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Wall Street Prep Accounting Crash Course(questions and answers).
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Wall Street Prep Accounting Crash Course(questions and answers). What is Accounting? Accounting is the language of business; it is a standard set of rules for measuring a company's financial performance. Assessing a company's financial performance is important for: The firm's officers (managers an...

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  • August 3, 2024
  • 76
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • wall street prep accounting crash coursequestions
  • wall street prep accounting crash course

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  • Wall Street Prep: Accounting Crash Course
  • Wall Street Prep: Accounting Crash Course

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Wall Street Prep:
Accounting Crash
Course(questions and
answers)

1. What is Accounting?: Accounting is the language of business; it is a standard set of ru
. . . . . . . . . . . . . . .




les for measuring a company's financial performance.
. . . . . .




Assessing a company's financial performance is important for: The
. . . . . . . .




firm's officers (managers and employees)
. . . . .




Investors Lend .




ers General pu
. .




blic

Standard financial statements serve as a "yardstick" of communicating financial perf
. . . . . . . . . .




ormance to the general public.
. . . .





. .

,2. Why is Accounting Important?: Enables managers to make corporate deci- sions
. . . . . . . . . .




Enables the general public to make investment decisions
. . . . . . .




3. Who Uses Accounting?: Used by a variety of organizations - fro governm the feder
. . . . . . . . . . . . .



al ations om . .




ment to non- . .
panies

profit organizations to small businesses to corpor We will discuss account
. . . . . . . . . .




ing rules as they pertain to publicly-traded c
. . . . . . .




4. Accounting Regulations: Accounting attempts to standardize financial informa- tion . . . . . . . . .




and follows rules and regulations
. . . .




These rules are called Generally Accepted Accounting Principles (GAAP)
. . . . . . . .




In the US, the Securities and Exchange Commision
. . . . . . . .




(SEC) authorizes the Financial Accounting Standards Board
. . . . . . .




(FASB) to determine accounting rules
. . . .




GAAP comes from the Statements of Financial Accounting Standards
. . . . . . . . .




(SFAS) issued by the FASB . . . .




5. An Overview of the SEC: A US federal agency established by the US Congress in 1934
. . . . . . . . . . . . . . .




Primary mission is "to protect investors and maintain the integrity of t ma he securiti
. . . . . . . . . . . .
.




rkets"

Division of Corporate Finance oversees FASB . . . . .




6. An Overview of FASB: Established in 1973 as an independent body to carry out the fun
. . . . . . . . . . . . . . .



EC

Financi . .

,ction of codifying accounting standards on the behalf of the S
. . . . . . . . . .




Composed of seven full- . . .




time members appointed for five years by the Account Foundation (FAF)
. . . . . . . . . .




Decisions are influenced by: . . .




7. International Financial
. Reporting
. Standards
. .




(IFRS): Over 100 countries, in- cluding the EU, UK, Canada, Australia, and Russia, have a
. . . . . . . . . . . . . .




dopted a unified set of international accounting standards (IFRS)
. . . . . . . .




Although we have seen unprecedented convergence over the last few years be- tween
. . . . . . . . . . . . .




US GAAP and IFRS, some differences remain
. . . . . .





. .

, 8. Assumption 1: Accounting Entity: A company is considered a separate "living" enter
. . . . . . . . . . .




prise, apart from its owners
. . . .




In other words, a corporation is a "fictional" being
. . . . . . . .




9. Assumption 2: Going Concern: A company is considered a "going concern" for the for
. . . . . . . . . . . . .




eseeable future; it is assumed to remain in existence indefinitely
. . . . . . . . .




10.Assumption 3: Measurement: Financial statements can only show measurable activ . . . . . . . . .




ities of a corporation such as its quantifiable resources, its liability, amount of taxes it is fa
. . . . . . . . . . . . . . . .




cing, etc. .




11.Assumption 4: Periodicity: Companies are required to file annual and interim repo . . . . . . . . . . .




rts

In the US, quarterly and annual financial reports are required
. . . . . . . . .




An accounting year (fiscal year) is frequently aligned with the calendar year
. . . . . . . . . . .




12.Four Underlying Assumptions of Accounting: (1) Accounting Entity
. . . . . . .




(2)Going Concern .




(3)Measurement

(4)Periodicity

13.Principle 1: Historical Cost: Financial statements report companies' resources at an
. . . . . . . . . .




initial historical cost . .





. .

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