Question: Briefly describe the difference between accounting

> Elliott Company constructed a building at a cost of $50,000. A local contractor had submitted a bid to construct it for $60,000 a. At what amount should the building be recorded? b. Should revenue be recorded for the savings between the cost of $50,000

> At which point is revenue from sales on account (credit sales) commonly recognized?

> Would an accountant record the personal assets and liabilities of the owners in the accounts of the business? Explain.

> Why did the FASB commence the Accounting Standards Codification™ project?

> Boston Celtics Limited Partnership II and Subsidiaries presented the following consolidated statements of income for 1998, 1997, and 1996. Required a. Comment on Amortization of NBA Franchise and Other Intangible Assets. b. Would the discontinued opera

> An entity may choose between the use of the accrual basis of accounting and the cash basis. Comment.

> Some industry practices lead to accounting reports that do not conform to the general theory that underlies accounting. Comment.

> Many important events that influence the prospects for the entity are not recorded in the financial records. Comment and give an example.

> Is the presentation of a personal income statement appropriate?

> The same generally accepted accounting principles apply to all companies. Comment.

> What personal financial statement should be prepared when an explanation of changes in net worth is desired?

> In a personal statement of financial condition, what is the equity section called?

> When preparing a personal statement of financial condition, should assets and liabilities be presented on the basis of historical cost or estimated current value?

> Are comparative financial statements required when presenting personal financial statements?

> Is a statement of changes in net worth required when presenting personal financial statements?

> What is the basic personal financial statement?

> May personal financial statements be prepared only for an individual? Comment.

> Why are the financial data of a component unit included with the government entities reporting entity?

> For the government-wide statements, governmental activities are to be presented separately from the financial statements of business-type activities. Give one example of a governmental activity and one example of a business-type activity.

> Under GASB, which statement has been the most substantial pronouncement?

> It is proper to handle immaterial items in the most economical, expedient manner possible. In other words, generally accepted accounting principles do not apply. Comment, including a concept that justifies your answer

> What is the purpose of the book, Codification of Governmental Accounting and Financial Reporting Standards?

> How many members serve on the GASB? How many votes are needed to issue a pronouncement?

> Could a profit-oriented enterprise use fund accounting practices? Comment Answer: No. The accounting for a profit enterprise is centered on the entity concept and the efficiency of the entity. Fund accounting is centered on a self-balancing set of acc

> The accounting for not-for-profit institutions does not typically include the concept of efficiency. Indicate how the concept of efficiency can be incorporated in the financial reporting of a not-for-profit institution.

> The rating on an industrial revenue bond is representative of the probability of default of bonds issued with the full faith and credit of a governmental unit. Comment.

> Which organization provides a service whereby it issues a certificate of conformance to governmental units with financial reports that meet its standards?

> The budget for a state or local government is not as binding as a budget for a commercial business. Comment.

> How many funds will be used by a state or local Government?

> The accounting for governments is centered on the entity concept and the efficiency of the entity. Comment.

> Do not-for-profit organizations, other than governments, use fund accounting? Comment.

> No estimate or subjectivity is allowed in the preparation of financial statements. Discuss.

> List some objectives that could be incorporated into the financial reporting of a professional accounting organization.

> If quoted market prices are not available, a personal financial statement cannot be prepared. Comment.

> Give examples of disclosure in notes with personal financial statements.

> List some sources of information that may be available when preparing personal financial statements.

> Is the concept of working capital used with personal financial statements? Comment.

> GAAP as they apply to personal financial statements use the cash basis. Comment.

> For governmental accounting, define the following types of funds: 1. General fund 2. Proprietary fund 3. Fiduciary fund

> Why must the user be cautious in analyzing bank holding companies?

> To what agencies and other users of financial statements must banks report?

> Why are banks concerned with their loans/deposits ratios?

> Discuss why the concept of full disclosure is difficult to apply.

> Why are savings accounts liabilities for banks?

> Why are loans, which are usually liabilities, treated as assets for banks?

> What are the main sources of revenue for banks?

> Insurance companies tend to have a stock market price at a discount to the average market price (price/ earnings ratio). Indicate some perceived reasons for this relatively low price/earnings ratio.

> Insurance industry-specific financial ratios are usually prepared from financial statements prepared under what standards?

> Briefly describe the unique aspects of revenue recognition for an insurance company.

> For an insurance company, describe the difference between GAAP reporting and SAP reporting of deferred policy acquisition costs?

> Why could an insurance company with substantial investments in real estate represent a risk?

> Annual reports that insurance companies issue to the public are in accordance with what accounting standards?

> The consistency concept requires the entity to give the same treatment to comparable transactions from period to period. Under what circumstances can an entity change its accounting methods, provided it makes full disclosure?

> Are annual reports filed with state insurance departments in accordance with U.S. GAAP?

> Explain how the publication Financial Analysis of the Motor Carrier Industry could be used to determine the percentage of total revenue a firm has in relation to similar trucking firms?

> How is the passenger load factor of a bus company related to profitability?

> If a transportation firm shows a rise in revenue per passenger mile, what does this increase imply?

> In a transportation firm, what types of things will change operating revenues? Operating expenses?

> Briefly describe the revenue section of the income statement for a transportation firm?

> What is the most important category of assets for transportation firms?

> What type of ratio is operating revenue to operating property? Will it exceed 1:1 for a utility?

> Is it more desirable to have the operating ratios increasing or decreasing for utilities and transportation companies?

> Oil and gas companies must disclose quantity estimates for proved oil and gas reserves and the major factors causing changes in these resource estimates. Briefly indicate why this disclosure can be significant.

> The matching concept involves the determination of when to recognize the costs associated with the revenue that is being recognized. For some costs, such as administrative costs, the matching concept is difficult to apply. Comment on when it is difficult

> Some industries described in this chapter are controlled by federal regulatory agencies. How does this affect their accounting systems?

> Differentiate between successful-efforts and full costing accounting as applied to the oil and gas industry.

> For regulated utilities, describe the income statement accounts, allowance for equity funds used during construction, and allowance for borrowed funds used during construction?

> For regulated utilities, are current liabilities usually presented first in utility reporting? Comment.

> Is times interest earned meaningful for utilities? Why or why not?

> What does the funded debt to operating property ratio measure for a utility?

> Are inventory ratios meaningful for utilities? Why?

> For regulated utilities, why are plant and equipment usually listed first for utilities?

> How does demand for utilities differ from demand for other products or services?

> Utilities are usually very highly leveraged. How is it that they are able to carry such high levels of debt?

> There are other acceptable methods of recognizing revenue when the point of sale is not acceptable. List and discuss the other methods reviewed in this chapter, and indicate when they can be used.

> On October 15, 1990, United Airlines (UAL Corporation) placed the largest wide-body aircraft order in commercial aviation history—60 Boeing 747-400s and 68 Boeing 777s—with an estimated value of $22 billion. With this order, United became the launch cust

> Why review the note that describes commitments and contingent liabilities for a bank?

> Why could a review of savings deposit balances be important when reviewing a bank’s financial statements?

> Why review the disclosure of nonperforming assets for banks?

> Why review the disclosure of allowance for loan losses for a bank?

> Why review the disclosure of foreign loans for banks?

> Why review the disclosure of the market value of investments versus the book amount of investments for banks?

> What type of ratio is deposits times capital?

> What does the loan loss coverage ratio measure?

> Why are banks concerned about the percentage of earning assets to total assets?

> What ratios are used to indicate profitability for banks?

> Inventory that has a market value below the historical cost should be written down in order to recognize a loss. Comment

> What does the ratio total deposits times capital measure?

> What is usually the biggest expense item for a bank?

> For regulated utilities, why review the account Construction Work in Progress?

> Give an example of why a review of bank assets may indicate risk or opportunity of which you were not aware?

> Real estate companies contend that conventional accounting does not recognize the underlying value of the property and that this misleads investors. Discuss.

> For oil and gas companies, there is the potential for a significant difference between the reported income and cash flows from operations. Comment.

> When reviewing the financial statements of oil and gas companies, why is it important to note the method of costing (expensing) exploration and production costs?

> List the sections of annual reports where ratios are most frequently located, in order of use.

> Financial ratios are used extensively in annual reports to interpret and explain financial statements. Comment.

> CPAs regard which two financial ratios as the most significant? The highest rated profitability ratio? The highest debt ratio?

> An arbitrary write-off of inventory can be justified under the conservatism concept. Is this statement true or false? Discuss.

> List the top five financial ratios included in corporate objectives according to the study reviewed in this book. Indicate what each of these ratios primarily measures.

> Corporate controllers regard profitability financial ratios as very significant. Comment.