Accounting 311 chapter 1

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True or False? Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan evaluate and control a company’s operations.
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True
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True or False? Users of financial reports of a company use the information provided by these reports to make their capital allocation decisions.
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True
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True or False? An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and gaining credit
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True
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True or False? The objective of financial reporting is to report the plans made by a company to improve the productivity of its employees
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False
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True or False? Users of financial accounting statements have both coinciding and conflicting needs for information of various types
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True
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True or False? Statements of Financial Accounting Concepts set fourth fundamental objectives and concepts that are used by the FASB in developing future standards of financial accounting and reporting.
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True
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True or False? The FASB Codification creates a new set of GAAP
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False
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True or False? The AICPA’s Code of professional conduct requires that members prepare financial statements in accordance with the GAAP
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True
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General-purpose financial statements are a product of…
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Financial Accounting
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The information provided by financial reporting pertains to…
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Individual business enterprises, rather than to industrie,s or an economy as a whole, or to members of society as consumers
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All the following are ways in which accounting information is used by Financial accounting except too…
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plan and control a company’s operations
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Which of the following represents a form of communication through financial reporting but NOT through Financial Statements
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Presidents Letter
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The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations is called…
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Managerial Accounting
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How does accounting help the capital allocation process attract investment capital?
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By providing timely, relevant information.`
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Financial statements in the early 2000s provide information related to
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hard assets (inventory and plant assets)
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What is the objective of financial reporting?
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Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.
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Which of the following will be of interest to investors in decision-making?
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Both assessing the company’s ability to generate net cash inflows and assessing management’s ability to protect and enhance the capital provider’s investments.
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Which perspective is adopted as a part of the objective of general-purpose financial reporting?
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An entity perspective
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A common set of accounting standards and procedures is called
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generally accepted accounting principles.
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Which of the following is a general limitation of “general purpose financial statements”?
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General purpose financial statements may not be the most informative for a specific enterprise.
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What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?
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The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
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What is not due process in the context of standard setting at the FASB?
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No public hearings are held on proposed accounting standards
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A characteristic of generally accepted accounting principles includes:
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a common set of standards and principles.
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Characteristics of generally accepted accounting principles include all of the following except
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each principle is approved by the SEC.
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Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight?
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The FASB follows due process.
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What is the purpose of Emerging Issues Task Force?
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Provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basi
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Each of the following are true of the Securities and Exchange Commission except that
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the FASB relies on the SEC to develop accounting standards.
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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
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SEC.
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Companies that are listed on a stock exchange are required to submit their financial statements to the
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SEC.
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Which of the following is true of the Financial Accounting Standards Board?
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The members of the FASB are appointed by the Financial Accounting Foundation.
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The Financial Accounting Foundation
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oversees the operations of the FASB.
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The Financial Accounting Standards Board employs a “due process” system which
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enables interested parties to express their views on issues under consideration.
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The purpose of the Emerging Issues Task Force is to
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provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis.
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The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except
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developing auditing standards for public companies.
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Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States?
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IASB
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The purpose of Statements of Financial Accounting Concepts is to
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form a conceptual framework for solving existing and emerging problems.
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Members of the Financial Accounting Standards Board are
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independent of any other organization.
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Which of the following is not true of generally accepted accounting principles?
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GAAP does not have substantial authoritative support
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The most significant current source of generally accepted accounting principles is the
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FASB.
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Which of the following is a source of pressure that may influence the accounting standard setting process?
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All of these answers are correct — Congress, Lobbyists, CPA Firms
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What is a possible danger if politics plays too big a role in accounting standard setting?
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Accounting standards that are not truly generally accepted.
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What is not a reason that accounting standards may differ across countries?
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Language
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Which of the following is a requirement for an accounting principle to be called “generally accepted”?
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An authoritative accounting rule-making body has established it or it has been accepted because of its universal application.

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