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Flashcard 1432443817228

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#sister-miriam-joseph #trivium
Question
Humans are [...] and therefore require a physical mode of communicating ideas from one mind, which is isolated from all others in the body, to another mind likewise isolated.
Answer
animal


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humans alone among animals have the power to think. Consequently, they alone have language in the proper sense of the word. 1 This follows from their nature, for they are rational and therefore have something to say, social and therefore have someone to say it to, and animal and therefore require a physical mode of communicating ideas from one mind, which

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Flashcard 1442121911564

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#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #study-session-11
Question
This reading is organized as follows:

In Section 2, we introduce [...] and its [...]

Section 3 presents a selection of methods for estimating the costs of the various sources of capital.

Section 4 discusses issues an analyst faces in using the cost of capital.
Answer
the cost of capital

basic computation.


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This reading is organized as follows: In Section 2, we introduce the cost of capital and its basic computation. Section 3 presents a selection of methods for estimating the costs of the various sources of capital. Section 4 discusses issues an anal

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1. INTRODUCTION
r, is to estimate the cost of capital for the company as a whole and then adjust this overall corporate cost of capital upward or downward to reflect the risk of the contemplated project relative to the company’s average project. <span>This reading is organized as follows: In the next section, we introduce the cost of capital and its basic computation. Section 3 presents a selection of methods for estimating the costs of the various sources of capital. Section 4 discusses issues an analyst faces in using the cost of capital. A summary concludes the reading. <span><body><html>







Flashcard 1447255739660

Tags
#sister-miriam-joseph #trivium
Question
Language can symbolize essence by either of two kinds of [...], both of which are applicable to all the members of a class
Answer
symbols


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Language can symbolize essence by either of t wo kinds of symbols, both of which are applicable to all the members of a class

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Flashcard 1453640518924

Tags
#conversation-tactics
Question
Let’s begin with what’s disrespectful: [...]
Answer
telling and ordering people around


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Let’s begin with what’s disrespectful: telling and ordering people around

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#bayes #programming #r #statistics
\(p(c|r) = \frac{p(r, c )}{ p(r)} \) In words, the definition simply says that the probability of c given r is the probability that they happen together relative to the probability that r happens at all

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Flashcard 1477085105420

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#cfa-level-1 #corporate-finance #reading-36-cost-of-capital
Question

If we choose to use the company’s WACC in the calculation of the NPV of a project, we are assuming that the project:

  • will have a [...] throughout its useful life.

Answer
constant target capital structure


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y>If we choose to use the company’s WACC in the calculation of the NPV of a project, we are assuming that the project: has the same risk as the average-risk project of the company, and will have a constant target capital structure throughout its useful life.3<body><html>

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2.3. Applying the Cost of Capital to Capital Budgeting and Security Valuation
e of the cash outflows, discounted using that same opportunity cost of capital: NPV = Present value of inflows − Present value of outflows If an investment’s NPV is positive, the company should undertake the project. <span>If we choose to use the company’s WACC in the calculation of the NPV of a project, we are assuming that the project: has the same risk as the average-risk project of the company, and will have a constant target capital structure throughout its useful life.3 These may not be realistic or appropriate assumptions and are potential drawbacks to using the company’s WACC in valuing projects. However, alternative approaches a







Flashcard 1477152476428

Tags
#biochem #biology #cell
Question
The [...] has similar advantages, but without this drawback. Its genome is compact—only half as big as that of a mouse or a human—and it has a generation time of only about three months. Many mutants are known, and genetic engineering is relatively easy.
Answer
zebrafish Danio rerio


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The zebrafish Danio rerio has similar advantages, but without this drawback. Its genome is compact—only half as big as that of a mouse or a human—and it has a generation time of only about three months. Many m

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Flashcard 1477159554316

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#biochem #biology #cell
Question
Living organisms are made of only a small selection of the [how many?] naturally occurring elements, four of which—carbon (C), hydrogen (H), nitrogen (N), and oxygen (O)—make up 96.5% of an organism’s weight
Answer
92


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Living organisms are made of only a small selection of the 92 naturally occurring elements, four of which—carbon (C), hydrogen (H), nitrogen (N), and oxygen (O)—make up 96.5% of an organism’s weight

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Flashcard 1477193108748

Tags
#bayes #programming #r #statistics
Question
The definition of variance is simply the [formula]
Answer
mean squared deviation (MSD) of the x values from their mean:\( \int var(x) = dx \space p(x) ( x − E[x] ) ^2\)


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The definition of variance is simply the mean squared deviation (MSD) of the x values from their mean: int var x = dxp(x) ( x − E[x] ) 2

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Flashcard 1477210410252

Tags
#biochem #biology #cell
Question
Even though a proton plus an electron is involved (instead of just an electron), such hydrogenation reactions are [...], and the reverse, dehydrogenation reactions are [...]
Answer
reductions; oxidations


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Even though a proton plus an electron is involved (instead of just an electron), such hydrogenation reactions are reductions, and the reverse, dehydrogenation reactions are oxidations.

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Flashcard 1477211983116

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#biochem #biology #cell
Question
Even though a proton plus an electron is involved (instead of just an electron), such hydrogenation reactions are reductions, and the reverse, dehydrogenation reactions are [...].
Answer
oxidations


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Even though a proton plus an electron is involved (instead of just an electron), such hydrogenation reactions are reductions, and the reverse, dehydrogenation reactions are oxidations.

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Flashcard 1477319462156

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#deeplearning #neuralnetworks
Question
When designing features or algorithms for learning features, our goal is usually to separate the factors of v ariation that explain the observ ed data. In this con text, we use the w ord “factors” simply to refer to [...]
Answer
separate sources of influence


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d><head>When designing features or algorithms for learning features, our goal is usually to separate the factors of v ariation that explain the observ ed data. In this con text, we use the w ord “factors” simply to refer to separate sources of influence<html>

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Flashcard 1477322607884

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#deeplearning #neuralnetworks
Question
How does deep learning solve the problem generating an appropriate representation in representation learning?
Answer
By intro- ducing representations that are expressed in terms of other, simpler representations.


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Deep learning solv es this cen tral problem in representation learning by intro- ducing representations that are expressed in terms of other, simpler representations.

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Flashcard 1477324180748

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#deeplearning #neuralnetworks
Question
The quin tessen tial example of a deep learning model is the [...].
Answer
feedforward deep net work or multilayer perceptron (MLP)


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The quin tessen tial example of a deep learning mo del is the feedforw ard deep net w ork or m ultila y er p erceptron (MLP). A multila y er p erceptron is just a mathematical function mapping some set of input v alues to output v alues. The function is formed b y comp osing many simpler functions. W e can th

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Flashcard 1477326802188

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#deeplearning #neuralnetworks
Question
The quin tessen tial example of a deep learning mo del is the feedforw ard deep net w ork or m ultila y er p erceptron (MLP). A multila y er p erceptron is just a [...]. The function is formed b y comp osing many simpler functions. W e can think of eac h application of a differen t mathematical function as providing a new representation of the input.
Answer
mathematical function mapping some set of input v alues to output v alues


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The quin tessen tial example of a deep learning mo del is the feedforw ard deep net w ork or m ultila y er p erceptron (MLP). A multila y er p erceptron is just a mathematical function mapping some set of input v alues to output v alues. The function is formed b y comp osing many simpler functions. W e can think of eac h application of a differen t mathematical function as providing a new representation of the input.</s

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Flashcard 1477328375052

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#deeplearning #neuralnetworks
Question
The quin tessen tial example of a deep learning mo del is the feedforw ard deep net w ork or m ultila y er p erceptron (MLP). A multila y er p erceptron is just a mathematical function mapping some set of input v alues to output v alues. The function is formed b y [doing what to what?] W e can think of eac h application of a differen t mathematical function as providing a new representation of the input.
Answer
comp osing many simpler functions.


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xample of a deep learning mo del is the feedforw ard deep net w ork or m ultila y er p erceptron (MLP). A multila y er p erceptron is just a mathematical function mapping some set of input v alues to output v alues. The function is formed b y <span>comp osing many simpler functions. W e can think of eac h application of a differen t mathematical function as providing a new representation of the input.<span><body><html>

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Flashcard 1477329947916

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#deeplearning #neuralnetworks
Question
The quin tessen tial example of a deep learning mo del is the feedforw ard deep net w ork or m ultila y er p erceptron (MLP). A multila y er p erceptron is just a mathematical function mapping some set of input v alues to output v alues. The function is formed b y comp osing many simpler functions. W e can think of eac h application of a differen t mathematical function as [...]
Answer
providing a new representation of the input.


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ila y er p erceptron is just a mathematical function mapping some set of input v alues to output v alues. The function is formed b y comp osing many simpler functions. W e can think of eac h application of a differen t mathematical function as <span>providing a new representation of the input.<span><body><html>

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Flashcard 1477333355788

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#deeplearning #neuralnetworks
Question
The idea of learning the right represen tation for the data provides one p ersp ec- tiv e on deep learning. Another p ersp ective on deep learning is that [...]. Eac h lay er of the represen tation can b e thought of as the state of the computer’s memory after executing another set of instructions in parallel. Netw orks with greater depth can execute more instructions in sequence.
Answer
depth allows the computer to learn a m ulti-step computer program


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The idea of learning the right represen tation for the data provides one p ersp ec- tiv e on deep learning. Another p ersp ective on deep learning is that depth allows the computer to learn a m ulti-step computer program. Eac h lay er of the represen tation can b e thought of as the state of the computer’s memory after executing another set of instructions in parallel. Netw orks with greater depth can e

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Flashcard 1477334928652

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#deeplearning #neuralnetworks
Question
The idea of learning the right represen tation for the data provides one p ersp ec- tiv e on deep learning. Another p ersp ective on deep learning is that depth allows the computer to learn a m ulti-step computer program. Eac h lay er of the represen tation can b e thought of as the [...]. Netw orks with greater depth can execute more instructions in sequence.
Answer
state of the computer’s memory after executing another set of instructions in parallel


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ation for the data provides one p ersp ec- tiv e on deep learning. Another p ersp ective on deep learning is that depth allows the computer to learn a m ulti-step computer program. Eac h lay er of the represen tation can b e thought of as the <span>state of the computer’s memory after executing another set of instructions in parallel. Netw orks with greater depth can execute more instructions in sequence.<span><body><html>

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Flashcard 1477343579404

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#deeplearning #neuralnetworks
Question
[...] is the length of the longest path from input to output but dep ends on the definition of what constitutes a p ossible computational step
Answer
Depth


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Depth is the length of the longest path from input to output but dep ends on the definition of what constitutes a p ossible computational step

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Flashcard 1477346725132

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#deeplearning #neuralnetworks
Question
Another approac h, used b y deep probabilistic mo dels, regards the depth of a mo del as b eing not the depth of the computational graph but the depth of the graph describing how [...]
Answer
concepts are related to each other.


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Another approac h, used b y deep probabilistic mo dels, regards the depth of a mo del as b eing not the depth of the computational graph but the depth of the graph describing how concepts are related to each other.

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Flashcard 1477349870860

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#deeplearning #neuralnetworks
Question
How ev er, deep learning can safely b e regarded as the study of mo dels that either involv e a greater amount of [...or...] than traditional mac hine learning do es
Answer
comp osition of learned functions or learned concepts


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How ev er, deep learning can safely b e regarded as the study of mo dels that either inv olv e a greater amount of comp osition of learned functions or learned concepts than traditional mac hine learning do es

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Flashcard 1477351443724

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#deeplearning #neuralnetworks
Question
deep learning dates bac k [...]
Answer
to the 1940s


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deep learning dates bac k to the 1940s

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Flashcard 1477353016588

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#deeplearning #neuralnetworks
Question
Broadly sp eaking, there ha v e b een three wa ves of dev elopmen t of deep learning: deep learning kno wn as [...] deep learning kno wn as connectionism in the 1980s–1990s, and the curren t resurgence under the name deep learning b eginning in 2006.
Answer
cyb ernetics in the 1940s–1960s,


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Broadly sp eaking, there ha v e b een three wa ves of dev elopmen t of deep learning: deep learning kno wn as cyb ernetics in the 1940s–1960s, deep learning kno wn as connectionism in the 1980s–1990s, and the curren t resurgence under the name deep learning b eginning in 2006.

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Flashcard 1477354589452

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#deeplearning #neuralnetworks
Question
Broadly sp eaking, there ha v e b een three wa ves of dev elopmen t of deep learning: deep learning kno wn as cyb ernetics in the 1940s–1960s, deep learning kno wn as [...], and the curren t resurgence under the name deep learning b eginning in 2006.
Answer
connectionism in the 1980s–1990s


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Broadly sp eaking, there ha v e b een three wa ves of dev elopmen t of deep learning: deep learning kno wn as cyb ernetics in the 1940s–1960s, deep learning kno wn as connectionism in the 1980s–1990s, and the curren t resurgence under the name deep learning b eginning in 2006.

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Flashcard 1477360880908

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#deeplearning #neuralnetworks
Question
What type were the ealierst predecessors of modern deep learning models and what were they designed to do?
Answer
They were linear models designed to tak e a set of n input v alues x 1 , . . . , x n and asso ciate them with an output y


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The earliest predecessors of mo dern deep learning were simple linear mo dels motiv ated from a neuroscientific p ersp ective. These mo dels w ere designed to tak e a set of n input v alues x 1 , . . . , x n and asso ciate them with an output y . These mo dels w ould learn a set of w eigh ts w 1 , . . . , w n and compute their output f ( x w , ) = x 1 w 1 + · · · + x n w n .

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Flashcard 1477365075212

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#bayes #programming #r #statistics
Question
\(p(c|r) = \frac{p(r, c )}{ p(r)} \) In words, the definition simply says that the probability of c given r is the probability that [...]
Answer
they happen together relative to the probability that r happens at all


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p(c|r)=p(r,c)p(r)p(c|r)=p(r,c)p(r) In words, the definition simply says that the probability of c given r is the probability that they happen together relative to the probability that r happens at all

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Flashcard 1477366123788

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#bayes #programming #r #statistics
Question
In summary, the key idea is that conditionalizing on a known row value is like [...]
Answer
restricting attention to only the row for which that known value is true, and then normalizing the probabilities in that row by dividing by the row’s total probability.


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In summary, the key idea is that conditionalizing on a known row value is like restricting attention to only the row for which that known value is true, and then normalizing the probabilities in that row by dividing by the row’s total probability.

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#ir #peds
A fontanelle is measured as full, fl at, or
depressed

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output. Initial assessment revealed an illappearing, febrile infant. While observing the infant and beginning the physical exam, it is important to place your hand on the infant’s head and assess the fontanelle. <span>A fontanelle is measured as full, fl at, or depressed. Cup your palm on the back of the baby’s head and then move forward. The curve of your palm should touch the fontanelle if it is normal. If the fontanelle doesn’t to

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Tricking Kids into the Perfect Exam: Tips for Evaluating the Pediatric Patient
king for rashes, bruises, hair tourniquets, etc. During the exam, this newborn was observed to have an apneic episode. The patient was admitted for an evaluation that ultimately revealed a diagnosis of pertussis. <span>Infant Case 2: A 5-month-old male presented with fever and fussiness. The patient was seen fi ve days earlier with fever and URI, diagnosed with otitis media and discharged home with amoxicillin. Prior to arrival, the patient had multiple episodes of vomiting and decreased urine output. Initial assessment revealed an illappearing, febrile infant. While observing the infant and beginning the physical exam, it is important to place your hand on the infant’s head and assess the fontanelle. A fontanelle is measured as full, fl at, or depressed. Cup your palm on the back of Rose House, MD EM/Pediatrics Resident Indiana University Indianapolis, IN “In general, when evaluating any child, observation is the best initial diagnostic tool.” 34 EMResident the baby’s head and then move forward. The curve of your palm should touch the fontanelle if it is normal. If the fontanelle doesn’t touch, it is depressed; if it pushes your hand up, it is full. In young infants, a bulging fontanelle may be seen with meningitis, but meningismus is rare before one year of age. Another possible exam fi nding in infants with meningitis is a paradoxical response to consoling maneuvers like cuddling. When a caregiver “cuddles” an infant, the meninges are stretched and irritated making the infant more fussy. By contrast, the same infant will calm when laid fl at. This infant’s fontanelle was full and tense. Throughout the exam, the patient was irritable and diffi cult to console. The infant was appropriately resuscitated and underwent a full septic work-up, revealing pneumococcal meningitis. Toddler Case 3: An 18-month-old male presents with complaint of seizure witnessed at home 20 minutes prior to arrival. Many pediatric patients will present to&#




#ir #peds
In young infants, a bulging fontanelle may
be seen with meningitis, but meningismus
is rare before one year of age.

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m on the back of the baby’s head and then move forward. The curve of your palm should touch the fontanelle if it is normal. If the fontanelle doesn’t touch, it is depressed; if it pushes your hand up, it is full. <span>In young infants, a bulging fontanelle may be seen with meningitis, but meningismus is rare before one year of age. Another possible exam fi nding in infants with meningitis is a paradoxical response to consoling maneuvers like cuddling. When a caregiver “cuddles” an infant,

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Tricking Kids into the Perfect Exam: Tips for Evaluating the Pediatric Patient
king for rashes, bruises, hair tourniquets, etc. During the exam, this newborn was observed to have an apneic episode. The patient was admitted for an evaluation that ultimately revealed a diagnosis of pertussis. <span>Infant Case 2: A 5-month-old male presented with fever and fussiness. The patient was seen fi ve days earlier with fever and URI, diagnosed with otitis media and discharged home with amoxicillin. Prior to arrival, the patient had multiple episodes of vomiting and decreased urine output. Initial assessment revealed an illappearing, febrile infant. While observing the infant and beginning the physical exam, it is important to place your hand on the infant’s head and assess the fontanelle. A fontanelle is measured as full, fl at, or depressed. Cup your palm on the back of Rose House, MD EM/Pediatrics Resident Indiana University Indianapolis, IN “In general, when evaluating any child, observation is the best initial diagnostic tool.” 34 EMResident the baby’s head and then move forward. The curve of your palm should touch the fontanelle if it is normal. If the fontanelle doesn’t touch, it is depressed; if it pushes your hand up, it is full. In young infants, a bulging fontanelle may be seen with meningitis, but meningismus is rare before one year of age. Another possible exam fi nding in infants with meningitis is a paradoxical response to consoling maneuvers like cuddling. When a caregiver “cuddles” an infant, the meninges are stretched and irritated making the infant more fussy. By contrast, the same infant will calm when laid fl at. This infant’s fontanelle was full and tense. Throughout the exam, the patient was irritable and diffi cult to console. The infant was appropriately resuscitated and underwent a full septic work-up, revealing pneumococcal meningitis. Toddler Case 3: An 18-month-old male presents with complaint of seizure witnessed at home 20 minutes prior to arrival. Many pediatric patients will present to&#




Flashcard 1477389454604

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#peds
Question
Penicillins cover most [...] , [...] , and [...]
Answer
Streptococcus (GP), N Meningitidis (GN), Oral anaerobes


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Flashcard 1477391289612

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#peds
Question
What are 3 classes of penicillins?
Answer
[CAP]
Cloxacillin
Ampicillin (IV)/Amoxicillin (PO)
Piperacillin


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Flashcard 1477393648908

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#medicine
Question
What is MSSA?
Answer
methicillin-sensitive S. aureus


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Flashcard 1477395483916

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#peds
Question
Ampicillin (IV)/Amoxicillin (PO) also covers [...] ​and [...] .
Answer
Enterococcus
HiPLESS (H influenza, Proteus, Listeria, E coli, Salmonella,Shigella)


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Flashcard 1477397318924

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#peds
Question
Ampicillin (IV)/Amoxicillin (PO) does not cover [...] ​/ [...]
Answer
MSSA/MRSA


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Flashcard 1477399416076

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Question
A common combination of Amoxicillin is [...]
Answer
amoxicillin-clavulanate


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#peds
Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.

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Flashcard 1477403086092

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Question
Piperacillin also covers [...], HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.
Answer
enterococcus


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Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.







Flashcard 1477404658956

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Question
Piperacillin also covers enterococcus, [...], pseudomonas, and enterobacter.
Answer
HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella)


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Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.







Flashcard 1477406231820

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Question
Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), [...], and enterobacter.
Answer
pseudomonas


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Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.







Flashcard 1477407804684

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Question
Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and [...].
Answer
enterobacter


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Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.







Flashcard 1477409377548

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Question
A common combination of piperacillin is [...]
Answer
piperacillin-tazobactam


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1st gen cephalosporins are cephalexin (PO) and cefazolin (IV).

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Flashcard 1477412523276

Question
1st gen cephalosporins are [...] and cefazolin (IV).
Answer
cephalexin (PO)


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1st gen cephalosporins are cephalexin (PO) and cefazolin (IV).







Flashcard 1477414096140

Question
1st gen cephalosporins are cephalexin (PO) and [...].
Answer
cefazolin (IV)


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1st gen cephalosporins are cephalexin (PO) and cefazolin (IV).







2nd gen cephalosporins are cefuroxime (PO) and cefprozil (IV).

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Flashcard 1477416979724

Question
2nd gen cephalosporins are [...] and cefprozil (IV).
Answer
cefuroxime (PO)


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2nd gen cephalosporins are cefuroxime (PO) and cefprozil (IV).







Flashcard 1477418552588

Question
2nd gen cephalosporins are cefuroxime (PO) and [...].
Answer
cefprozil (IV)


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2nd gen cephalosporins are cefuroxime (PO) and cefprozil (IV).







3rd gen cephalosporins are cefotaxime (IV), ceftriaxone (IV), cefixime (PO).

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Flashcard 1477421436172

Question
3rd gen cephalosporins are [...], ceftriaxone (IV), cefixime (PO).
Answer
cefotaxime (IV)


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3rd gen cephalosporins are cefotaxime (IV), ceftriaxone (IV), cefixime (PO).







Flashcard 1477423009036

Question
3rd gen cephalosporins are cefotaxime (IV), [...], cefixime (PO).
Answer
ceftriaxone (IV)


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3rd gen cephalosporins are cefotaxime (IV), ceftriaxone (IV), cefixime (PO).







Flashcard 1477424581900

Question
3rd gen cephalosporins are cefotaxime (IV), ceftriaxone (IV), [...].
Answer
cefixime (PO)


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3rd gen cephalosporins are cefotaxime (IV), ceftriaxone (IV), cefixime (PO).







Flashcard 1477426679052

Question
A 4th gen cephalosporin is [...]
Answer
cefepime (IV)


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Flashcard 1477428514060

Question
1st gen cephalosporins are good against mostly [...] ​ and some [...]
Answer
mostly GP
some GN


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Flashcard 1477430349068

Question
2nd gen cephalosporins are good against some [...] , some [...] , and some have [...] coverage
Answer
some GP, some GN, some anaerobic


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Flashcard 1477432184076

Question
3rd gen cephalosporins are good against some [...] and good against [...] .
Answer
some GP, good vs GN


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Flashcard 1477434019084

Question
4th gen cephalosporins are good vs [...] ​ and most [...] ​ and [...]
Answer
good vs GP, most GN, pseudomonas


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Flashcard 1477435854092

Question
fluoroquinolones have good [...] ​ coverage but there are [...] ​ issues
Answer
GN coverage, resistance issues


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#cfa-level-1 #reading-23-financial-reporting-mechanics
In the cashflow statement direct format, which refers to the operating cash section appearing simply as operating cash receipts less operating cash disbursements. An alternative format for the operating cash section, which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format. The alternative formats and detailed rules are discussed in the reading on understanding the statement of cash flows.

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Question
In the cashflow statement [...] refers to the operating cash section appearing simply as operating cash receipts less operating cash disbursements.
Answer


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In the cashflow statement direct format , which refers to the operating cash section appearing simply as operating cash receipts less operating cash disbursements. An alternative format for the operating cash section, which b







#cfa-level-1 #reading-23-financial-reporting-mechanics
The format for the operating cash section which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format .

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In the cashflow statement direct format , which refers to the operating cash section appearing simply as operating cash receipts less operating cash disbursements. An alternative format for the operating cash section, which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format . The alternative formats and detailed rules are discussed in the reading on understanding the statement of cash flows.




Flashcard 1477983472908

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
The format for the operating cash section which begins with net income and shows adjustments to derive operating cash flow, is known as the [...] .
Answer
indirect format


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The format for the operating cash section which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format .

Original toplevel document

Open it
In the cashflow statement direct format , which refers to the operating cash section appearing simply as operating cash receipts less operating cash disbursements. An alternative format for the operating cash section, which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format . The alternative formats and detailed rules are discussed in the reading on understanding the statement of cash flows.







#cfa-level-1 #reading-23-financial-reporting-mechanics
One observation to make in the balance sheet is: of the increase in total assets, how much is it due to liabilities and how much of equity?

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Flashcard 1477986356492

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Question
One observation to make in the balance sheet is: of the increase in total assets, [...]
Answer
how much is it due to liabilities and how much of equity?


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One observation to make in the balance sheet is: of the increase in total assets, how much is it due to liabilities and how much of equity?







Flashcard 1477987929356

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Question
Difficulty usually arises when a cash receipt or disbursement occurs in a [...] than the [...], or when the reportable values of assets vary.
Answer
different period than the related revenue or expense


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Flashcard 1477990288652

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Question
[...] requires that revenue be recorded when earned and that expenses be recorded when incurred, irrespective of when the related cash movements occur.
Answer
Accrual accounting


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Flashcard 1477992123660

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Question
The purpose of accrual entries is to report revenue and expense in [...]
Answer
the proper accounting period.


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#cfa-level-1 #reading-23-financial-reporting-mechanics
Because accrual entries occur due to timing differences between cash movements and accounting recognition of revenue or expense, there are only a 2 possibilities.

First, cash movement and accounting recognition can occur at the same time, in which case there is no need for accruals.

Second, cash movement may occur before or after accounting recognition, in which case accruals are required.

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Question
Because accrual entries occur due to timing differences between cash movements and accounting recognition of revenue or expense, there are only a 2 possibilities.

First, cash movement and accounting recognition can [...]
Answer
occur at the same time, in which case there is no need for accruals.


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body>Because accrual entries occur due to timing differences between cash movements and accounting recognition of revenue or expense, there are only a 2 possibilities. First, cash movement and accounting recognition can occur at the same time, in which case there is no need for accruals. Second, cash movement may occur before or after accounting recognition, in which case accruals are required.<body><html>







Flashcard 1477997628684

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Question
Accrual entries occur due to timing differences between cash movements and accounting recognition

Cash movement occurs at the same time as the revenue/expense

Cash movement
occurs [...]
Answer
before or after accounting recognition.

And you need accruals


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ting recognition of revenue or expense, there are only a 2 possibilities. First, cash movement and accounting recognition can occur at the same time, in which case there is no need for accruals. Second, cash movement may <span>occur before or after accounting recognition, in which case accruals are required.<span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics

Unearned revenue (or deferred revenue) arises when a company receives cash prior to earning the revenue. In the IAL illustration, in Transaction 5, the company received $1,200 for a 12-month subscription to a monthly newsletter. At the time the cash was received, the company had an obligation to deliver 12 newsletters and thus had not yet earned the revenue. Each month, as a newsletter is delivered, this obligation will decrease by 1/12th (i.e., $100). And at the same time, $100 of revenue will be earned. The accounting treatment involves an originating entry (the initial recording of the cash received and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue.

In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Unearned revenue (or deferred revenue ) arises when a company receives cash prior to earning the revenue.

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Unearned revenue (or deferred revenue ) arises when a company receives cash prior to earning the revenue. In the IAL illustration, in Transaction 5, the company received $1,200 for a 12-month subscription to a monthly newsletter. At the time the cash was received, the company had an obligat




Flashcard 1478011260172

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Question
[...] arises when a company receives cash prior to earning the revenue.


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Unearned revenue (or deferred revenue ) arises when a company receives cash prior to earning the revenue.

Original toplevel document

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Unearned revenue (or deferred revenue ) arises when a company receives cash prior to earning the revenue. In the IAL illustration, in Transaction 5, the company received $1,200 for a 12-month subscription to a monthly newsletter. At the time the cash was received, the company had an obligat







#cfa-level-1 #reading-23-financial-reporting-mechanics
In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




#cfa-level-1 #reading-23-financial-reporting-mechanics
In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment.

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In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cas

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Open it
ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478015716620

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Question
In practice, a large amount of [...] may cause some concern about a company’s ability to deliver on this future commitment.
Answer
unearned revenue


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In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment.

Original toplevel document

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
A positive aspect of unearned revenue is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

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In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

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Open it
ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478019124492

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Question
A positive aspect of [...] is that increases are an indicator of future revenues.
Answer
unearned revenue


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A positive aspect of unearned revenue is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline

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Open it
ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478021483788

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Question
A large liability on the balance sheet of an airline relates to cash received for future airline travel.

This is an example of what kind of account?
Answer
Unearned revenue


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A positive aspect of unearned revenue is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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Unbilled revenue (or accrued revenue) arises when a company earns revenue prior to receiving cash but has not yet recognized the revenue at the end of an accounting period. In such cases, the accounting treatment involves an originating entry to record the revenue earned through the end of the accounting period and a related receivable reflecting amounts due from customers. When the company receives payment (or if goods are returned), an adjusting entry eliminates the receivable.

Accrued revenue specifically relates to end-of-period accruals; however, the concept is similar to any sale involving deferred receipt of cash. In the IAL illustration, in Transaction 9, the company sold books on account, so the revenue was recognized prior to cash receipt. The accounting treatment involved an entry to record the revenue and the associated receivable. In the future, when the company receives payment, an adjusting entry (not shown) would eliminate the receivable. In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection).

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In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




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Question

If a company earns revenue before receiving cash but has not yet recognized the revenue at the end of an accounting period.

This is called...


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Unbilled revenue (or accrued revenue ) arises when a company earns revenue prior to receiving cash but has not yet recognized the revenue at the end of an accounting period. In such cases, the accounting treatment involves a

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478027513100

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Question
In such cases, the accounting treatment involves an originating entry to record the revenue earned through the end of the accounting period and a related receivable reflecting amounts due from customers.

Which cases?
Answer
Accrued revenue


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Unbilled revenue (or accrued revenue ) arises when a company earns revenue prior to receiving cash but has not yet recognized the revenue at the end of an accounting period. In such cases, the accounting treatment involves an originating entry to record the revenue earned through the end of the accounting period and a related receivable reflecting amounts due from customers. When the company receives payment (or if goods are returned), an adjusting entry eliminates the receivable. Accrued revenue specifically relates to end-of-period accruals;

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection).

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recognized prior to cash receipt. The accounting treatment involved an entry to record the revenue and the associated receivable. In the future, when the company receives payment, an adjusting entry (not shown) would eliminate the receivable. <span>In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection). <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




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Question
In practice, it is important to understand the [...] of a company’s receivables.
Answer
quality

(i.e., the likelihood of collection).


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In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection).

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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Prepaid expense arises when a company makes a cash payment prior to recognizing an expense. In the illustration, in Transaction 3, the company prepaid one month’s rent. The accounting treatment involves an originating entry to record the payment of cash and the prepaid asset reflecting future benefits, and a subsequent adjusting entry to record the expense and eliminate the prepaid asset. (See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepaid expenses are assets that will be subsequently expensed. In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.

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recognized prior to cash receipt. The accounting treatment involved an entry to record the revenue and the associated receivable. In the future, when the company receives payment, an adjusting entry (not shown) would eliminate the receivable. <span>In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection). <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




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Question
[...] arises when a company makes a cash payment prior to recognizing an expense.


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Prepaid expense arises when a company makes a cash payment prior to recognizing an expense. In the illustration, in Transaction 3, the company prepaid one month’s rent. The accounting treatment involv

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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prepaid expenses are assets that will be subsequently expensed.

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ng entry to record the expense and eliminate the prepaid asset. (See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, <span>prepaid expenses are assets that will be subsequently expensed. In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.</s

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478038785292

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Question
[...] are assets that will be subsequently expensed.
Answer
prepaid expenses


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prepaid expenses are assets that will be subsequently expensed.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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Question
What is the accounting treatment of a prepaid expense?
Answer
Originating entry to record the payment of cash and the prepaid asset reflecting future benefits.

A subsequent adjusting entry to record the expense and eliminate the prepaid asset.


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Prepaid expense arises when a company makes a cash payment prior to recognizing an expense. In the illustration, in Transaction 3, the company prepaid one month’s rent. The accounting treatment involves an originating entry to record the payment of cash and the prepaid asset reflecting future benefits, and a subsequent adjusting entry to record the expense and eliminate the prepaid asset. (See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepai

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.

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(See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepaid expenses are assets that will be subsequently expensed. <span>In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




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Question
[...] have future value only as future operations transpire, unless they are refundable.
Answer
prepaid assets


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In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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Accrued expenses arise when a company incurs expenses that have not yet been paid as of the end of an accounting period. Accrued expenses result in liabilities that usually require future cash payments. In the IAL illustration, the company had incurred wage expenses at month end, but the payment would not be made until after the end of the month (Transaction 11). To reflect the company’s position at the end of the month, the accounting treatment involved an originating entry to record wage expense and the corresponding liability for wages payable, and a future adjusting entry to eliminate the liability when cash is paid (not shown because wages will be paid only in February). Similarly, the IAL illustration included interest accrual on the company’s bank borrowing. (See the boxes showing the accounting treatment of Transaction 8, where Transaction 8 refers to the originating entry, and Transaction 8a, which refers to the adjusting entry.)

As with accrued revenues, accrued expenses specifically relate to end-of-period accruals. Accounts payable are similar to accrued expenses in that they involve a transaction that occurs now but the cash payment is made later. Accounts payable is also a liability but often relates to the receipt of inventory (or perhaps services) as opposed to recording an immediate expense. Accounts payable should be listed separately from other accrued expenses on the balance sheet because of their different nature

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(See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepaid expenses are assets that will be subsequently expensed. <span>In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




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Question

[...] arise when a company incurs expenses that have not yet been paid as of the end of an accounting period.


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Accrued expenses arise when a company incurs expenses that have not yet been paid as of the end of an accounting period. Accrued expenses result in liabilities that usually require future cash payments

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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Question

To which one of the 5 financial statement elements does Accrued Expenses belong?

Answer
Liabilities


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Accrued expenses arise when a company incurs expenses that have not yet been paid as of the end of an accounting period. Accrued expenses result in liabilities that usually require future cash payments. In the IAL illustration, the company had incurred wage expenses at month end, but the payment would not be made until af

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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Question
What is the accrued expenses accounting treatment for the account of wages payable?
Answer
An originating entry to record wage expense and the corresponding liability for wages payable.

A future adjusting entry to eliminate the liability decreasing wages payable and asset account decreasing cash.


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lustration, the company had incurred wage expenses at month end, but the payment would not be made until after the end of the month (Transaction 11). To reflect the company’s position at the end of the month, the accounting treatment involved <span>an originating entry to record wage expense and the corresponding liability for wages payable, and a future adjusting entry to eliminate the liability when cash is paid (not shown because wages will be paid only in February). Similarly, the IAL illustration included interest accrual on the company’s bank borrowing. (See the boxes showing the accounting treatment of Transaction 8, where Transaction 8 refers

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







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In practice, complex businesses require additional accruals that require considerably more judgment. For example, there may be significant lags between a transaction and cash settlement.

In such cases, accruals can span many accounting periods (even 10–20 years!), and it is not always clear when revenue has been earned or an expense has been incurred. Considerable judgment is required to determine how to allocate/distribute amounts across periods.

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(See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepaid expenses are assets that will be subsequently expensed. <span>In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




5.2. Valuation Adjustments
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In contrast to accrual entries that allocate revenue and expenses into the appropriate accounting periods, valuation adjustments are made to a company’s assets or liabilities—only where required by accounting standards—so that the accounting records reflect the current market value rather than the historical cost. In this discussion, we focus on valuation adjustments to assets. For example, in the IAL illustration, Transaction 13 adjusted the value of the company’s investment portfolio to its current market value. The income statement reflects the $2,100 increase (including interest), and the ending balance sheets report the investment portfolio at its current market value of $102,100. In contrast, the equipment in the IAL illustration was not reported at its current market value and no valuation adjustment was required.

As this illustration demonstrates, accounting regulations do not require all types of assets to be reported at their current market value. Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement. Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity). Other assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.” This topic will be discussed in more detail in later readings.

In summary, where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets: An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income. Conversely for decreases: An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income.

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(See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepaid expenses are assets that will be subsequently expensed. <span>In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




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Valuation adjustments are made to a company’s assets or liabilities—only where required by accounting standards—so that the accounting records reflect the current market value rather than the historical cost.

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In contrast to accrual entries that allocate revenue and expenses into the appropriate accounting periods, valuation adjustments are made to a company’s assets or liabilities—only where required by accounting standards—so that the accounting records reflect the current market value rather than the historical cost. In this discussion, we focus on valuation adjustments to assets. For example, in the IAL illustration, Transaction 13 adjusted the value of the company’s investment portfolio to its cur

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478058708236

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Question
Valuation adjustments are made to a company’s [...] or [...]— where required by accounting standards—
Answer
assets or liabilities


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Valuation adjustments are made to a company’s assets or liabilities—only where required by accounting standards—so that the accounting records reflect the current market value rather than the historical cost.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478060281100

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Do all assets need to be reported at their current market value?
Answer
No


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tment portfolio at its current market value of $102,100. In contrast, the equipment in the IAL illustration was not reported at its current market value and no valuation adjustment was required. As this illustration demonstrates, <span>accounting regulations do not require all types of assets to be reported at their current market value. Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement. Some assets a

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement.

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ion was not reported at its current market value and no valuation adjustment was required. As this illustration demonstrates, accounting regulations do not require all types of assets to be reported at their current market value. <span>Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement. Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity). Other assets (e.g., a particular class of investment securities)

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478063688972

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Some assets (e.g., [...]) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement.
Answer
trading securities


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Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement.

Original toplevel document

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity).

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uire all types of assets to be reported at their current market value. Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement. <span>Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity). Other assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement an

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478066310412

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Some assets are shown at their historical cost (e.g., [...]).
Answer
Investment securities being held to maturity


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Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity).

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
Some assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.”

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n the balance sheet at their current market value, and changes in that market value are reported in the income statement. Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity). <span>Other assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.” This topic will be discussed in more detail in later readings. In summary, where valuation adjustment entries are required for assets, the basic pattern is the following fo

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478069718284

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Some assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “ [...]
Answer
other comprehensive income.


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Some assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a compon

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
Where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets:

An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income.

An asset is decreased: An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income.

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arket value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.” This topic will be discussed in more detail in later readings. In summary, <span>where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets: An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income. Conversely for decreases: An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income. <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478073126156

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets:

An asset is increased with the other side of the equation being a gain on [...] or Increase to [...]
Answer
the income statement

other comprehensive income.


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Where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets: An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income. An asset is decreased : An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income.</s

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478075485452

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets:

An asset is decreased with the other side of the equation being [...] or [...]
Answer
a loss on the income statement or a decrease to other comprehensive income.


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increases in assets: An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income. An asset is decreased : An asset is decreased with the <span>other side of the equation being a loss on the income statement or a decrease to other comprehensive income.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Journal entries and adjusting entries
#cfa-level-1 #reading-23-financial-reporting-mechanics
  • A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases.

  • Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction.

  • Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system.

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arket value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.” This topic will be discussed in more detail in later readings. In summary, <span>where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets: An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income. Conversely for decreases: An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income. <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




#cfa-level-1 #reading-23-financial-reporting-mechanics
A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases.

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A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases. Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and d

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478080204044

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
A [...] is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order).
Answer
journal


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A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478082039052

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
What is the order that journal entries follow?
Answer
chronological order


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A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. So

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478084398348

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
The [...] is the collection of all business transactions in an accounting system sorted by date.
Answer
general journal

All accounting systems have a general journal to record all transactions.


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A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478086757644

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Some accounting systems also include [...] journals.
Answer
special


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r (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include <span>special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478089903372

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
What are some examples of special journals?
Answer
there may be one journal for recording sales transactions and another for recording inventory purchases.


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neral journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include special journals. For example, <span>there may be one journal for recording sales transactions and another for recording inventory purchases.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction.

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ms have a general journal to record all transactions. Some accounting systems also include special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases. <span>Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction. Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478093835532

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Journal entries—recorded in journals—are dated, show the [...], and the amounts.
Answer
accounts affected


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Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business tra

Original toplevel document

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
If necessary, a journal entry will include an explanation of the transaction and documented authorization to record the entry.

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Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction.</s

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Open it
ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478098554124

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
If necessary, a journal entry will include an [...] of the transaction and [...] to record the entry.
Answer
explanation

documented authorization


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If necessary, a journal entry will include an explanation of the transaction and documented authorization to record the entry.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478100913420

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
The [...] is useful for obtaining detailed information regarding a particular transaction.
Answer
journal entry


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e accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, <span>the journal entry is useful for obtaining detailed information regarding a particular transaction.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system.

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cumented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction. <span>Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system. <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478104321292

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Question
[...] are a subset of journal entries.
Answer
Adjusting journal entries


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Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system.</

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478106680588

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Question
Adjusting journal entries are typically made (chronologically) at [...]
Answer
the end of an accounting period


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Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478109039884

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Adjusting journal entries are typically made to record items such as [...] that are not [...].
Answer
accruals

yet reflected in the accounting system


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Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







General Ledgers and T-accounts
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A ledger is a document or computer file that shows all business transactions by account. Note that the general ledger, the core of every accounting system, contains all of the same entries as that posted to the general journal—the only difference is that the data are sorted by date in a journal and by account in the ledger. The general ledger is useful for reviewing all of the activity related to a single account. T-accounts, explained in Appendix 23, are representations of ledger accounts and are frequently used to describe or analyze accounting transactions.

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cumented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction. <span>Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system. <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478112709900

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
A [...] is a document or computer file that shows all business transactions by account.
Answer
ledger


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A ledger is a document or computer file that shows all business transactions by account. Note that the general ledger, the core of every accounting system, contains all of the same entries as th

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478115069196

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
The general ledger contains all of the same entries as that posted to the general journal—the only difference is that [...].
Answer
the data are sorted by date in a journal and by account in the ledger


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a document or computer file that shows all business transactions by account. Note that the general ledger, the core of every accounting system, contains all of the same entries as that posted to the general journal—the only difference is that <span>the data are sorted by date in a journal and by account in the ledger. The general ledger is useful for reviewing all of the activity related to a single account. T-accounts, explained in Appendix 23, are representations of ledger accounts and are frequen

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478117428492

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
The [...] is useful for reviewing all of the activity related to a single account.
Answer
general ledger


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. Note that the general ledger, the core of every accounting system, contains all of the same entries as that posted to the general journal—the only difference is that the data are sorted by date in a journal and by account in the ledger. The <span>general ledger is useful for reviewing all of the activity related to a single account. T-accounts, explained in Appendix 23, are representations of ledger accounts and are frequently used to describe

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Trial balance and adjusted trial balance
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A trial balance is a document that lists account balances at a particular point in time. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statements. A key difference between a trial balance and a ledger is that the trial balance shows only total ending balances. An initial trial balance assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an adjusted trial balance can be prepared.

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cumented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction. <span>Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system. <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478121098508

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
A [...] is a document that lists account balances at a particular point in time.
Answer
trial balance


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A trial balance is a document that lists account balances at a particular point in time. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478123457804

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Trial balances are typically prepared at [...] of an accounting period as a first step in producing financial statements.
Answer
the end


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A trial balance is a document that lists account balances at a particular point in time. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statements. A key difference between a trial balance and a ledger is that the trial balance shows only total ending balanc

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478125817100

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Question
What is the first step in producing financial statements at the end of a period?
Answer
Creating Trial balances


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A trial balance is a document that lists account balances at a particular point in time. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statements. A key difference between a trial balance and a ledger is that the trial balance shows only total ending balanc

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
A key difference between a trial balance and a ledger is that the trial balance shows only total ending balances.

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head><head>A trial balance is a document that lists account balances at a particular point in time. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statements. A key difference between a trial balance and a ledger is that the trial balance shows only total ending balances. An initial trial balance assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an adjusted trial balance can be prepared.</

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478128700684

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Question
A key difference between a trial balance and a ledger is that the trial balance [...].
Answer
shows only total ending balances


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A key difference between a trial balance and a ledger is that the trial balance shows only total ending balances.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







#cfa-level-1 #reading-23-financial-reporting-mechanics
An initial trial balance assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an adjusted trial balance can be prepared.

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ime. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statements. A key difference between a trial balance and a ledger is that the trial balance shows only total ending balances. <span>An initial trial balance assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an adjusted trial balance can be prepared.<span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>




Flashcard 1478131322124

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Question
An [...] assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an [...] can be prepared.
Answer
initial trial balance

adjusted trial balance


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An initial trial balance assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an adjusted trial balance can be prepared.

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>







Flashcard 1478133681420

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Question
The financial statements, a final product of the accounting system, are prepared based on the account totals from an [...] .
Answer
adjusted trial balance


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Flashcard 1478143380748

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Question
The correct usage of “ [...] ” and “ [...] ” in an accounting context differs from how these terms are used in everyday language.
Answer
debit

credit


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Article 1478155177228

7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
#cfa-level-1 #reading-23-financial-reporting-mechanics

Financial statements serve as a foundation for credit and equity analysis, including security valuation. Analysts may need to make adjustments to reflect items not reported in the statements (certain assets/liabilities and future earnings). Analysts may also need to assess the reasonableness of management judgment (e.g., in accruals and valuations). Because analysts typically will not have access to the accounting system or individual entries, they will need to infer what transactions were recorded by examining the financial statements. 7.1. The Use of Judgment in Accounts and Entries Quite apart from deliberate misrepresentations, even efforts to faithfully represent the economic performance and position of a company require judgments and estimates. Financial reporting systems need to accommodate complex business models by recording accruals and changes in valuations of balance sheet accounts. Accruals and valuation entries require considerable judgment and thus create many of the limitat



#cfa-level-1 #reading-23-financial-reporting-mechanics
Financial statements serve as a foundation for credit and equity analysis, including security valuation.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
Financial statements serve as a foundation for credit and equity analysis, including security valuation. Analysts may need to make adjustments to reflect items not reported in the statements (certain assets/liabilities and future earnings). Analysts may also need to assess the reasonablene




Flashcard 1478157536524

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Question
Financial statements serve as a foundation for credit and equity analysis, including [...]
Answer
security valuation.


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Financial statements serve as a foundation for credit and equity analysis, including security valuation.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
Financial statements serve as a foundation for credit and equity analysis, including security valuation. Analysts may need to make adjustments to reflect items not reported in the statements (certain assets/liabilities and future earnings). Analysts may also need to assess the reasonablene







#cfa-level-1 #reading-23-financial-reporting-mechanics
Because analysts typically will not have access to the accounting system or individual entries, they will need to infer what transactions were recorded by examining the financial statements.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ysts may need to make adjustments to reflect items not reported in the statements (certain assets/liabilities and future earnings). Analysts may also need to assess the reasonableness of management judgment (e.g., in accruals and valuations). <span>Because analysts typically will not have access to the accounting system or individual entries, they will need to infer what transactions were recorded by examining the financial statements. 7.1. The Use of Judgment in Accounts and Entries Quite apart from deliberate misrepresentations, even efforts to faithfully represent the economic perfo




Flashcard 1478160157964

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Because analysts typically will not have access to the accounting system or individual entries, they will need to [...] what transactions were recorded by examining the financial statements.
Answer
infer


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Because analysts typically will not have access to the accounting system or individual entries, they will need to infer what transactions were recorded by examining the financial statements.

Original toplevel document

7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ysts may need to make adjustments to reflect items not reported in the statements (certain assets/liabilities and future earnings). Analysts may also need to assess the reasonableness of management judgment (e.g., in accruals and valuations). <span>Because analysts typically will not have access to the accounting system or individual entries, they will need to infer what transactions were recorded by examining the financial statements. 7.1. The Use of Judgment in Accounts and Entries Quite apart from deliberate misrepresentations, even efforts to faithfully represent the economic perfo







#cfa-level-1 #reading-23-financial-reporting-mechanics
Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
y represent the economic performance and position of a company require judgments and estimates. Financial reporting systems need to accommodate complex business models by recording accruals and changes in valuations of balance sheet accounts. <span>Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. An important first step in analyzing financial statements is identifying the types of accruals and v




Flashcard 1478162779404

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Accruals and valuation entries require [...] and thus create many of the limitations of the accounting model.
Answer
considerable judgment


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Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
y represent the economic performance and position of a company require judgments and estimates. Financial reporting systems need to accommodate complex business models by recording accruals and changes in valuations of balance sheet accounts. <span>Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. An important first step in analyzing financial statements is identifying the types of accruals and v







#cfa-level-1 #reading-23-financial-reporting-mechanics
Judgments could prove wrong or, worse, be used for deliberate earnings manipulation.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ed to accommodate complex business models by recording accruals and changes in valuations of balance sheet accounts. Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. <span>Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be not




Flashcard 1478165400844

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Judgments could prove wrong or, worse, be used for deliberate [...].
Answer
earnings manipulation


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Judgments could prove wrong or, worse, be used for deliberate earnings manipulation.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ed to accommodate complex business models by recording accruals and changes in valuations of balance sheet accounts. Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. <span>Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be not







#cfa-level-1 #reading-23-financial-reporting-mechanics
An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be noted in the critical accounting policies/estimates section of management’s discussion and analysis (MD&A) and in the significant accounting policies footnote, both found in the annual report.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ions of balance sheet accounts. Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. <span>An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be noted in the critical accounting policies/estimates section of management’s discussion and analysis (MD&A) and in the significant accounting policies footnote, both found in the annual report. Analysts should use this disclosure to identify the key accruals and valuations for a company. The analyst needs to be aware, as Example 4 shows, that the manipulation of earnings and a




Flashcard 1478168022284

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
How can you identify the types of accruals and valuation entries in an entity’s financial statements?
Answer
MD&A and in the significant accounting policies footnote, both found in the annual report.


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An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be noted in the critical accounting policies/estimates section of management’s discussion and analysi

Original toplevel document

7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ions of balance sheet accounts. Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. <span>An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be noted in the critical accounting policies/estimates section of management’s discussion and analysis (MD&A) and in the significant accounting policies footnote, both found in the annual report. Analysts should use this disclosure to identify the key accruals and valuations for a company. The analyst needs to be aware, as Example 4 shows, that the manipulation of earnings and a







Flashcard 1478171954444

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
An important first step in analyzing financial statements is identifying the [...] and [...] in an entity’s financial statements. (Found in MD&A)
Answer
types of accruals

valuation entries


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An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be noted in the critical accounting policies/estimates section of management’s discussion and analysi

Original toplevel document

7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
ions of balance sheet accounts. Accruals and valuation entries require considerable judgment and thus create many of the limitations of the accounting model. Judgments could prove wrong or, worse, be used for deliberate earnings manipulation. <span>An important first step in analyzing financial statements is identifying the types of accruals and valuation entries in an entity’s financial statements. Most of these items will be noted in the critical accounting policies/estimates section of management’s discussion and analysis (MD&A) and in the significant accounting policies footnote, both found in the annual report. Analysts should use this disclosure to identify the key accruals and valuations for a company. The analyst needs to be aware, as Example 4 shows, that the manipulation of earnings and a







#cfa-level-1 #reading-23-financial-reporting-mechanics
Manipulation of earnings and assets can take place within the context of satisfying the mechanical rules governing the recording of transactions.

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7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
) and in the significant accounting policies footnote, both found in the annual report. Analysts should use this disclosure to identify the key accruals and valuations for a company. The analyst needs to be aware, as Example 4 shows, that the <span>manipulation of earnings and assets can take place within the context of satisfying the mechanical rules governing the recording of transactions. <span><body><html>




Flashcard 1478176673036

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#cfa-level-1 #reading-23-financial-reporting-mechanics
Question
Understanding that there has to be [...] is key in detecting inappropriate accounting.
Answer
another side to every entry


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Flashcard 1478178508044

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Question
Why is understanding that there has to be another side to every entry key in detecting inappropriate accounting?
Answer
Because usually in the course of “fixing” one account there will be another account with a balance that does not make sense.


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Flashcard 1478180343052

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Question
In the case of recording fictitious revenue, there is likely to be a [...]
Answer
growing receivable whose collectibility is in doubt.


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Article 1478182178060

Summary
#cfa-level-1 #reading-23-financial-reporting-mechanics #summary

The accounting process is a key component of financial reporting. The mechanics of this process convert business transactions into records necessary to create periodic reports on a company. An understanding of these mechanics is useful in evaluating financial statements for credit and equity analysis purposes and in forecasting future financial statements. Key concepts are as follows: Business activities can be classified into three groups: operating activities, investing activities, and financing activities. Companies classify transactions into common accounts that are components of the five financial statement elements: assets, liabilities, equity, revenue, and expense. The core of the accounting process is the basic accounting equation: Assets = Liabilities + Owners’ equity. The expanded accounting equation is Assets = Liabilities + Contributed capital + Beginning retained earnings + Revenue – Expenses – Dividends. Business transactions are recorded in an accounting



Flashcard 1478183488780

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#cfa-level-1 #reading-23-financial-reporting-mechanics #summary
Question

  • Companies classify transactions into common accounts that are components of the [...]

Answer
five financial statement elements: assets, liabilities, equity, revenue, and expense.


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Summary
#13; Business activities can be classified into three groups: operating activities, investing activities, and financing activities. Companies classify transactions into common accounts that are components of the <span>five financial statement elements: assets, liabilities, equity, revenue, and expense. The core of the accounting process is the basic accounting equation: Assets = Liabilities + Owners’ equity. The expanded accounting equation is Assets =







#cfa-level-1 #reading-23-financial-reporting-mechanics #summary

Business transactions are recorded in an accounting system that is based on the basic and expanded accounting equations.

The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’ equity. The statement of retained earnings is a component of the statement of owners’ equity.

Accruals are a necessary part of the accounting process and are designed to allocate activity to the proper period for financial reporting purposes.

The results of the accounting process are financial reports that are used by managers, investors, creditors, analysts, and others in making business decisions.

An analyst uses the financial statements to make judgments on the financial health of a company.

Company management can manipulate financial statements, and a perceptive analyst can use his or her understanding of financial statements to detect misrepresentations.

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Summary
e basic accounting equation: Assets = Liabilities + Owners’ equity. The expanded accounting equation is Assets = Liabilities + Contributed capital + Beginning retained earnings + Revenue – Expenses – Dividends. <span>Business transactions are recorded in an accounting system that is based on the basic and expanded accounting equations. The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’ equity. The statement of retained earnings is a component of the statement of owners’ equity. Accruals are a necessary part of the accounting process and are designed to allocate activity to the proper period for financial reporting purposes. The results of the accounting process are financial reports that are used by managers, investors, creditors, analysts, and others in making business decisions. An analyst uses the financial statements to make judgments on the financial health of a company. Company management can manipulate financial statements, and a perceptive analyst can use his or her understanding of financial statements to detect misrepresentations. <span><body><html>




Flashcard 1478186896652

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics #summary
Question

Business transactions are recorded in an accounting system that is based on [...]

Answer
the basic and expanded accounting equations.


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Business transactions are recorded in an accounting system that is based on the basic and expanded accounting equations. The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’

Original toplevel document

Summary
e basic accounting equation: Assets = Liabilities + Owners’ equity. The expanded accounting equation is Assets = Liabilities + Contributed capital + Beginning retained earnings + Revenue – Expenses – Dividends. <span>Business transactions are recorded in an accounting system that is based on the basic and expanded accounting equations. The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’ equity. The statement of retained earnings is a component of the statement of owners’ equity. Accruals are a necessary part of the accounting process and are designed to allocate activity to the proper period for financial reporting purposes. The results of the accounting process are financial reports that are used by managers, investors, creditors, analysts, and others in making business decisions. An analyst uses the financial statements to make judgments on the financial health of a company. Company management can manipulate financial statements, and a perceptive analyst can use his or her understanding of financial statements to detect misrepresentations. <span><body><html>







Flashcard 1478189255948

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics #summary
Question

The statement of retained earnings is a component of the [...] .

Answer
statement of owners’ equity


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the basic and expanded accounting equations. The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’ equity. The <span>statement of retained earnings is a component of the statement of owners’ equity. Accruals are a necessary part of the accounting process and are designed to allocate activity to the proper period for fi

Original toplevel document

Summary
e basic accounting equation: Assets = Liabilities + Owners’ equity. The expanded accounting equation is Assets = Liabilities + Contributed capital + Beginning retained earnings + Revenue – Expenses – Dividends. <span>Business transactions are recorded in an accounting system that is based on the basic and expanded accounting equations. The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’ equity. The statement of retained earnings is a component of the statement of owners’ equity. Accruals are a necessary part of the accounting process and are designed to allocate activity to the proper period for financial reporting purposes. The results of the accounting process are financial reports that are used by managers, investors, creditors, analysts, and others in making business decisions. An analyst uses the financial statements to make judgments on the financial health of a company. Company management can manipulate financial statements, and a perceptive analyst can use his or her understanding of financial statements to detect misrepresentations. <span><body><html>







Flashcard 1478191615244

Tags
#cfa-level-1 #reading-23-financial-reporting-mechanics #summary
Question

Accruals are designed to [...] to the [...] for financial reporting purposes.

Answer
allocate activity

proper period


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tatement, statement of cash flows, and statement of owners’ equity. The statement of retained earnings is a component of the statement of owners’ equity. Accruals are a necessary part of the accounting process and are designed to <span>allocate activity to the proper period for financial reporting purposes. The results of the accounting process are financial reports that are used by managers, investors, creditors, analysts, and others in makin

Original toplevel document

Summary
e basic accounting equation: Assets = Liabilities + Owners’ equity. The expanded accounting equation is Assets = Liabilities + Contributed capital + Beginning retained earnings + Revenue – Expenses – Dividends. <span>Business transactions are recorded in an accounting system that is based on the basic and expanded accounting equations. The accounting system tracks and summarizes data used to create financial statements: the balance sheet, income statement, statement of cash flows, and statement of owners’ equity. The statement of retained earnings is a component of the statement of owners’ equity. Accruals are a necessary part of the accounting process and are designed to allocate activity to the proper period for financial reporting purposes. The results of the accounting process are financial reports that are used by managers, investors, creditors, analysts, and others in making business decisions. An analyst uses the financial statements to make judgments on the financial health of a company. Company management can manipulate financial statements, and a perceptive analyst can use his or her understanding of financial statements to detect misrepresentations. <span><body><html>