LO3.2 Describe the standard setting process under which financial accounting information is created and reported, as well as the underlying principles applied. The Financial Accounting Standards Board and the Government Accounting Standards Board set standards. Both are private organizations. LO3.3 Give the components of the income statement. Income statements are divided into revenues and expenses.
Net income is the excess of revenues over expenses.
LO3.4 Explain the differences between net income and cash flow. Accruals and deferrals are used in determining net income, but not cash flow. LO3.5 Explain the function of an audit. Auditors perform a set of ritualistic procedures so that they can attest to the fact that the financial statements were prepared according to GAAP and provide assurance to users of the financial statements as to their accuracy. LO3.6 Give some things that are disclosed in footnotes.