Accounting Principles are fundamental truths or axioms that can be derived from laws and have been specified in detail in the FASB conceptual framework.
They derive their credibility and authority from general recognition and derive their authority from legal court proceedings.
According to the FASB's conceptual framework, which of the following is true?
- An asset is tangible.
- An asset provides future benefits.
- The claims to an asset's benefits are legally enforceable.
Accrual accounting is used because it recognizes revenues when cash is received and expenses when cash is paid. It provides a better indication of a company's ability to generate cash flows than it provides past ability to generate negative cash flows. It is considered less important.
Which of the following is true of accounting for changes in estimates?
- Changes in estimates are not carried back to adjust prior years.
- Changes in estimates are considered as errors.
- A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.
- A company accounts for changes in estimates only in the period of change, even though it affects the future periods.
Presented below are data for Bangkok Corp. on December 31st, 2017 and 2018:
Contributed Capital:
2017 - $1,458
2018 - $1,296
Retained Earnings:
2017 - $8,850
2018 - $9,720
Liabilities:
2017 - $4,860
2018 - ?
Dividends for the year:
2017 - $1,620
2018 - $1,215
Net Income for the year:
2017 - $1,920
2018 - $1,296
Liabilities at December 31, 2018 is $2,532, $2,613, $5,840, or $5,811.