Deck 4: Accounting Concepts

Question 1

The entity concept tells us that we should not commingle resources of one entity with another entity's resources. Explain your answer.

Answer 1

True
In doing so, we ensure that we account for a particular entity and exclude other entities, getting a clear picture of the finances of that one particular entity.

Question 2

Why might a not-for-profit health care organization use fund accounting?

Answer 2

To track donor restricted money to ensure terms of the donation are met, to track grants or contracts for particular purposes from other funders to ensure it is spent in accordance with the terms.

Question 3

What is the difference between "equity" and "net assets"?

Answer 3

Conceptually, the two terms are similar, referring to the accumulated wealth or net worth of an organization. Equity is used in for-profit contexts and implies an ownership claim, whereas net assets is used with not-for-profits where there are no owners other than society as a whole.

Question 4

Match the following generally accepted accounting principles with their definitions.

-__ Going Concern

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 5

Match the following generally accepted accounting principles with their definitions.

-__ Conservatism

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 6

Match the following generally accepted accounting principles with their definitions.

-__ Matching

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 7

Match the following generally accepted accounting principles with their definitions.

-__ Cost

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 8

Match the following generally accepted accounting principles with their definitions.

-__ Objective Evidence

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 9

Match the following generally accepted accounting principles with their definitions.

-__ Materiality

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 10

Match the following generally accepted accounting principles with their definitions.

-__ Consistency

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 11

Match the following generally accepted accounting principles with their definitions.

-__ Full Disclosure

A) The value of what was given up to acquire the item.
B) In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces.
C) To avoid misleading users of financial reports, organizations should generally use the same accounting methods from period to period.
D) Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed.
E) Financial reports should disclose any information needed to ensure that the reports are a fair presentation.
F) An error is large enough to be a concern if any individual would make a different decision based on the incorrect information resulting from the error than if he or she possessed the correct information.
G) Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating.
H) Financial report should be based on such evidence as reasonable individuals could all agree upon within relatively narrow bounds.

Question 12

Select all of the following accounts that would be considered assets.

A) cash
B) patient receivables
C) mortgage payable
D) goodwill
E) notes payable