AC 310 7th EditionExam # 1 Study Guide Lectures: 1 - 5Lecture 1 (January 8)Objectives of Financial AccountingFinancial reporting should provide information that:A. Is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisionsB. Helps present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receiptsC. Clearly portrays the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events, and circumstances that change its resources and claims to those resourcesRole of the Auditor: Auditors serve as independent intermediaries to help ensure that management has appropriately applied U.S. GAAP in preparing the company’s financial statements.Underlying Assumptions:Economic entity: All economic events identified with a particular economic entityGoing concern: Business entity will continue to operate indefinitelyPeriodicity: Life of company is divided into time periods to provide timely informationMonetary unit: Financial statements are measured in a particular monetary unit (like the US dollar)Lecture 2 (January 13)Rules for Adjusting Entries:1.End of Accounting Period: Adjusting entries always occur at the end of an accounting period (monthly, quarterly, annually)2. Balance Sheet and Income Statement: Adjusting entries always involves a balance sheet AND an Income Statement account3. NO CASH: The cash account is never used with Adjusting Entries. If you are using cash then it is not an adjusting entry4. Repeat 1-3: Always remember rules 1-3 and that DEBITS = CREDITS with any journal entry.Lecture 3 (January 15)Key Take-Aways from Chapter 4:1.Components of the Income Statement2. Prepare a multi-step income statement3. Intraperiod tax allocation4. Comprehensive income and statement of comprehensive income5. Earnings per share calculations and statement of retained earnings6. Conceptual framework definitions of revenue, expenses, gains and losses7. Change in principle v. change in estimates (retrospective, adjustment)8. Identify key differences between IFR and US GAAPLecture 4 (January 20)Reporting Discontinued OperationsReporting for Components Solda.Income or loss from operations of the component from the beginning of the reporting period to the disposal date b. Gain or loss on the disposal of the component’s assetsReporting for Components Held for Salea. Income or loss from operations of the component from the beginning of the reporting period to the end of the reporting periodb. An “Impairment loss” if the carrying value of the assets of the component is more than the fair value minus cost to sellLecture 5 (January 22)Five Measures of Income1. Gross Profit2. Operating Income3. Income from Continuing Operations4. Net Income5. Comprehensive IncomeComprehensive IncomeAll changes in equity during a period except those resulting from investments b owners and distributions to ownersIncludes: All revenues and gains, expenses and losses, reported in net income, and all gains andlosses that bypass net income but affect stockholders’