CPA - FAR (F1) questions and
answers
M1 - Standards and Conceptual Framework - Answer
SEC (2) - Answer1) Has legal authority to establish GAAP
2) Allows profession to self-regulate
FASB - AnswerDetermined GAAP since 1973
FASB Accounting Standards Codification (2) - Answer1) Became the single source of authoritative
non-governmental US GAAP
2) Reporting and practices not in the codification are not GAAP
Private Company Council - AnswerImproved standard setting for privately held companies by
establishing an alternative to GAAP to make companies more relevant, less complex, and cost-
beneficial
Statement of Financial Accounting Concepts (SFAC) - AnswerBasis for all FASB pronouncements that
provides basic reasoning and concepts for business and nonbusiness enterprises
The objective of general purpose financial reporting is - AnswerTo provide financial information
useful to the primary users in making decisions about providing resources
Primary uses - AnswerInvestors, creditors, and lendors
Financial information needed by primary users (4) - Answer1) resources of the entity
2) claims against the entity
3) changes in resources and claims
4) how efficiently and effectively management and gov. board have discharged their responsibilities
Qualitative characteristics of useful financial information - AnswerRelevant and faithful
, Relevant - AnswerPredict value, confirm value, materiality
Faithful - AnswerComplete, neutral, free of error
Enhancing qualitative characteristics (Crystal Understands The Variables) - AnswerComparability,
understandability, timeliness, verifiability
Cost constraint - AnswerCost of obtaining and presenting financial information must be less than the
benefit of reporting
Full set of financial statements (5) - Answer1) Statement of financial position (BS)
2) Statement of earnings (IS)
3) Statement of comprehensive income
4) Statement of cash flows
5) Statement of changes in owners equity
Measurements of assets and liabilities (5) - AnswerHistorical cost, current cost, NRV, PV of FCF, and
FMV
Entity assumption - AnswerEconomic activity can be accounted for (a separate corporation or a
division)
Going concern assumption - AnswerIt is presumed that the entity will continue to operate in the
foreseeable future
Monetary unit assumption - AnswerAssumed that money is an appropriate basis by which to
measure economic activity
Periodicity assumption - AnswerEconomic activity can be divided into meaningful time periods
Measurement principle - AnswerFinancial statements use a mixed system of measurement
answers
M1 - Standards and Conceptual Framework - Answer
SEC (2) - Answer1) Has legal authority to establish GAAP
2) Allows profession to self-regulate
FASB - AnswerDetermined GAAP since 1973
FASB Accounting Standards Codification (2) - Answer1) Became the single source of authoritative
non-governmental US GAAP
2) Reporting and practices not in the codification are not GAAP
Private Company Council - AnswerImproved standard setting for privately held companies by
establishing an alternative to GAAP to make companies more relevant, less complex, and cost-
beneficial
Statement of Financial Accounting Concepts (SFAC) - AnswerBasis for all FASB pronouncements that
provides basic reasoning and concepts for business and nonbusiness enterprises
The objective of general purpose financial reporting is - AnswerTo provide financial information
useful to the primary users in making decisions about providing resources
Primary uses - AnswerInvestors, creditors, and lendors
Financial information needed by primary users (4) - Answer1) resources of the entity
2) claims against the entity
3) changes in resources and claims
4) how efficiently and effectively management and gov. board have discharged their responsibilities
Qualitative characteristics of useful financial information - AnswerRelevant and faithful
, Relevant - AnswerPredict value, confirm value, materiality
Faithful - AnswerComplete, neutral, free of error
Enhancing qualitative characteristics (Crystal Understands The Variables) - AnswerComparability,
understandability, timeliness, verifiability
Cost constraint - AnswerCost of obtaining and presenting financial information must be less than the
benefit of reporting
Full set of financial statements (5) - Answer1) Statement of financial position (BS)
2) Statement of earnings (IS)
3) Statement of comprehensive income
4) Statement of cash flows
5) Statement of changes in owners equity
Measurements of assets and liabilities (5) - AnswerHistorical cost, current cost, NRV, PV of FCF, and
FMV
Entity assumption - AnswerEconomic activity can be accounted for (a separate corporation or a
division)
Going concern assumption - AnswerIt is presumed that the entity will continue to operate in the
foreseeable future
Monetary unit assumption - AnswerAssumed that money is an appropriate basis by which to
measure economic activity
Periodicity assumption - AnswerEconomic activity can be divided into meaningful time periods
Measurement principle - AnswerFinancial statements use a mixed system of measurement
