AC305 EXAM study

The primary objective of financial reporting is to provide information

That is useful in decision making.

The documents that set forth fundamental concepts on which financial accounting and reporting standards will be based are:

Statements of Financial Accounting Concepts.

The type of financial information to external decision makers is referred to as

Financial accounting.

The two primary decision-specific qualities that make accounting information useful are:

Relevance and faithful representation.

source documents

Used to identify and process external transactions. step 1

Transaction Analysis

Determine the dual effect on the accounting equation. step 2

Journal

Record of the dual effect of a transaction in debit/credit step 3

Posting

Transferring debits and credits from the journal to the ledger. step 4

Unadjusted Trial Balance

List of accounts and their balances before recording, step 5

Adjusting entries

Updates to account balances recorded at the end of a reporting period. step 6

Adjusted Trial Balance

List of accounts and their balances after recording adjusting entries. step 7

Financial Statements

Primary means of disseminating information to external decision makers. step 8

Closing Entries

To zero out the temporary accounts. step 9

Post Closing trial balance

List of accounts and their balances after recording closing entries. step 10

The SEC exerts a continuing influence on the establishment of accounting standards. It does so primarily by:

Monitoring the development of GAAP within the accounting profession and using its stature to influence that development.

The primary objective of financial reporting is to provide information:

useful to capital providers.

Statements of Financial Accounting Concepts issued by the FASB:

identify the conceptual framework within which accounting standards are developed.

revenue is recognized when:

a good or service has been delivered to a customer.

In depreciating the cost of an asset, accountants are most concerned with:

recognizing expense in the appropriate period.

primary objective of expense recognition is to:

record expenses in the period that related revenues are recognized.

The economic entity assumption states that, in the absence of contrary evidence, all entities will survive indefinitely.

False

Which of the following is considered a practical constraint on the qualitative characteristics?

Cost effectiveness.

GAAP includes which of the following pronouncements:

All of the choices are correct.