MHA 706 Module 2 (LSUS MHA 706)
Financial Accounting - CORRECT ANSWER-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? - CORRECT
ANSWER-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? - CORRECT ANSWER-Yes, it is important to have financial reporting
that is accurate and based on reliable data.
SEC - CORRECT ANSWER-has legal authority to regulate the form and content
of financial statements
GAAP- applies only to financial accounting statements - CORRECT
ANSWER-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? - CORRECT ANSWER-no, because
business practices are continuously evolving, so GAAP also has to adapt
accordingly.
Assumptions - CORRECT ANSWER-accounting entity, going concern,
periodicity, and monetary unit
Accounting entity - CORRECT ANSWER-the specific entity for which the
statements apply can be defined
Going concern - CORRECT ANSWER-it is assumed that the entity will have an
indefinite lifetime rather than be liquidated in the near future
, Monetary unit - CORRECT ANSWER-in the US, the unit is the US dollar,
unadjusted for inflation and deflation
Historical costs - CORRECT ANSWER-Requires most assets to be valued at
acquisition (historical) costs rather than fair market (current) value
Revenue recognition - CORRECT ANSWER-Revenues must be recognized in
the period in which they are realizable and earned
Expense matching - CORRECT ANSWER-Expenses must be matched (in time)
to the related revenues
Full disclosure - CORRECT ANSWER-Financial statements must contain a
complete picture of the economic (financial) events of the organization
Which two principles are related? - CORRECT ANSWER-Revenue recognition
and full disclosure- financial statements must capture a complete picture of the
economic or financial events of the organization
Materiality - CORRECT ANSWER-To keep statements manageable, only entries
that are important to the operational and financial status of the organization need
be separately identified
Cost Benefit - CORRECT ANSWER-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 - CORRECT ANSWER-an event when a cash
transaction takes place
accrual accounting recognizes - CORRECT ANSWER-an even when a cash
obligation is created (is required by GAAP)
Transaction - CORRECT ANSWER-is an exchange of goods (including cash) or
services from one individual or business to another
Financial Accounting - CORRECT ANSWER-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? - CORRECT
ANSWER-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? - CORRECT ANSWER-Yes, it is important to have financial reporting
that is accurate and based on reliable data.
SEC - CORRECT ANSWER-has legal authority to regulate the form and content
of financial statements
GAAP- applies only to financial accounting statements - CORRECT
ANSWER-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? - CORRECT ANSWER-no, because
business practices are continuously evolving, so GAAP also has to adapt
accordingly.
Assumptions - CORRECT ANSWER-accounting entity, going concern,
periodicity, and monetary unit
Accounting entity - CORRECT ANSWER-the specific entity for which the
statements apply can be defined
Going concern - CORRECT ANSWER-it is assumed that the entity will have an
indefinite lifetime rather than be liquidated in the near future
, Monetary unit - CORRECT ANSWER-in the US, the unit is the US dollar,
unadjusted for inflation and deflation
Historical costs - CORRECT ANSWER-Requires most assets to be valued at
acquisition (historical) costs rather than fair market (current) value
Revenue recognition - CORRECT ANSWER-Revenues must be recognized in
the period in which they are realizable and earned
Expense matching - CORRECT ANSWER-Expenses must be matched (in time)
to the related revenues
Full disclosure - CORRECT ANSWER-Financial statements must contain a
complete picture of the economic (financial) events of the organization
Which two principles are related? - CORRECT ANSWER-Revenue recognition
and full disclosure- financial statements must capture a complete picture of the
economic or financial events of the organization
Materiality - CORRECT ANSWER-To keep statements manageable, only entries
that are important to the operational and financial status of the organization need
be separately identified
Cost Benefit - CORRECT ANSWER-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 - CORRECT ANSWER-an event when a cash
transaction takes place
accrual accounting recognizes - CORRECT ANSWER-an even when a cash
obligation is created (is required by GAAP)
Transaction - CORRECT ANSWER-is an exchange of goods (including cash) or
services from one individual or business to another
