ACC 311 – Financial Accounting – Flashcards
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Financial accounting
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Financial statements
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are the principal means through which a company communicated its financial information to those outside it
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Financial accounting
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users of financial report of a company use the information provided by these reports to make their capital allocation decisions
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Capital allocation process
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An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit.
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Objective of financial reporting
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Decision-Usefulness approach
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Investors are interested in financial reporting because it provides information that is useful for making decisions.
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Users of financial statements
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Users of financial accounting statements have both coinciding and conflicting needs for information of various types.
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Committee on Accounting Procedure
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New FASBE Statements
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Statements of Financial Accounting Concepts
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Statements of Financial Accounting Concepts set forth fundamental objectives and concepts that are used by the FASB in developing future standards of financial accounting and reporting.
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Creation of APB (Accounting Principles Board)
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The AICPA created the Accounting Principles Board in 1959.
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FASB Codification
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Code of Professional Conduct
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The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles.
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GAAP and political action
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(PCAOB) Public Company Accounting Oversight Board
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The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes auditing and independence standards and rules.
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Expectations gap
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The expectations gap is due to the difference between what the public thinks accountants should do and what accountants think they can do.
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Financial Reports
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Fair Value Information
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IFRS (International Financial Reporting Standards)
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Ethical Issues
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Which organization is responsible for issuing Emerging Issues Task Force Statements? a. The FASB b. The CAP c. The APB d. The SEC
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a. The FASB
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The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as a. consistently primary. b. consistently secondary. c. sometimes primary and sometimes secondary. d. non-existent.
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c. sometimes primary and sometimes secondary
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The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the a. FASB. b. AICPA. c. SEC. d. APB.
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c. SEC
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Companies that are listed on a stock exchange are required to submit their financial statements to the a. AICPA. b. APB c. FASB. d. SEC.
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d. SEC
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The Financial Accounting Standards Board (FASB) was proposed by the a. American Institute of Certified Public Accountants. b. Accounting Principles Board. c. Study Group on the Objectives of Financial Statements. d. Study Group on establishment of Accounting Principles (Wheat Committee).
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d. Study Group on establishment of Accounting Principles (Wheat Committee).
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Which of the following is true of the Financial Accounting Standards Board a. It has issued a series of pronouncements entitled Auditing Standards Updates. b. It was the forerunner of the current Accounting Principles Board. c. It is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards. d. The members of the FASB are appointed by the Financial Accounting Foundation.
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d. The members of the FASB are appointed by the Financial Accounting Foundation.
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The Financial Accounting Foundation a. oversees the operations of the FASB. b. oversees the operations of the AICPA. c. provides information to interested parties on financial reporting issues. d. works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.
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a. oversees the operations of the FASB.
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The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is a. the FASB issues exposure drafts of proposed standards. b. all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions. c. all members of the FASB possess extensive experience in financial reporting. d. a majority of the members of the FASB are CPAs drawn from public practice.
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b. all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.
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The Financial Accounting Standards Board employs a "due process" system which a. is an efficient system for collecting dues from members. b. enables interested parties to express their views on issues under consideration. c. identifies the accounting issues that are the most important. d. requires that all accountants must receive a copy of financial standards.
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b. enables interested parties to express their views on issues under consideration.
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Which of the following is not a publication of the FASB? a. Statements of Financial Accounting Concepts b. Accounting Research Bulletins c. Interpretations d. Technical Bulletins
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b. Accounting Research Bulletins
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FASB Technical Bulletins a. are similar to FASB Interpretations in that they establish enforceable standards under the AICPA's Code of Professional Ethics. b. are issued monthly by the FASB to deal with current topics. c. are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict with any broad fundamental accounting principle. d. were recently discontinued by the FASB because they dealt with specialized topics having little impact on financial reporting in general.
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c. are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict with any broad fundamental accounting principle.
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The purpose of the Emerging Issues Task Force is to a. develop a conceptual framework as a frame of reference for the solution of future problems. b. lobby the FASB on issues that affect a particular industry. c. do research on issues that relate to long-term accounting problems. d. issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.
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d. issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.
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The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except a. developing and enforcing professional ethics. b. developing auditing standards for public companies. c. providing professional education programs. d. All of the answer choices are correct.
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b. developing auditing standards for public companies.
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Which of the following pronouncements were issued by the Accounting Principles Board? a. Accounting Research Bulletins b. APB Opinions c. APB Statements of Position d. Statements of Financial Accounting Concepts
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b. APB Opinions
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Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States? a. AICPA b. FASB c. IASB d. SEC
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c. IASB
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Which of the following organizations has not published accounting standards? a. American Institute of Certified Public Accountants. b. Securities and Exchange Commission. c. Financial Accounting Standards Board. d. All of these have published accounting standards.
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d. All of these have published accounting standards.
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The purpose of Statements of Financial Accounting Concepts is to a. establish GAAP. b. modify or extend an existing FASB Accounting Standards Update. c. form a conceptual framework for solving existing and emerging problems. d. determine the need for FASB involvement in an emerging issue.
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c. form a conceptual framework for solving existing and emerging problems.
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Members of the Financial Accounting Standards Board are a. employed by the American Institute of Certified Public Accountants (AICPA). b. part-time employees. c. required to hold a CPA certificate. d. independent of any other organization.
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d. independent of any other organization.
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The following are part of the "due process" system used by the FASB in the evolution of a typical FASB Accounting Standards Update: 1. Exposure Draft 2. FASB Accounting Standards Update 3. Preliminary Views The chronological order in which these items are released is as follows: a. 1, 2, 3. b. 1, 3, 2. c. 2, 3, 1. d. 3, 1, 2.
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d. 3, 1, 2.
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Which of the following is true of generally accepted accounting principles? a. GAAP includes detailed practices and procedures as well as broad guidelines of general application. b. GAAP is influenced by pronouncements of the SEC and IRS. c. GAAP changes over time as the nature of the business environment changes. d. All of these answer choices are correct.
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d. All of these answer choices are correct.
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The most significant current source of generally accepted accounting principles is the a. AICPA. b. SEC. c. APB. d. FASB.
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d. FASB.
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Which of the following is not a part of generally accepted accounting principles? a. The FASB Interpretations b. The CAP Accounting Research Bulletins c. The APB Opinions d. All of these are part of generally accepted accounting principles.
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d. All of these are part of generally accepted accounting principles.
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Which of the following publications does not qualify as a statement of generally accepted accounting principles? a. Statements of financial standards issued by the FASB b. Accounting interpretations issued by the FASB c. APB Opinions d. Accounting research studies issued by the AICPA
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d. Accounting research studies issued by the AICPA
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Rule 203 of the Code of Professional Conduct addresses: a. ethical requirements. b. financial statements being based on generally accepted accounting principles. c. advertising to obtain clients. d. auditing financial statements.
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b. financial statements being based on generally accepted accounting principles.
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What is the purpose of a FASB Staff Position? a. Provide interpretation of existing standards. b. Provide a consensus on how to account for new and unusual financial transactions. c. Provide interpretive guidance. d. Provide timely guidance on select issues.
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c. Provide interpretive guidance.
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Which of the following is not considered a component of generally accepted accounting principles? a. FASB Implementation Guides. b. Widely recognized industry practices. c. Articles published in CPA journals. d. AICPA Accounting Interpretations.
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c. Articles published in CPA journals.
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Financial accounting standard-setting in the United States a. can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic. b. is based solely on research and empirical findings. c. is a legalistic process based on rules promulgated by governmental agencies. d. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
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a. can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.
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The purpose of the International Accounting Standards Board is to a. issue enforceable standards which regulate the financial accounting and reporting of multinational corporations. b. develop a uniform currency in which the financial transactions of companies through-out the world would be measured. c. promote uniform accounting standards among countries of the world. d. arbitrate accounting disputes between auditors and international companies.
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c. promote uniform accounting standards among countries of the world.
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Which of the following is a source of pressure that may influence the accounting standard setting process? a. Congress. b. Lobbyist. c. CPA firms. d. All of these answers are correct.
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c. CPA firms.
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What is a possible danger if politics plays too big a role in accounting standard setting? a. Accounting standards that are not truly generally accepted. b. Individuals may influence the standards. c. User groups become active. d. The FASB delegates its authority to elected officials.
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a. Accounting standards that are not truly generally accepted.
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What is the "expectations gap"? a. The difference between what the public thinks the accountant should not do and what the accountant knows they should do. b. The difference between what the public thinks the accountant is doing and what Congress says the accountant is doing. c. The difference between what the public thinks the accountant should do and what the accountant thinks they can do. d. The difference between what the accountant is doing and what the Courts say the accountant should be doing.
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c. The difference between what the public thinks the accountant should do and what the accountant thinks they can do.
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What is not a reason that accounting standards may differ across countries? a. Governments. b. Language. c. Culture. d. Past practice.
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b. Language.
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What would be an advantage of having all countries adopt and follow the same accounting standards? a. Agreement. b. Comparability. c. Lower preparation costs. d. Comparability and lower preparation costs.
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d. Comparability and lower preparation costs.
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Which of the following is an ethical concern of accountants? a. Earnings manipulation. b. Conservative accounting. c. Industry practices. d. None of these answers are correct.
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a. Earnings manipulation.
