1.8: Discussion Questions

1. What are generally accepted accounting principles (GAAP)?
2. When is revenue recognised?
3. How does the matching concept more accurately determine the Net Income of a business?
4. What are the qualities that accounting information is expected to have? What are the limitations on the disclosure of useful accounting information?
5. What are assets?
6. To what do the terms liability and equity refer?
7. Explain the term financial transaction. Include an example of a financial transaction as part of your explanation.
8. Identify the three forms of business organization.
9. What is the business entity concept of accounting? Why is it important?
10. What is the general purpose of financial statements? Name the four financial statements?
11. Each financial statement has a title that consists of the name of the financial statement, the name of the business, and a date line. How is the date line on each of the four financial statements the same or different?
12. What is the purpose of an income statement? a balance sheet? How do they interrelate?
13. Define the terms revenue and expense.
14. What is net income? What information does it convey?
15. What is the purpose of a statement of changes in equity? a statement of cash flows?
16. Why are financial statements prepared at regular intervals? Who are the users of these statements?
17. What is the accounting equation?
18. Explain double-entry accounting.
19. What is a year-end? How does the timing of year-end financial statements differ from that of interim financial statements?
20. How does a fiscal year differ from a calendar year?