Exam 2: Introduction to Financial Statements and Other Financial Reporting Topics

For consolidating, the FASB recognizes risks, rewards, decision-making ability and the primary beneficiary.

Most companies consolidate the parent's and subsidiary's accounts summed.

In addition to the balance sheet, the income statement, and the statement of cash flows, a complete set of financial statements must include:

The financial statements of the parent and the subsidiary are consolidated for all subsidiaries unless control is temporary or does not rest with the majority.

The sequence of accounting procedures completed during each accounting period is called the accounting cycle.

Transactions must be external to the company.

A sole proprietorship is a legal entity separate from its owner.

Subsequent events are those that occur after the balance sheet date but before the statements are issued.

The point of cash receipt for revenue and cash disbursement for expenses is important under the accrual basis when determining income.

Contingent liabilities are recorded as a liability only if the loss is considered substantial and the amount is reasonably determinable.

Ethics can be a particular problem with financial reports.

After posting, the general ledger accounts contain the same information as in the journals, but the information has been summarized by account.

Which of the following is not a true statement relating to the Treadway Commission?

Accounting for a business combination must be accounted for using the purchase method.

Several accounts could be involved in a single transaction, but the debits and credits must still be equal.

A partnership is a business owned by two or more individuals.Each owner is personally responsible for the debts of the partnership.