Chapter 1 – Financial Accounting Flashcard Essay

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21. General-purpose financial statements are the product of
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Financial Accounting
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22. Users of financial reports include all of the following except a. creditors. b. government agencies. c. unions.
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all Af these are users
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23. The financial statements most frequently provided include all of the following except a. balance sheet. b. income statement. c. statement of cash flows. d. statement of retained earnings.
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The Statement of retained earnings
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24. The information provided by financial reporting pertains to
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Individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers
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30. An effective capital allocation process
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Promotes productivity encourages innovation and provides an efficient market for buying and selling securities.
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32. Which of the following is not a major challenge facing the accounting profession?
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c Accounting for hard assets
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33. What is the objective of financial reporting?
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c to provide Information about the reporting entity that is useful to present and potential equity investors, lenders and other creditors
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34. Primary users for general-purpose financial statements include
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d) Creditors and investors
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35. When making decisions, investors are interested in assessing
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c) the company’s ability to generate net cash inflows and the managers’ ability to protect and enhance the capital providers’ investments
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36. Accrual accounting is used because
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b. it provides a better indication of ability to generate cash flows than the cash basis.
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37. Which perspective is adopted as part of the objective of general-purpose financial reporting?
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c Entity perspective
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39. A common set of accounting standards and procedures are called
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b General Accounting Principles (GAAP)
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41. What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?
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c The SEC has the mandate to establish accounting standards for enterprises under its jurisdiction.
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42. What is due process in the context of standard setting at the FASB? a. FASB operates in full view of the public. b. Public hearings are held on proposed accounting standards. c. Interested parties can make their views known. d. All of the above.
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d. all the above
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43. Which of the following organizations has been responsible for setting U.S. accounting standards?
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Accounting Principles Board. Committee on Accounting Procedure. Financial Accounting Standards B
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44. Why did the AICPA create the Accounting Principles Board?
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The previous standard setting organization did not provide a structured set of accounting principles.
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46. A characteristic of generally accepted accounting principles (GAAP) include the following:
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a common set of standards and principles
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47. Characteristics of generally accepted accounting principles include all of the following except a. authoritative accounting the rule-making body established a principle of reporting. b. standards are considered useful by the profession. c. each principle is approved by the SEC. d. Practice has become universally accepted over time.
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Execpt that each principle is approved by the SEC.
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49. The passage of a new FASB Standards Statement requires the support of
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c four Board members.
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51. Which organization is responsible for issuing Emerging Issues Task Force Statements?
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FASB
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52. The role of the Securities and Exchange Commission (SEC) in the formulation of accounting principles can be best described as
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c sometimes primary and sometimes secondary.
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53. 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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54. Companies that are listed on a stock exchange are required to submit their financial statements to the
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d SEC
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55. The Financial Accounting Standards Board (FASB) was proposed by the
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d Special Study Group on establishment of Accounting Principles (Wheat Committee).
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56. The Financial Accounting Standards Board
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is appointed by the Financial Accounting Foundation.
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57. The Financial Accounting Foundation
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a oversees the operations of the FASB.
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58. The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is
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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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59. The Financial Accounting Standards Board employs a “due process” system which
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b. enables interested parties to express their views on issues under consideration.
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60. 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 Technical Bulletins
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61. FASB Technical Bulletins
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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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63. 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. c. providing professional education programs. d. all of the above.
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b developing auditing standards.
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65. Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States?
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Internationa Accounting Standards Board (IASB)
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66. An organization that has not published accounting standards is the 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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67. The purpose of Statements of Financial Accounting Concepts is to
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c. form a conceptual framework for solving existing and emerging problems.
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P68. Members of the Financial Accounting Standards Board are
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d independent of any other organization.
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70. Generally Accepted Accounting Principles a. include detailed practices and procedures as well as broad guidelines of general application. b. are influenced by pronouncements of the SEC and IRS. c. change over time as the nature of the business environment changes. d. all of these.
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d all of these
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71. The most significant current source of generally accepted accounting principles is the
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d FASB
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72. Which of the following is not a part of generally accepted accounting principles? a. FASB Interpretations b. CAP Accounting Research Bulletins c. APB Opinions d. All of these are part of generally accepted accounting principles.
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d
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73. 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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75. What is the purpose of a FASB Staff Position?
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c. Provide interpretive guidance.
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76. Which of the following is not considered a component of generally accepted accounting principles?
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c Articles published in CPA journals.
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78. The purpose of the International Accounting Standards Board is to
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c promote uniform accounting standards among countries of the world.
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81. What is “expectation gap”?
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c. The difference between what the public thinks the accountant is doing and what the accountant thinks they can do.
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82. What is not a reason that accounting standards may differ across countries?
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b Language
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83. What would be an advantage of having all countries adopt and follow the same accounting standards?
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Comparability and Lower preparation costs.

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