Generally Accepted Accounting Principles

Briefly summarize the key facts you noted in your study of the five components of internal control and the rationale for the conclusions you made in the audit program concerning whether each component was adequately designed and implemented.

g. On December 31, 2012, the company completed the work on a contract for an out-of-province company for $7,900 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction.

Student Cases with Solutions to accompany Accounting & Auditing Research: Tools & Strategies (7th edition)

> The cost principle requires that companies record plant assets at cost. Cost consists of all expenditures necessary to acquire an asset and make it

Q. Which principle determines the amount initially entered into the records for purchases? a. Cost principle b. Going concern concept c. Business entity concept d. Objectivity concept ANS:

GAAP (Generally Accepted Accounting Principles) determine the content and format of financial statements. SEC (Securities and Exchange Commission) requires publicly traded companies to issue annual audit. Concerns are about adequacy of disclosure; and behavioral implications are secondary.

The case centers on actual events that occurred in the Roman Catholic Archdiocese of New Orleans from 2001 to 2009. In 2008, the archdiocese announced that it had lost more than $100 million as a result of Hurricane Katrina — because insurance failed to cover all its property losses. Those losses had no bearing on the parish a closure, the church says. Not all the faithful are convinced. Later released prospectus indicated that the Archdiocese paid over $10 million directly from its own assets to settle claims of sexual abuse, and these payments were not part of financial statement or notes. Due to unauthorized expenditure parishioners and media questioned about Good Counsel’s. Good Counsel’s parishioners were very

In the instant case of Elegant Housing, Inc. neither has the affirmative customer acceptance been received by Caltron Computers, Inc. nor has the 6 month trial period ending on May 15, 20X2 lapsed. In light of the above circumstances and the revenue recognition provisions, it is recommended that the revenue of $400,000 should not be recognized.

tangible assets, and therefore have to be restated differently. However, we do not know the costs

There are general rules and concepts that preside over the field of accounting. These general rules, known as basic accounting principles and guidelines, shape the groundwork on which more thorough, complex, and legalistic accounting rules are based. The Financial Accounting Standards Board (FASB) uses the basic accounting principles and guidelines as a foundation for their own comprehensive and complete set of accounting rules and standards.

The structure is based upon generally accepted accounting principles (i.e. GAAP). It is focused on utilizing a double entry system to understand what is happening and serve as a way of rechecking the information. The sources of it include: the total debt, liabilities, revenues and credits. This helps actuaries to determine where possible errors occurred and how to correct them.

G. Define the Going Concern Concept—financial reports of a business are prepared with the expectation that the business will remain in operation indefinitely. Since this concept assumes that a business will continue indefinitely into the future, by accruing expenses and revenues, it is understood that the business has a future.

According to this concept the asset is recorded in the books of accounts at the price paid for it and not at its market value. For example: if a business entity purchases a building valued at $15 million from a friend for $12 million, this asset would be recorded at $12 million and not at $ 15 million, because for the business entity the cost was $12 million and not $15 million.

Generally, valuation is done by using cash flows and other financial factors. The value of intangible assets is

Under this type of accounting, assets and liabilities are recorded at their values when first acquired. They are not then generally restated for changes in values. Costs recorded in the Income Statement are based on the historical cost of items sold or used, rather than their replacement costs.