The Securities and Exchange Commission organization primarily represents ____ that participate in the process of establishing GAAP.
Users
The Financial Executives International organization primarily represents ____ that participate in the process of establishing GAAP.
Preparers
The American Institute of Certified Public Accountants primarily represents ____ that participate in the process of establishing GAAP.
Auditors
The Institute of Management Accountants organization primarily represents ____ that participate in the process of establishing GAAP.
Preparers
The Association of Investment Management and Research organization primarily represents ____ that participate in the process of establishing GAAP.
Users
Obligation to transfer cash or other resources as a result of a past transaction
Liability
Dividends paid by a corporation to its shareholders; decreases in equity resulting from transfers to owners
Distribution to owners
Inflow of an asset from providing a good or service
Revenue
The financial position of a company
Assets, Liabilities and Equity
Increase in equity during a period from non-owner transactions; change in equity
Comprehensive Income
Increase in equity from peripheral or incidental transaction; results if an asset is sold for more than its book value
Gain
Sale of an asset used in the operations of a business for less than the asset's book value
Loss
The owners' residual interest in the assets of a company
Equity
An item owned by the company representing probable future benefits
Asset
Revenues plus gains less expenses and losses
Net Income
An owners' contribution of cash to a corporation in exchange for ownership shares of stock
Investment by Owners
Outflow of an asset related to the production of revenue
Expense
Predictive Value
Information is useful in predicting the future
Relevance
Pertinent to the decision at hand
Timeliness
Information is available prior to the decision
Confirmatory Value
Information confirms expectations
Understandability
Users understand the information in the context of the decision being made
Faithful Representation
Agreement between a measure and the phenomenon it purports to represent
Materiality
Concerns the relative size of an item and its effects on decisions
Comparability
Important for making inter-firm comparisions
Neutrality
The absence of bias
Recoginition
The process of admitting information into financial statements
Consistency
Applying the same accounting practices over time
Cost Effectiveness
Requires consideration of the costs and value of the information
Verifiability
Implies consensus among different measures
Matching Priniciple
Record expenses in the period the related revenue is recognized
Periodicity
The life of an enterprise can be divided into artificial time periods
Historical Cost Principle
The original transaction value upon acquisition
Realization Principle
Criteria usually satisfied at point of scale
Going Concern Assumption
The entity will continue indefinitely
Monetary Unit Assumption
A common denominator is the dollar
Economic Entity Assumption
The enterprise is separate from its owners and other entities
Full-Disclosure Principle
All information that could affect decisions should be reported
Jim Marley is the sole owner of Marley's Appliances. Jim borrowed $100,000 to buy a new home to be used as his personal residence. The liability was not recorded in the records of Marley's Appliances.
The Economic Entity Assumption
Apple Inc. distributes an annual report to its shareholders.
The Periodicity Assumption
Hewlett-Packard Corp. depreciates machinery and equipment over their useful lives.
The Matching Principle (also the Going Concern Assumption)
Crosby Company lists land on its balance sheet at $120,000, its original purchase price, even though the land has a current fair value of $200,000.
The Historical Cost (original transaction value) Principle
Honeywell Corp. records revenue when products are delivered to customers, even though the cash has not yet been received.
The Realization (revenue recognition) Principle
Liquidation values are not normally reported in financial statements even though many companies do go out of business.
The Going Concern Assumption
IBM, a multi-billion company, purchased some small tools at a cost of $800. Even though the tools will be used for a number of years, the company recorded the purchase as an expense.
Materiality
The accounting equation can be stated as:
A-L-OE=0
XYZ Corp. receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a:
Credit to Capital Stock
Incurring an expense for advertising on account would be recorded by:
Debiting an expense
A sale on account would be recorded by:
Debiting assets
Hughes Aircraft sold a 4-passenger airplane for $380,000, receiving a $50,000 down payment and a 12% note for the balance. The journal entry to record this sale would include a:
Debit to Note Receivable
Davis Hardware uses a perpetual inventory system.. How should Davis record the sale of merchandise, costing $620 and sold for $950 on account?
Accounts Receivable $960
Sales Revenue $960
Cost of Goods Sold $620
Inventory $620
An example of a contra account is:
Accumulated Depreciation
Making insurance payments in advance is an example of:
A prepaid expense transaction
When a magazine company collects cash for selling a subscription, it is an example of:
An unearned revenue transaction
Adjusting entries are primarily needed for:
Accrual accounting