ACCT 301 FINAL EXAM STUDY GUIDE
full disclosure principle - Answers -accounting principle that dictates that in deciding
what information to report, companies follow the general practice of providing
information that is of sufficient importance to influence the judgement and decisions of
an informed user; it recognizes that the nature and amount of information included in
financial reports reflects a series of judgmental tradeoffs between sufficient detail that
makes a difference to users, sufficient condensation to make the information
understandable, and the costs and benefits of providing the information
differential disclosure - Answers -the FASB, in recognizing that certain disclosure
requirements are costly and unnecessary for certain companies, has eliminated
reporting requirements for nonpublic enterprises
accounting policies - Answers -the specific accounting principles and methods a
company currently uses and considers most appropriate to present fairly its financial
statements
notes to the financial statements - Answers -a set of disclosures in a company's
financial statements that further explain the items presented in the main body of the
statements; the additional information provided in the notes does not have to be
quantifiable, nor does it need to qualify as an accounting element
related-party transactions - Answers -when a company engages in transactions in
which one of the parties has the ability to significantly influence the policies of the other;
may also occur when a non-transacting party has the ability to influence the policies of
the two transacting parties
errors - Answers -unintentional accounting mistakes
fraud - Answers -intentional distortions of financial statements
illegal acts - Answers -violations of laws and regulations; if a company derives revenue
from an illegal act that is considered material in relation to the financial statements, this
information should be disclosed
post balance sheet events - Answers -significant financial events that took place after
the formal balance sheet date but before final issuance and that may materially affect
the company's finanicial position
subsequent events - Answers -significant financial events that took place after the
formal balance sheet date but before issuance and that may materially affect the
company's financial position
, recognized subsequent events - Answers -an event that provides additional evidence
about conditions that existed at the balance sheet date
nonrecognized subsequent event - Answers -an event that provides evidence about
conditions that did not exist at the balance sheet date but arose subsequent to that date
management approach - Answers -how a company can meet the segmented reporting
objective, by providing financial statements segmented based on how the company's
operations are managed
operating segment - Answers -a component of an enterprise (1) that engages in
business activities from which it earns revenues and incurs expenses, (2) whose
operating results are regularly reviewed by the company's chief operating decision
maker to assess segment performance and to allocate resources to the segment, and
(3) for which discrete financial information is available that is generated by or based on
the internal financial reporting system
common costs - Answers -those incurred for the benefit of more than one segment and
whose interrelated nature prevents a completely objective division of costs among
segments
interim reports - Answers -financial reports that cover periods of less than one year
discrete approach - Answers -the belief that companies should treat each interim period
as a separate accounting period
integral approach - Answers -the belief that the interim report is an integral part of the
annual report and that deferrals an accruals in an interim report should take into
consideration what will happen for the entire year
seasonality - Answers -when most of a company's sales are concentrated in a short
period of the year, while certain costs are spread more equally throughout the year
auditor's report - Answers -the results of an independent examination of a company's
accounting data
auditor - Answers -an accounting professional who conducts an independent
examination of a company's accounting data
unqualified or clean opinion - Answers -the auditor's opinion that the financial statement
present fairly, in all material respects, the financial position, results of operations, and
cash flows of the entity in conformity
qualified opinion - Answers -an auditor's report that contains an exception to the
standard opinion, but usually not of sufficient magnitude to invalidate the statements as
a whole
full disclosure principle - Answers -accounting principle that dictates that in deciding
what information to report, companies follow the general practice of providing
information that is of sufficient importance to influence the judgement and decisions of
an informed user; it recognizes that the nature and amount of information included in
financial reports reflects a series of judgmental tradeoffs between sufficient detail that
makes a difference to users, sufficient condensation to make the information
understandable, and the costs and benefits of providing the information
differential disclosure - Answers -the FASB, in recognizing that certain disclosure
requirements are costly and unnecessary for certain companies, has eliminated
reporting requirements for nonpublic enterprises
accounting policies - Answers -the specific accounting principles and methods a
company currently uses and considers most appropriate to present fairly its financial
statements
notes to the financial statements - Answers -a set of disclosures in a company's
financial statements that further explain the items presented in the main body of the
statements; the additional information provided in the notes does not have to be
quantifiable, nor does it need to qualify as an accounting element
related-party transactions - Answers -when a company engages in transactions in
which one of the parties has the ability to significantly influence the policies of the other;
may also occur when a non-transacting party has the ability to influence the policies of
the two transacting parties
errors - Answers -unintentional accounting mistakes
fraud - Answers -intentional distortions of financial statements
illegal acts - Answers -violations of laws and regulations; if a company derives revenue
from an illegal act that is considered material in relation to the financial statements, this
information should be disclosed
post balance sheet events - Answers -significant financial events that took place after
the formal balance sheet date but before final issuance and that may materially affect
the company's finanicial position
subsequent events - Answers -significant financial events that took place after the
formal balance sheet date but before issuance and that may materially affect the
company's financial position
, recognized subsequent events - Answers -an event that provides additional evidence
about conditions that existed at the balance sheet date
nonrecognized subsequent event - Answers -an event that provides evidence about
conditions that did not exist at the balance sheet date but arose subsequent to that date
management approach - Answers -how a company can meet the segmented reporting
objective, by providing financial statements segmented based on how the company's
operations are managed
operating segment - Answers -a component of an enterprise (1) that engages in
business activities from which it earns revenues and incurs expenses, (2) whose
operating results are regularly reviewed by the company's chief operating decision
maker to assess segment performance and to allocate resources to the segment, and
(3) for which discrete financial information is available that is generated by or based on
the internal financial reporting system
common costs - Answers -those incurred for the benefit of more than one segment and
whose interrelated nature prevents a completely objective division of costs among
segments
interim reports - Answers -financial reports that cover periods of less than one year
discrete approach - Answers -the belief that companies should treat each interim period
as a separate accounting period
integral approach - Answers -the belief that the interim report is an integral part of the
annual report and that deferrals an accruals in an interim report should take into
consideration what will happen for the entire year
seasonality - Answers -when most of a company's sales are concentrated in a short
period of the year, while certain costs are spread more equally throughout the year
auditor's report - Answers -the results of an independent examination of a company's
accounting data
auditor - Answers -an accounting professional who conducts an independent
examination of a company's accounting data
unqualified or clean opinion - Answers -the auditor's opinion that the financial statement
present fairly, in all material respects, the financial position, results of operations, and
cash flows of the entity in conformity
qualified opinion - Answers -an auditor's report that contains an exception to the
standard opinion, but usually not of sufficient magnitude to invalidate the statements as
a whole
