ACC 100 Lecture Notes - Lecture 2: Cash Flow, Issued Shares, Asset

48 views6 pages

ochretoad724

30 Apr 2015

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Chapter 2 financial statements and the annual report. Objectives of financial reporting: primary objective, supporting objective. : provide information for decision making; communicate information to permit users of the information to make informed decisions. creditors claims to resources. : assist with prediction of cash receipts to investors and: supporting objective: reflect the management"s stewardship of resources and. Understandability the quality of accounting information that makes it comprehensible to those willing to spend necessary times. Relevance the capacity of information to make a difference in a decision. Comparability quality that allows a user to analyze two or more companies and looks for similarities and differences. Depreciation the process of allocation the cost of a long-term tangible asset over its useful life; also termed amortization. Consistency quality that allows a user to compare two or more accounting periods for a single company; closely related to the concept of comparability.

Related Questions

Chapter 1 Financial Accounting and Accounting Standards

The essential characteristics of accounting are (1) theidentification, measurement, and communication of financialinformation about (2) economic entities to (3) interested partiesFinancial accounting is_________________________________________________________________________________________________________________________________________________.For example accounting information is used by financial accountingto decide whether to invest in the company, evaluate borrowingcapacity to determine the extent of a loan to grant or buy, sell,hold equity and debt instruments.

Managerial accounting is_________________________________________________________________________________________________________________________________________________.

The financial statements* most frequently provided are (1)_______________________ (2) _______________________ (3)_______________________ (4) _______________________ *Also part ofthe financial statements are the notes of the financial statements.Other means of financial reporting that are not financialstatements include the presidentâs letter or supplementaryschedules in the corporate annual report, prospectuses, reportsfiled with government agencies, news releases, managementforecasts, and social or environmental impactstatements.

a) The objectives of Financial Reporting The objective;__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

General-purpose financialstatements_______________________________________________________________________________________________________________________________________________________________.

Entity perspective____________________________________________________________________

Provide decision-useful_________________________________________________________________________________________________________________________________________________.

The accounting profession has developed a set of standards andprocedures called _________________________________________________________

Which of the following represents a form of communicationthrough financial reporting but not through financialstatements?

A. Notes to financial statements. B. Balance sheet. C.President's letter. D. Income statement.

The objective of financial reporting places most emphasison:

A. providing specific guidance related to specific needs. B.providing information to individuals who are experts in the field.C. reporting on stewardship. D. reporting to capital providers.

General-purpose financial statements are prepared primarily for:A. external users. B. auditors. C. internal users. D. governmentregulators.

LO 1.2 Identify the major policy-setting bodies and their rolein the standard-setting process.

Three organizations: Securities and Exchange Commission (SEC):______________________________

American Institute of Certified Public Accountants (AICPA):_______________________________________________________________

Financial Accounting Standards Board (FASB):____________________________

The federal government established the SEC to help develop andstandardize financial information presented to stockholders. Mostcompanies that issue securities to the public or are listed on astock exchange are required to file audited financial statementswith the SEC._____________________________________________________________________________________________________________________________________.

Under the direction of the SEC the__________________________________ was created by the AICPA in_______. It was the first private sector organization that had thetask of setting accounting standards in the United States. ï·___________________________________________________ that narrowedthe wide range of alternative accounting practices then inexistence. In _______. the __________________________________ wasformed to meet the demand for more structured accounting standards.The APB issued pronouncements on accounting principles until_______. the pronouncements where known as _________________, whenit was replaced by the __________________________________ .WheatCommitteeâs recommendations resulted in creation of FASB.

The FASB represents the current rule-making body within theaccounting profession. The mission of the FASB is to establish andimprove standards of financial accounting and reporting for theguidance and education of the public, which includes issuers,auditors, and users of financial information. The FASB differs fromthe predecessor APB in the following ways: a.__________________________________ b.__________________________________ c.__________________________________ d.__________________________________ e.__________________________________

In 1984, the FASB created the __________________________________The purpose of the Task Force is to reach a consensus on how toaccount for new and unusual financial transactions that have thepotential for creating differing financial reporting practices.

Which organization was responsible for issuing AccountingResearch Bulletins? A. The Accounting Principles Board. B. The SEC.C. The Committee on Accounting Procedure. D. The FASB.

The Financial Accounting Standards Board (FASB) was proposed bythe A. Study Group on the Objectives of Financial Statements. B.American Institute of Certified Public Accountants. C. Study Groupon establishment of Accounting Principles (Wheat Committee). D.Accounting Principles Board.

The major distinction between the Financial Accounting StandardsBoard (FASB) and its predecessor, the Accounting Principles Board(APB), is A. a majority of the members of the FASB are CPAs who aredrawn from public practice. B. all members of the FASB possessextensive experience in financial reporting.C. all members of theFASB are fully remunerated, serve full time, and are independent ofany companies or institutions. D. the FASB issues exposure draftsof proposed standards.

The FASB issues two major types of pronouncements: a. When theFASB issues a new standard it is refers as_________________________________to communicate changes to the FASBCodification. They are considered GAAP and must be followed inpractice. o How the FASB has changed US GAAP, including eachspecific amendment to the FASB Codification o Why the FASB decidedto change US GAAP and background information related to the changeo When the changes will be effective and the transition method. b.__________________________________ The SFACs represent an attemptto move away from the problem-by-problem approach to standardsetting that has been characteristic of the accounting profession.The Concept Statements are intended to form a cohesive set ofinterrelated concepts, a conceptual framework that will serve astools for solving existing and emerging problems in a consistentmanner. Unlike FASB statements, the Concept Statements do notestablish GAAP.

Prior to 2009 the FASB issued several type of pronouncementswhich had different levels of authority. The type of pronouncementsare listed in descending order of relative weight of authority theyhad within GAAP

ï· __________________________________

ï· ______________ : these pronouncements refined GAAP byclarifying conflicting or unclear issues relating to previouslyissued standards

ï· ______________ FASB staff issued pronouncements to providemore timely and consistent application guidance and to make narrowand limited revision of standards.

ï· ______________: FASB staff issue these pronouncements toclarify and explain, or elaborate on accounting and reportingproblems. ï· __________________________________

Which of the following is not a publication of the FASB? A.Statements of Financial Accounting Concepts B. Accounting ResearchBulletins C. Interpretations D. Technical Bulletins

_________________________________________________________________________The FASB has established the following procedures for developingaccounting standards. These procedures are used for major projects.Not all of the steps may be necessary for projects focused onnarrower application and implementation issues. Many other stepsare followed during the course of the project that are notspecifically required by the Boardâs Rules of Procedures.

Why was it believed that accounting standards that were issuedby the Financial Accounting Standards Board would carry moreweight? A. The FASB board had a smaller membership. B. The FASBboard members were well-paid. C. The FASB follows due process. D.The FASB board members were CPAs.

GAAP

The FASB developed the Financial Accounting Standards BoardAccounting Standards Codification _____________________________ toprovide in one place all the authoritative literature related to aparticulartopic._________________________________________________________________________________________________________________

Major sources of GAAP:

ï· _______________________________________

Most countries have recognized the need for more globalstandards. _____________________________________________ and U.S.rule-making bodies are working together to reconcile U.S. GAAP withthe IASB _________________________________________

Major challenges in the financial reporting environment.

ï·______________________________________________________________________

carminecrab519

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

The General Accounting Office prepared a report showing thatmany publicly-owned companies restated their financial statementsduring the period 1997 to 2001. Of course, they did not includehappenings such as the situation reported in The Wall StreetJournal, which told its readers that Qwest Communications (whichowns one of the Bell telephone companies) had restated its priorfinancial statements four times from July 2002 to February2003.

Assume that on one of the Sunday television news programs,whether Sunday morning as in Meet the Press or Sunday evening suchas 20/20, an accounting professor was being interviewed. "Hello,professor. Tell our viewers a little about yourself." "I amProfessor Blahblah. I am a certified public accountant, I amlicensed to practice as a certified public accountant, I have anearned doctorate in accounting, and I presently teach auditing atthe university level. Sometimes the department also has me teach acourse in accounting information systems, which I teach as a way ofdesigning accounting systems to provide information to decisionmakers." "What do you think of this situation of Qwest restatingits financial statements four times in seven months?" "Oh, this isterrible. The management of Qwest had a duty to file auditedfinancial statements with the SEC, and to provide those auditedfinancial statements to each of the company's stockholders.Naturally, those financial statements were required to be truthful.The accounting firm which audited those financial statements had aduty to design its audit to assure itself that those financialstatements were free of material misstatement, whatever the cause.If Qwest restated its financial statements four times in sevenmonths, then as they say in law, res ipso loquitur, which means'the thing speaks for itself.'" In other words, the very fact thatthe company restated its financial statements four times in sevenmonths, and by material amounts each time, suggests that neithermanagement nor the auditors did what they were obligated todo."

"Thank you, Professor Blahblah. Do you think our millions ofviewers should know anything else?"

"Yes, I do. If management was making decisions based on thosewrong numbers, then management probably made some bad decisionswhich they would not have made if they would have used correctnumbers."

"Thank you very much, Professor Blahblah. Let's hope that noneof our millions of viewers was among the people who sufferedfinancially as a result of what management and the auditors did orfailed to do."

Required:

1. Does the audit firm which gave clean opinions on thoseoriginal sets of financial statements have any obligation to doanything now about those earlier audit reports? Cite theauthoritative professional literature.

2. Design an audit program for asserted and unasserted claimsagainst this client company. Cite the authoritative professionalliterature related to the claims, and show how your audit programfulfills your professional responsibilities.

Thanks

ACC 100 Lecture Notes - Lecture 2: Cash Flow, Issued Shares, Asset

Document Summary

Get access

Related Documents

ACC 100 Chapter Notes - Chapter 2: Cash Flow, Financial Statement, Income Statement

ACC 100 Chapter Notes - Chapter 2: Cash Flow Statement, Asset, Cash Flow

ACC 100 Chapter Notes - Chapter 2: Intangible Asset, Deferral, Accounts Payable

Related Questions