: expected to convert to cash, sell, or
consume in < one year.
In what order are current assets presented in the balance sheet? - In the order of liquidity
