ACCTG 215 Notes 1-20
ACCTG 215 Notes 1-20 ACCTG 215
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This 2 page One Day of Notes was uploaded by Shogo Okuda on Tuesday October 28, 2014. The One Day of Notes belongs to ACCTG 215 at University of Washington taught by Wells in Winter2010. Since its upload, it has received 105 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.
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Date Created: 10/28/14
ACCTG 215 Notes 120 GAAP important so that people can compare nancial info among companies Financial accounting and reporting standards in US established primarily by Financial Accounting Standards Board FASB International Accounting Standards Board IASB Pressures on accounting profession to establish uniform accounting standards D of 1929 Securities and Exchange Commission SEC more powerful than FASB Auditors trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company s nancial statements Stock market crash Financial accounting should provide information that 1 Is useful to investors and creditors in making decisions 2 Helps to predict cash ows 3 Tells about economic resources claims to resources and changes in resources and claims Pressures on accounting profession resurfaced following the stock market bubble and subsequent crash of high technology rms in the early 2000s Collapse of Enron in 2001 and Arthur Andersen Sarbanes Oxley Act SOX FASB s Conceptual framework prescribes the correctness of nancial accounting rules Main focus Decision usefulness the ability of the information to be useful in decision making Understandability users must understand the info within the context of the decision they are making 2 primary decision speci c qualities that make accounting information useful are relevance and faithful representation Relevance accounting info should possess con rmatory value predictive value andor timeliness Faithful representation veri able neutral complete Veri ability consensus among different measurers Neutrality unbiased highly related to the establishment of accounting standards Completeness including all info necessary for faithful representation of the business activity the rm is reporting Comparability ability of users to see similarities and differences between two different business activities Consistency use of similar accounting procedures either over time for the same company or across companies at the same point in time Cost effectiveness suggests that nancial accounting information is provided only when the bene ts of doing so exceed the costs Materiality reflects the impact of nancial accounting information on investors and creditors decisions GAAP Economic entity assumption we can identify all economic events w a particular economic entity Monetary Unit Assumption to measure nancial statements we need a unit or scale of measurement Periodicity Assumption requires that the economic life of an enterprise be divided into arti cial time periods for nancial reporting Going Concern Assumption in the absence of information to the contrary a business entity will continue to operate inde nitely When using a company s current earnings to estimate future earnings to re ect the company s true earnings as well as the usefulness of reported earnings to predict future earnings Quality of earnings ability of reported earnings to re ect the company s true earnings as well as the usefulness of reported earnings to predict future earnings Conservative accounting practices result in reporting lower income lower assets and higher liabilities Aggressive accounting practices result in reporting higher income higher assets and lower liabilities Changes in accounting estimates and practices alter the appearance of amounts reported in the income statement and the balance sheet Changes in accounting estimates and practices usually have no effect on a company s underlying cash ows