question

Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations.

answer

False

question

Financial statements are the principal means through which financial information is communicated to those outside an enterprise.

answer

True

question

Users of the financial information provided by a company use that information to make capital allocation decisions.

answer

True

question

An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit.

answer

True

question

Financial reports in the early 21st century did not provide any information about a company's soft assets.

answer

False

question

Accounting standards are now less likely to require the recording or disclosure of fair value information due to its inherent subjectivity.

answer

False

question

While objectives for financial reporting exist on an informal basis, no formal objectives have been adopted.

answer

False

question

One weakness of accrual accounting is that it does not provide a good indication of the enterprise's present and continuing ability to generate favorable cash flows.

answer

False

question

Some generally accepted accounting principles have simply been accepted as appropriate because of their universal application rather than due to the action of an authoritative accounting rule-making body.

answer

True

question

Users of financial accounting statements have both coinciding and conflicting needs for information of various types.

answer

True

question

The Securities and Exchange Commission appointed the Committee on Accounting Procedure.

answer

False

question

The passage of a new FASB Standards Statement requires the support of five of the seven board members.

answer

False

question

Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of financial accounting and reporting.

answer

True

question

The AICPA created the Accounting Principles Board in 1959.

answer

True

question

FASB Technical Bulletins are more authoritative than FASB Standards and Interpretations.

answer

False

question

The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles.

answer

True

question

Accounting standards are a product of careful logic or empirical findings and are not influenced by political action.

answer

False

question

Currently, both U.S. GAAP and the International Financial Reporting Standards are acceptable for international use.

answer

True

question

The expectations gap is caused by what the public thinks accountants should be doing and what accountants think they can do.

answer

True

question

Ethical issues in financial accounting are governed by the AICPA.

answer

False

question

financial accounting

answer

General-purpose financial statements are the product of a. financial accounting b. managerial accounting c. both financial and managerial accounting d. neither financial nor managerial accounting

question

all of these are users

answer

Users of financial reports include all of the following except a. creditors b. government agencies c. unions d. all of these are users

question

statement of retained earnings

answer

The financial statements most frequently provided include all of the following except the a. balance sheet b. income statement c. statement of cash flows d. statement of retained earnings.

question

individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers

answer

The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

question

all of the above

answer

All the following are differences between financial and managerial accounting in how accounting information is used except to a. plan and control company's operations. b. decide whether to invest in the company. c. evaluate borrowing capacity to determine the extent of a loan to grant. d. All the above.

question

president's letter

answer

Which of the following represents a form of communication through financial reporting but not through financial statements? a. Balance sheet. b. President's letter. c. Income statement. d. Notes to financial statements.

question

managerial accounting

answer

The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations is called a. financial accounting. b. managerial accounting. c. tax accounting. d. auditing.

question

provides timely, relevant information

answer

How does accounting help the capital allocation process attract investment capital? a. Provides timely, relevant information. b. Encourages innovation. c. Promotes productivity. d. a and b above.

question

all of these

answer

Whether a business is successful and thrives is determined by a. markets. b. free enterprise. c. competition. d. all of these.

question

all of these

answer

An effective capital allocation process a. promotes productivity. b. encourages innovation. c. provides an efficient market for buying and selling securities. d. all of these.

question

hard assets (inventory and plant assets)

answer

Financial statements in the early 2000s provide information related to a. nonfinancial measurements. b. forward-looking data. c. hard assets (inventory and plant assets). d. none of these.

question

accounting for hard assets

answer

Which of the following is not a major challenge facing the accounting profession? a. Nonfinancial measurements. b. Timeliness. c. Accounting for hard assets. d. Forward-looking information.

question

provide information that is useful to assess the amounts, timing, and uncertainty of perspective cash receipts

answer

What is a major objective of financial reporting? a. Provide information that is useful to management in making decisions. b. Provide information that clearly portray nonfinancial transactions. c. Provide information that is useful to assess the amounts, timing, and uncertainty of perspective cash receipts. d. Provide information that excludes claims to the resources.

question

provide information that clearly portrays the economic resources of an enterprise

answer

What is a major objective of financial reporting? a. Provide information that is useful to the Internal Revenue Service in determining the amount of federal income taxes payable. b. Provide information that is useful in assessing the amounts and timing of revenue. c. Provide information that is comprehensible only by sophisticated investors. d. Provide information that clearly portrays the economic resources of an enterprise.

question

provide information on the liquidation value of an enterprise

answer

Which of the following statements is not an objective of financial reporting? a. Provide information that is useful in investment and credit decisions. b. Provide information about enterprise resources, claims to those resources, and changes to them. c. Provide information on the liquidation value of an enterprise. d. Provide information that is useful in assessing cash flow prospects.

question

it provides a better indication of ability to generate cash flows than the cash basis

answer

Accrual accounting is used because a. cash flows are considered less important. b. it provides a better indication of ability to generate cash flows than the cash basis. c. it recognizes revenues when cash is received and expenses when cash is paid. d. none of the above.

question

information is useful in assessing cash flow prospects

answer

One objective of financial reporting is to provide a. information about the investors in the business entity. b. information about the liquidation values of the resources held by the enterprise. c. information that is useful in assessing cash flow prospects. d. information that will attract new investors.

question

both a and b

answer

Accounting principles are "generally accepted" only when a. an authoritative accounting rule-making body has established it in an official pro- nouncement. b. it has been accepted as appropriate because of its universal application. c. both a and b. d. neither a nor b.

question

generally accepted accounting principles

answer

A common set of accounting standards and procedures are called a. financial accounting standards. b. generally accepted accounting principles. c. objectives of financial reporting. d. statements of financial accounting concepts.

question

general purpose financial statements may not be the most informative for a specific enterprise

answer

Which of the following is a general limitation of "general purpose financial statements"? a. General purpose financial statements may not be the most informative for a specific enterprise. b. General purpose financial statements are comparable. c. General purpose financial statements are assumed to present fairly the company's financial operations. d. None of the above.

question

the SEC has a mandate to establish accounting standards for enterprises under its jurisdiction

answer

What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States? a. The SEC requires all companies listed on an exchange to submit their financial statements to the SEC. b. The SEC coordinates with the AICPA in establishing accounting standards. c. The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction. d. The SEC reviews financial statements for compliance.

question

all of the above

answer

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.

question

all of the above

answer

Which of the following organizations has been responsible for setting U.S. accounting standards? a. Accounting Principles Board. b. Committee on Accounting Procedure. c. Financial Accounting Standards Board. d. All of the above.

question

the previous standard setting organization did not provide a structured set of accounting principles

answer

Why did the AICPA create the Accounting Principles Board? a. The SEC disbanded the previous standard setting organization. b. The previous standard setting organization did not provide a structured set of accounting principles. c. No such organization existed in the past. d. None of the above.

question

committee on accounting procedure

answer

Which organization was responsible for issuing Accounting Research Bulletins? a. Accounting Principles Board. b. Committee on Accounting Procedure. c. The SEC. d. AICPA.

question

common set of standards and principles

answer

A characteristic of generally accepted accounting principles include the following a. common set of standards and principles. b. standards and principles are based federal statutes. c. acceptance requires an affirmative vote of Certified Public Accountants. d. practices that become accepted for at least a year by all industry members.

question

each principle is approved by the SEC

answer

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.

question

due process

answer

Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight? a. Smaller membership. b. FASB board members are well-paid. c. FASB board members must be CPAs. d. Due process.

question

three board members

answer

The passage of a new FASB Standards Statement requires the support of a. all Board members. b. three Board members. c. four Board members. d. five Board members.

question

provide a consensus on how to account for new and unusual financial transactions

answer

What is the purpose of Emerging Issues Task Force? 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.

question

FASB

answer

Which organization is responsible for issuing Emerging Issues Task Force Statements? a. FASB b. CAP c. APB d. SEC

question

sometimes primary and sometimes secondary

answer

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.

question

SEC

answer

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.

question

SEC

answer

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.

question

special study group on establishment of accounting principles (wheat committee)

answer

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. Special Study Group on establishment of Accounting Principles (Wheat Committee).

question

is appointed by the financial accounting foundation

answer

The Financial Accounting Standards Board a. has issued a series of pronouncements entitled Statements on Auditing Standards. b. was the forerunner of the current Accounting Principles Board. c. is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards. d. is appointed by the Financial Accounting Foundation.

question

oversees the operations of the FASB

answer

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.

question

all members of the FASB possess extensive experience in financial reporting

answer

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.

question

enables interested parties to express their views on issues under consideration

answer

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.

question

accounting research bulletins

answer

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

question

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

answer

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.

question

issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly

answer

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.

question

developing auditing standards

answer

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.

question

opinions

answer

Which of the following pronouncements were issued by the Accounting Principles Board? a. Accounting Research Bulletins b. Opinions c. Statements of Position d. Statements of Financial Accounting Concepts

question

IASB

answer

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

question

all of these have published accounting standards

answer

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.

question

form a conceptual framework for solving existing and emerging problems

answer

The purpose of Statements of Financial Accounting Concepts is to a. establish GAAP. b. modify or extend the existing FASB Standards Statement. c. form a conceptual framework for solving existing and emerging problems. d. determine the need for FASB involvement in an emerging issue.

question

independent of any other organization

answer

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.

question

3,1,2

answer

The following published documents are part of the "due process" system used by the FASB in the evolution of a typical FASB Statement of Financial Accounting Standards: 1. Exposure Draft 2. Statement of Financial Accounting Standards 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.

question

all of these

answer

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.

question

FASB

answer

The most significant current source of generally accepted accounting principles is the a. AICPA. b. SEC. c. APB. d. FASB.

question

all of these are part of generally accepted accounting principles

answer

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.

question

accounting research studies issued by the AICPA

answer

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

question

financial statements should be based on generally accepted accounting principles

answer

Rule 203 of the Code of Professional Conduct address: a. ethical requirements. b. financial statements should be based on generally accepted accounting principles. c. advertising to obtained clients. d. auditing financial statements.

question

provide interpretive guidance

answer

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.

question

articles published in CPA journals

answer

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.

question

can be described as a social process which reflects political actions of various interested user groups as well as a product or research and logic

answer

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.

question

promote uniform accounting standards among countries of the world

answer

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.

question

none of the above

answer

What is not a source of pressure that may influence the accounting standard setting process? a. Congress. b. Lobbyist. c. CPA firms. d. None of the above.

question

accounting standards that are not truly generally accepted

answer

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.

question

the difference between what the public thinks the accountant is doing and what the accountant thinks they can do

answer

What is "expectation gap"? a. The difference between what the public thinks the accountant is not doing and what the accountant knows they don't 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 is doing 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.

question

language

answer

What is not a reason that accounting standards may differ across countries? a. Governments. b. Language. c. Culture. d. Past Practice.

question

b and c

answer

What would be an advantage of having all countries adopt and follow the same accounting standards? a. Consistency. b. Comparability. c. Lower preparation costs. d. b and c

question

earnings manipulation

answer

Which of the following is an ethical concern of accountants? a. Earnings manipulation. b. Conservative accounting. c. Industry practices. d. None of the above.

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