ACC 205 Chapter 1

What does the SEC do?

Requires public companies to follow GAAP and has enforcement authority.

What is the main purpose of the FASB?

To establish and improve financial accounting and reporting standards.

What are Accounting Standards Updates?

Official changes to GAAP.

What are Statements of Financial Accounting Concepts (SFAC)?

Theoretical foundation for GAAP, not actual rules.

What is the purpose of the FASB Codification?

Organizes all authoritative GAAP into one place.

What is the Economic Entity assumption?

Business activities must be kept separate from owner activities.

What is the Monetary Unit assumption?

Financial information is recorded in a stable currency.

What is the Periodicity assumption?

Business activities are divided into time periods.

What is the Going Concern assumption?

The business is expected to continue operating.

When is revenue recorded under accrual accounting?

When it is earned.

When is revenue recorded under cash accounting?

When cash is received.

When are expenses recorded under accrual accounting?

When incurred or used.

When are expenses recorded under cash accounting?

When cash is paid.

Under accrual accounting, when does SJU record revenue for prepaid services?

In June, when services are performed.

Under cash accounting, when does SJU record revenue for prepaid services?

In May, when cash is received.

Under accrual accounting, when does SJU record expense for supplies?

In June, when supplies are used.

Under cash accounting, when does SJU record expense for supplies?

In May, when cash is paid.

Which is an accrual‑basis expense?

Using utilities this period without paying cash.

Which is a cash‑basis expense?

Buying supplies with cash even if not used.

Accrual revenue for Ramirez Company?

28,000.

Accrual expenses for Ramirez Company?

15,800.

Accrual net income for Ramirez Company?

12,200.

Cash revenue for Ramirez Company?

22,000.

Cash expenses for Ramirez Company?

14,400.

Cash net income for Ramirez Company?

7,600.