MHA 706 Module 2 (LSUS MHA 706) – Q’s And A’s
Financial Accounting ✔️Ans - involves identifying, recording and
communicating the operational results and status of organization. (i.e.
income statement, statement of changes in equity, balance sheet, and
statement of cash flows)
Do not for profit organizations have to prepare financial statements?
✔️Ans - Yes- they also have stakeholders and managers that have an
interest in financial reporting
Should the preparation and presentation of financial accounting data be
regulated? ✔️Ans - Yes, it is important to have financial reporting that is
accurate and based on reliable data.
SEC ✔️Ans - has legal authority to regulate the form and content of
financial statements
GAAP- applies only to financial accounting statements ✔️Ans - The
conventions that have evolved from the pronouncements and rulings of the
implementing organizations constitute a set of guidelines for the
preparation of financial accounting statements
Does GAAP remain static over time? ✔️Ans - no, because business
practices are continuously evolving, so GAAP also has to adapt accordingly.
Assumptions ✔️Ans - accounting entity, going concern, periodicity, and
monetary unit
Accounting entity ✔️Ans - the specific entity for which the statements
apply can be defined
Going concern ✔️Ans - it is assumed that the entity will have an
indefinite lifetime rather than be liquidated in the near future
Monetary unit ✔️Ans - in the US, the unit is the US dollar, unadjusted for
inflation and deflation
, Historical costs ✔️Ans - Requires most assets to be valued at acquisition
(historical) costs rather than fair market (current) value
Revenue recognition ✔️Ans - Revenues must be recognized in the period
in which they are realizable and earned
Expense matching ✔️Ans - Expenses must be matched (in time) to the
related revenues
Full disclosure ✔️Ans - Financial statements must contain a complete
picture of the economic (financial) events of the organization
Which two principles are related? ✔️Ans - Revenue recognition and full
disclosure- financial statements must capture a complete picture of the
economic or financial events of the organization
Materiality ✔️Ans - To keep statements manageable, only entries that
are important to the operational and financial status of the organization
need be separately identified
Cost Benefit ✔️Ans - Financial statements cannot report all possible
information that every potential user might find relevant. When deciding
what information should be reported and how it will be done, standard
setters must determine whether the benefits outweigh the associated costs
cash accounting recognizes ✔️Ans - an event when a cash transaction
takes place
accrual accounting recognizes ✔️Ans - an even when a cash obligation is
created (is required by GAAP)
Transaction ✔️Ans - is an exchange of goods (including cash) or services
from one individual or business to another
unique activity ✔️Ans - once a transaction is identified, it must be
recorded or posted to an account
chart of accounts ✔️Ans - assign numeric identifiers to individual
accounts
Financial Accounting ✔️Ans - involves identifying, recording and
communicating the operational results and status of organization. (i.e.
income statement, statement of changes in equity, balance sheet, and
statement of cash flows)
Do not for profit organizations have to prepare financial statements?
✔️Ans - Yes- they also have stakeholders and managers that have an
interest in financial reporting
Should the preparation and presentation of financial accounting data be
regulated? ✔️Ans - Yes, it is important to have financial reporting that is
accurate and based on reliable data.
SEC ✔️Ans - has legal authority to regulate the form and content of
financial statements
GAAP- applies only to financial accounting statements ✔️Ans - The
conventions that have evolved from the pronouncements and rulings of the
implementing organizations constitute a set of guidelines for the
preparation of financial accounting statements
Does GAAP remain static over time? ✔️Ans - no, because business
practices are continuously evolving, so GAAP also has to adapt accordingly.
Assumptions ✔️Ans - accounting entity, going concern, periodicity, and
monetary unit
Accounting entity ✔️Ans - the specific entity for which the statements
apply can be defined
Going concern ✔️Ans - it is assumed that the entity will have an
indefinite lifetime rather than be liquidated in the near future
Monetary unit ✔️Ans - in the US, the unit is the US dollar, unadjusted for
inflation and deflation
, Historical costs ✔️Ans - Requires most assets to be valued at acquisition
(historical) costs rather than fair market (current) value
Revenue recognition ✔️Ans - Revenues must be recognized in the period
in which they are realizable and earned
Expense matching ✔️Ans - Expenses must be matched (in time) to the
related revenues
Full disclosure ✔️Ans - Financial statements must contain a complete
picture of the economic (financial) events of the organization
Which two principles are related? ✔️Ans - Revenue recognition and full
disclosure- financial statements must capture a complete picture of the
economic or financial events of the organization
Materiality ✔️Ans - To keep statements manageable, only entries that
are important to the operational and financial status of the organization
need be separately identified
Cost Benefit ✔️Ans - Financial statements cannot report all possible
information that every potential user might find relevant. When deciding
what information should be reported and how it will be done, standard
setters must determine whether the benefits outweigh the associated costs
cash accounting recognizes ✔️Ans - an event when a cash transaction
takes place
accrual accounting recognizes ✔️Ans - an even when a cash obligation is
created (is required by GAAP)
Transaction ✔️Ans - is an exchange of goods (including cash) or services
from one individual or business to another
unique activity ✔️Ans - once a transaction is identified, it must be
recorded or posted to an account
chart of accounts ✔️Ans - assign numeric identifiers to individual
accounts
