ACCT 301 EXAM #1 VERIFIED STUDY GUIDE
preparers of financial information - Answers - sole-proprietorships, partnerships,
corporations
users of financial information - Answers - investors, creditors, analysts, government
agencies, employees, suppliers, customers, management, ect.
Generally Accepted Accounting Principles (GAAP) - Answers - help standardize the
information provided to users
Securities and Exchange Commissions (SEC) - Answers - agency (has the mandate)
authorized by Congress to regulate accounting for public companies, issues some
narrow standards affecting public companies but the majority of standard-setting has
been delegated to private bodies who create GAAP , requires public companies to
adhere to GAAP and retains oversight and enforcement authority, created by Act of
1934
American Institute of Certified Public Accountants (AICPA) - Answers - national
professional organization who establishes early rule-making bodies: Committee on
Accounting Procedures and Accounting Principles Board
Financial Accounting Standards Board (FASB) - Answers - 7 full time independent
voting members who are appointed by Financial Accounting Foundation, serve up to
two five-year terms, not required to be a CPA, most influenced by government (SEC
and IRS), current standard setter in the U.S.
International Accounting Standards Board (IASB) - Answers - issues International
Financial Reporting Standards (IFRS), was formed in 2012 and has 14 members
Premises FASB Relies On - Answers - (1) responsive to entire economic community (2)
operate in full view of the public
Steps FASB Takes for Standards Updates - Answers - (1) topic placed on agenda (2)
research conducted and discussion paper issued (3) solicits and evaluated responses
and issues a Proposed Accounting Standards Update (4) evaluates responses and
issues an Accounting Standards Update and updates Accounting Standards
Codification
U.S. GAAP - Answers - characterized as "rules-based"
iGAAP - Answers - characterized as "principle-based" stressing professional judgment
, Ethical Behavior - Answers - high standard set in the accounting profession, particularly
after highly-publicized accounting scandals in the past two decades
Conceptual Framework - Answers - intended to act as constitution for current and future
accounting standards to develop coherent set of standards and rules, to solve new and
emerging practical problems, compromised of three levels (1) objective for financial
reporting (2) qualitative characteristics and basic elements (3) recognition and
measurement concepts, established by Statement of Financial Concepts, written by
FASB
Objective of Financial Reporting - Answers - to provide financial information about the
reporting entity that is (1) useful (2) to existing and potential equity investors, lenders,
and other creditors (3) in making decisions about providing resources to the entity
Qualitative Characteristics - Answers - distinguish better (more useful) information from
inferior (less useful) information for decision-making purposes
relevance - Answers - contains predictive value and/or confirmatory value, and is
material (influences decision users make) (Qualitative Characteristics - Fundamental)
faithful representation - Answers - (reliability) information complete, neutral, and free
from error (Qualitative Characteristics - Fundamental)
comparability - Answers - enables users to understand similarity and differences among
items (Qualitative Characteristics - Enhancing)
verifiability - Answers - independent observers would reach consensus (Qualitative
Characteristics - Enhancing)
timeliness - Answers - having information available in time to influence decisions
(Qualitative Characteristics - Enhancing)
understandability - Answers - classified, characterized, and presented clearly and
concisely (Qualitative Characteristics - Enhancing)
Elements of Financial Statements - Answers - portray the economic resources of an
enterprise, the claims to those resources, and the effects of transactions, events, and
circumstances that change these resources and claims
assets - Answers - probable future economic benefit obtained or controlled by a
particular entity as a result of past transactions or events (Element)
liabilities - Answers - probable future sacrifices of economic resources arising from
present obligations of a particular entity to transfer assets or provide services to other
entities in the future as a result of past transactions or events (Element)
preparers of financial information - Answers - sole-proprietorships, partnerships,
corporations
users of financial information - Answers - investors, creditors, analysts, government
agencies, employees, suppliers, customers, management, ect.
Generally Accepted Accounting Principles (GAAP) - Answers - help standardize the
information provided to users
Securities and Exchange Commissions (SEC) - Answers - agency (has the mandate)
authorized by Congress to regulate accounting for public companies, issues some
narrow standards affecting public companies but the majority of standard-setting has
been delegated to private bodies who create GAAP , requires public companies to
adhere to GAAP and retains oversight and enforcement authority, created by Act of
1934
American Institute of Certified Public Accountants (AICPA) - Answers - national
professional organization who establishes early rule-making bodies: Committee on
Accounting Procedures and Accounting Principles Board
Financial Accounting Standards Board (FASB) - Answers - 7 full time independent
voting members who are appointed by Financial Accounting Foundation, serve up to
two five-year terms, not required to be a CPA, most influenced by government (SEC
and IRS), current standard setter in the U.S.
International Accounting Standards Board (IASB) - Answers - issues International
Financial Reporting Standards (IFRS), was formed in 2012 and has 14 members
Premises FASB Relies On - Answers - (1) responsive to entire economic community (2)
operate in full view of the public
Steps FASB Takes for Standards Updates - Answers - (1) topic placed on agenda (2)
research conducted and discussion paper issued (3) solicits and evaluated responses
and issues a Proposed Accounting Standards Update (4) evaluates responses and
issues an Accounting Standards Update and updates Accounting Standards
Codification
U.S. GAAP - Answers - characterized as "rules-based"
iGAAP - Answers - characterized as "principle-based" stressing professional judgment
, Ethical Behavior - Answers - high standard set in the accounting profession, particularly
after highly-publicized accounting scandals in the past two decades
Conceptual Framework - Answers - intended to act as constitution for current and future
accounting standards to develop coherent set of standards and rules, to solve new and
emerging practical problems, compromised of three levels (1) objective for financial
reporting (2) qualitative characteristics and basic elements (3) recognition and
measurement concepts, established by Statement of Financial Concepts, written by
FASB
Objective of Financial Reporting - Answers - to provide financial information about the
reporting entity that is (1) useful (2) to existing and potential equity investors, lenders,
and other creditors (3) in making decisions about providing resources to the entity
Qualitative Characteristics - Answers - distinguish better (more useful) information from
inferior (less useful) information for decision-making purposes
relevance - Answers - contains predictive value and/or confirmatory value, and is
material (influences decision users make) (Qualitative Characteristics - Fundamental)
faithful representation - Answers - (reliability) information complete, neutral, and free
from error (Qualitative Characteristics - Fundamental)
comparability - Answers - enables users to understand similarity and differences among
items (Qualitative Characteristics - Enhancing)
verifiability - Answers - independent observers would reach consensus (Qualitative
Characteristics - Enhancing)
timeliness - Answers - having information available in time to influence decisions
(Qualitative Characteristics - Enhancing)
understandability - Answers - classified, characterized, and presented clearly and
concisely (Qualitative Characteristics - Enhancing)
Elements of Financial Statements - Answers - portray the economic resources of an
enterprise, the claims to those resources, and the effects of transactions, events, and
circumstances that change these resources and claims
assets - Answers - probable future economic benefit obtained or controlled by a
particular entity as a result of past transactions or events (Element)
liabilities - Answers - probable future sacrifices of economic resources arising from
present obligations of a particular entity to transfer assets or provide services to other
entities in the future as a result of past transactions or events (Element)
