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And Answers
Who uses financial statements? - correct answer ✅External and Internal users Who requires US public companies to issue audited financial statements? - correct answer ✅SEC Who sets the accounting and financial reporting rules for US companies? - correct answer ✅FASB Who sets the accounting and financial reporting principles for over 100 of non-US countries? - correct answer ✅IFRS Accounting information should help investors and creditors evaluate ______, _______, and ___________ of the enterprise's future cash flows - correct answer ✅Amount, timing, and uncertainty
And Answers
Shareholders receive cash in the form of - correct answer ✅Dividends, sale of stock Creditors receive cash in the form of - correct answer ✅Interest and repayment of principle GAAP stands for - correct answer ✅Generally Accepted Accounting Principles What is codification (related to GAAP) - correct answer ✅Creation of an online database for all accounting pronouncements IASB - correct answer ✅International Accounting Standards Board Role of the auditor - correct answer ✅To serve as independent intermediaries to help ensure that management has appropriately applied U.S. GAAP in preparing the company's financial statements
And Answers
Completeness - correct answer ✅includes all pertinent information Neutrality - correct answer ✅does not favor one interested party over another Free from material error - correct answer ✅not error free, but some minimum level of accuracy Decision usefulness traits - correct answer ✅Comparability, Verifiability, Timeliness, Understandability Underlying Assumptions - correct answer ✅Economic entity, Going Concern, Periodicity, Monetary Unit Economic entity - correct answer ✅All economic events can be identified with a particular economic entity
And Answers
Going concern - correct answer ✅Business entity will continue to operate indefinitely Periodicity - correct answer ✅Life of company is divided into time periods to provide timely information Monetary Unit - correct answer ✅financial statements are measured in a particular monetary unit (like the US dollar) Recognition Concepts - correct answer ✅Definition, Measurability, Relevance, Reliability 2 Criteria for Revenue Recognition - correct answer ✅Earnings process is complete or virtually complete, reasonable certainty as to the collectibility of the asset to be received
And Answers
Auditor's Opinions can be - correct answer ✅Unqualified, Qualified, Adverse, Disclaimer What are the two-primary types of income? - correct answer ✅Operating and non-operating Difference between GAAP and IFRS (Income Statement) - correct answer ✅SEC requires expenses be classified by function, report extraordinary items separately; IFRS requires expense to be classified by function or by natural description, no extraordinary items allowed Earnings quality - correct answer ✅Ability of reported earnings to predict a company's future earnings 2 ways to manipulate income - correct answer ✅Income shifting, income statement classification What are the 3 primary elements of a cash flow statement? - correct answer ✅Operating, investing, financing
And Answers
When would it make sense to recognize revenue early? - correct answer ✅% of completion rather than completed contract method (at delivery) When would it make sense to recognize revenue late? - correct answer ✅When there is unearned revenue, or when collectibility is not assured Criteria for judging whether or not realization principle is satisfied - correct answer ✅Persuasive evidence of an arrangement exists, delivery has occurred, the seller's price to the buyer is fixed or determinable, collectibility is reasonably assured When do you use use point of delivery & completed contract method? - correct answer ✅At delivery when collectibility is reasonably assured (can make estimate) When do you use installment & cost recovery method? - correct answer ✅After delivery (collectibility not reasonably assured)
And Answers
Gross Profit Margin - correct answer ✅Sales - COGS / Sales Profit Margin - correct answer ✅Net income / Sales
