Final definitions review

Question 1

Info must be what two fundamental qualitative characteristics to be useful

Answer 1

Relevant
faithfully represented

Question 2

Relevant and factors

Answer 2

Capable of making a difference in users decisions: Predictive value, Confirmatory value, materiality

Question 3

Faithful representation and factors

Answer 3

Transactions/reports agree with what actually happened: Completeness, neutrality, free from error

Question 4

Enhancing quantitative characteristics

Answer 4

Comparability
Verifiability
Timeliness
Understandability

Question 5

Comparability

Answer 5

Within: involves consistency throughout the years

Between: same industry using different methods

Question 6

Verifiability

Answer 6

Others should reach same conclusion using the same measurement method

Question 7

Timeliness

Answer 7

Received at time that will influence decision making

Question 8

Understandability

Answer 8

Reasonable users are able to identify significant info

Question 9

Historical cost

Answer 9

Amount paid to acquire asset or incur liability

Question 10

Amortized cost

Answer 10

Original amount +/- any discount or premium

Question 11

Net realizable value

Answer 11

Amount expected to be collected after deducting the uncollectible amount

Question 12

Lower of cost or net realizable value

Answer 12

Estimated selling price - cost to complete and sell

Question 13

Par/stated value

Answer 13

An amount assigned per share

Question 14

Face value

Answer 14

Debt = principal amount
receivable = original amount owed

Question 15

PV

Answer 15

Discounted amount of expected future cash flows

Question 16

Fair value

Answer 16

Price received to sell an asset or paid to transfer a liability

Question 17

Deferral

Answer 17

Cash comes before the revenue or expense

Expense: Prepay
Revenue: Unearned revenue

Question 18

Accrual

Answer 18

Cash comes after the revenue or expense

Expense: Accrued expense
Revenue: Accrued revenue

Question 19

Straight line depreciation

Answer 19

(cost - residual value) / useful life

Question 20

Interest accrual

Answer 20

Interest = Principal x Rate x Time

Question 21

Residual value

Answer 21

Estimated value of an asset at the end of its useful life

Question 22

Face value

Answer 22

Amount printed on the note/bond

Question 23

Operating activities

Answer 23

Cash related to the income statement

Question 24

Investing activities

Answer 24

Cash related to long term assets

Question 25

Financing activities

Answer 25

Cash related to long term liabilities and equity

Question 26

Temporary accounts

Answer 26

Revenue Expenses Dividends

Question 27

Permanent accounts

Answer 27

balance sheet account

Question 28

Contra account

Answer 28

A deduction to the account, so it is opposite of the normal balance

Question 29

Contra account examples

Answer 29

PPE = Accumulated depreciation AR = Allowance for doubtful accounts Sales revenue = Sales returns and allowances Sales revenue = Sales discount Bonds payable = Discount on bonds payable Notes receivable = Discount on notes receivable Intangible asset = Amortized amortization

Question 30

Net realizable value

Answer 30

Gross AR - Allowance for doubtful accounts

Question 31

Allowance method

Answer 31

Estimating uncollectible, matches expense to the same period as revenue so is accepted by GAAP