Acct 311 Chapter 2

Front 1

First Level of Conceptual Framework

Back 1

Basic Objectives (what is useful?)

Front 2

Second Level

Back 2

Qualitative Characteristics and Elements

Front 3

Qualitative Characteristics

Back 3

Relevance, Faithful representation, and Enhancing Qualities. (REF)

Front 4

Relevance

Back 4

Predictive Value, Confirmatory, and Materiality

(PMC)

Front 5

Faithful Representation

Back 5

Completeness, Neutrality, and free from error

(CNF)

Front 6

Enhancing Qualities

Back 6

Verifiability, Comparability, Understanding, and Timeliness (VCUT)

Front 7

Elements

Back 7

Assets, Liabilities, Equity, Investment by owners, distribution by owners, comprehensive income, revenues, expenses, gains, losses

Front 8

Third Level

Back 8

Assumptions, Principles, Constraints

(Apc)

Front 9

Assumptions

Back 9

Periodicity, Going Concern, Economic Entity, Monetary Unit (PGEM)

Front 10

Principles

Back 10

Measurement, Expense Recognition, Revenue Recognition, Full Disclosure (MERF)

Front 11

Constraints

Back 11

Cost Constraint

Front 12

Relevant

Back 12

Making a difference in a decision

Front 13

predictive value

Back 13

value as an input to predictive processes used by investors

Front 14

material

Back 14

omitting or misstating could influence decisions

Front 15

Faithful representation

Back 15

numbers and descriptions match what really existed

Front 16

Completeness

Back 16

all information that is necessary is provided

Front 17

Neutrality

Back 17

company cannot select information to favor one party over another

Front 18

Free from error

Back 18

free from error

Front 19

Verifiability

Back 19

when independent measures, using the same methods, obtain the same results

Front 20

Comparable

Back 20

Information that is measured and reported in a similar manner for different companies

Front 21

Understandability

Back 21

quality of information that lets reasonably informed users see its significance

Front 22

Moment in Time (Basic Elements)

Back 22

Assets, Liability, and Equity

Front 23

Period Time

Back 23

Investment by owners, distribution to owners, comprehensive income, revenue, expenses, gains, losses

Front 24

Economic Entity

Back 24

company keeps its activity separate from its owners and other businesses

Front 25

Going Concern

Back 25

Company to last long enough to fulfill objectives and commitments

Front 26

Monetary Unit

Back 26

Money is the common denominator

Front 27

Periodicity

Back 27

Company can divide its economic activities into time periods

Front 28

Measurement principle

Back 28

Historical cost and fair value

Front 29

Historical cost

Back 29

record cost when you bought it

Front 30

Fair value

Back 30

what its worth today

Front 31

Revenue Recognition

Back 31

requires that companies recognize revenue in the accounting period in which performance is satisfied

Front 32

Expense Recognition

Back 32

Expense follows revenues

Front 33

Product costs

Back 33

Material, labor, overhead, direct relationship between cost and revenue, and recognize in period of revenue

Front 34

Period costs

Back 34

Salaries, administrative costs, no direct relationship between cost and revenue, recognize expense as incurred

Front 35

Cost Constraint

Back 35

cost of providing information must be weighed against the benefits that can be derived from using it

Front 36

Conceptual Framework

Back 36

we need an established body of concepts

Front 37

7 Statements of Financial Accounting

Back 37

SFAC Nos. 1,2,3,5,6,7,8

Front 38

SFAC No. 1

Back 38

presents the goals and purposes of accounting superseded by SFAC No. 8

Front 39

SFAC No. 2

Back 39

examines the characteristics that make accounting information useful

superseded by SFAC no. 8

Front 40

SFAC no. 3

Back 40

Provides definitions of items in financial statements, such as Assets, liabilities, revenues, and expenses

Front 41

SFAC No. 5

Back 41

Sets forth fundamental recognition and measurement criteria and guidance on what information should be formally incorporated into financial statements

Front 42

SFAC No. 6

Back 42

Replaces SFAC. No 3, includes non-profit organizations

Front 43

SFAC No. 7

Back 43

provides a framework for using expected future cash flows and present values as a basis for measurement

Front 44

SFAC No. 8

Back 44

replaces SFAC No. 1 and 2

Front 45

"Why" purpose of accounting

Back 45

First Level: Basic Objective

Front 46

Forms bridge between the "why" and the "how"

Back 46

Second Level: Fundamental Concepts

Front 47

Investments by owners

Back 47

increases net assets

Front 48

Distribution by owners

Back 48

decreases the net assets

Front 49

comprehensive income

Back 49

change in net assets from non-owner sources

Front 50

gains

Back 50

increase in equity incidentally

Front 51

losses

Back 51

decrease in equity incidentally

Front 52

Economic entity assumption

Back 52

a company keeps its activity separate and distinct from its owners

Front 53

Going Concern

Back 53

Company will have a long life, use depreciation and amortization

Front 54

Full Disclosure

Back 54

financial reports reflects a series of trade-offs

Front 55

Full disclosure

Back 55

sufficient detail, sufficient condensation, keeping in mind costs of preparing