CHAPTER 1 ENVIRONMENT AND THEORETICAL STRUCTURE OF FINANCIAL ACCOUNTING Overview The primary function of financial accounting is to provide useful financial information to users external to the business enterprise. The focus of financial accounting is on the information needs of investors and creditors. These users make critical resource allocation decisions that affect the nation’s economy. The primary means of conveying financial information to investors, creditors, and other external users
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Name______________________ Sample Test Key for Midterm 1 (Chapters 1 – 4) Multiple Choice - Circle the one best answer. 1. The primary accounting standard-setting body in the United States is the a. Securities and Exchange Commission. b. Internal Revenue Service. c. Financial Accounting Standards Board. d. Corporate Board of Directors. 2. An increase in an expense a. increases revenues. b. increases assets. c. decreases liabilities
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WHAT IS ACCOUNTING? Identify Communicate What is the purpose of accounting ? Measure Record 9 3 8/13/2014 WHAT IS ACCOUNTING? Accounting information is important because it… Assists decision making Provides information about the past, present and future performance of an entity Measures business activity 10 WHO USES ACCOUNTING DATA? Internal users External users Managers who plan, Investors who make organise and run the decisions to buy, hold or
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Basic assumptions of accounting Going concern assumption proposes that the financial statements are normally prepared on the assumption that an entity will continue its operations in the foreseeable future. If this is not applicable the financial statements needs to be revised and assets and liabilities should be measured at their current net realizable value. Additional disclosures about the basis of preparation must be made in the financial statements. Accounting entity or business entity assumption
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INTRODUCTION United States Generally Accepted Accounting Principles (GAAP) is the standard platform of guidelines that governs the rules of financial accounting utilized in the preparation of financial statements. The US GAAP can be quite flexible in its interpretations and rulings, but the framework of GAAP is based upon certain constraints and principles in the preparation of financial reports. This paper shall endeavor to address the organization of GAAP and some of the specific areas
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2-7, 2-8, 3-1, 3-4, 3-10, 3-14 E2-7: (Assumptions, Principles, and Constraints) Presented below are the assumptions, principles, and constraints used in this chapter. 1. Economic entity assumption 5. Historical-cost principle 9. Materiality 2. Going-concern assumption 6. Matching principle 10. Industry practices 3. Monetary unit assumption 7. Full disclosure principle 11. Conservatism 4. Periodicity assumption 8. Cost-benefit relationship
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Instructions Categorize the accounting tasks performed by Urlacher as relating to either the identification (I), recording (R), or communication (C) aspects of accounting. E1-1 Urlacher Company performs the following accounting tasks during the year. ___C Analyzing and interpreting information. ___R_ Classifying economic events. ___C_ Explaining uses, meaning, and limitations of data. ___R_ Keeping a systematic chronological diary of events. __ R__Measuring events in dollars and
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Reporting Practices & Ethics Paper Schniqua Bennett HCS 405 October 22, 2012 Sandra Di Pietro Reporting Practices & Ethics Paper In the health care environment financial practices and ethical care finance is very important to produce successfully organizations. In the health care industry and in any business, ethical and financial practices are adopted to increase the organization value and consumer confident as well as protected
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The role of positive accounting theory. PAT has been the most significant accounting research agendas during the past four decades (Kabir). Before the arrival of PAT, normative accounting research had been the leading research tradition in accounting. Normative accounting theorists concentrated in developing accounting principles for recognition and measurement issues. In contrast with normative accounting theory which deals with “should” kind questions, PAT deals with “is” kind questions. According
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What is a conceptual framework? Why is a conceptual framework necessary in financial accounting? .A conceptual framework establishes the concepts that underlie financial reporting. A conceptual framework is a coherent system of interrelated objectives and fundamentals that are expect to lead to consistent standards'. A coherent system of concepts that flow from an objective. The objective identifies the purpose of financial reporting. The other concepts provide guidance on (1) identifying the boundaries
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