Advanced Intermediate Accounting – Exam #1 Practice Questions and Answers

ADVANCED INTERMEDIATE
ACCOUNTING EXAM #1
The process that culminates in the preparation of financial reports on the enterprise for use by both
internal and external parties - CORRECT ANSWER -Financial accounting



The process of identifying, measuring, analyzing, and communicating financial information needed by
management to plan, control, and evaluate a company's operations - CORRECT ANSWER -Managerial
accounting



What are the 4 types of financial statements? - CORRECT ANSWER -1. Balance sheet

2. Income statement

3. Statement of cash flows

4. Statement of owners or stockholders equity



Examples include the president's letter or supplementary schedules in the corporate annual report,
prospectuses, reports filed with government agencies, news releases, management's forecasts, and
social or environmental impact statements - CORRECT ANSWER -Financial reporting



The financial information a company provides to help users with capital allocation decisions about the
company - CORRECT ANSWER -Financial reporting



Investors and creditors use financial reports to make their capital allocation decisions - CORRECT
ANSWER -Users



The process of determining how and at what cost is allocated among competing interests - CORRECT
ANSWER -Capital allocation

,What mare mthe m3 msteps mof mthe mCost mAllocation mProcess? m- mCORRECT mANSWER m-1. mFinancial mreporting
m



2. Users m

3. Capital mallocation m
m



What mis mthe mobjective mof mfinancial mreporting? m- mCORRECT mANSWER m-To mprovide mfinancial
minformation mabout mthe mreporting mentity mthat mis museful mto mpresent mand mpotential mequity minvestors,


mlenders, mand mother mcreditors m


m



Provide mfinancial mreporting minformation mto ma mwide mvariety mof musers m- mCORRECT mANSWER m-General-
purpose mfinancial mstatements m
m



Provide mat mthe mleast mcost mthe mmost museful minformation mpossible m- mCORRECT mANSWER m-General-
purpose mfinancial mstatements m
m



Identifies minvestors mand mcreditors mas mthe mprimary musers mfor mgeneral-purpose mfinancial mstatements m-
mCORRECT mANSWER m-The mobjective mof mfinancial mreporting m


m



A mperspective mof mgeneral-purpose mfinancial mreporting mwhere mcompanies mare mviewed mas mseparate
mand mdistinct mfrom mtheir mowners mor mpresent mshareholders m- mCORRECT mANSWER m-Entity mperspective m


m



A mperspective mof mgeneral-purpose mfinancial mreporting mthat mis mfocused monly mon mthe mneeds mof mthe
mshareholders m- mCORRECT mANSWER m-Proprietary mperspective m


m



An mapproach mused mwhen minvestors mare minterested min mfinancial mreporting mbecause mit mprovides
minformation mthat mis mcareful mfor mmaking mdecisions m- mCORRECT mANSWER m-Decision-usefulness


mapproach m


m



Ensures mthat ma mcompany mrecords mevents mthat mchange mits mfinancial mstatements min mthe mperiods min
mwhich mthe mevents moccur, mrather mthan monly min mthe mperiods min mwhich mit mreceives mor mpays mcash m-


mCORRECT mANSWER m-


Accrual-basis maccounting m
m

, Companies mprepare mthese mto mmeet mthe mneeds, mand mto msatisfy mthe mstewardship mreporting
mresponsibility mof mmanagement m- mCORRECT mANSWER m-General-purpose mfinancial mstatements m


m



The mcommon mset mof maccounting mstandards mand mprocedures m- mCORRECT mANSWER m-Generally
mAccepted mAccounting mPrinciples m(GAAP) m


m



Means meither mthan man mauthoritative maccounting mrule-making mbody mhas mestablished ma mprinciple mor
mreporting min ma mgiven marea mor mthat mover mtime ma mgiven mpractice mhas mbeen maccepted mas mappropriate


mbecause mof mits muniversal mapplication m- mCORRECT mANSWER m-"Generally maccepted" m


m



Who mare mthe mparties minvolved min mstandard-setting? m- mCORRECT mANSWER m-1. mSEC m

2. AICPA m

3. FASB m
m



Established mby mthe mfederal mgovernment mto mhelp mdevelop mand mstandardize mfinancial minformation
mpresent mto mstockholders m- mCORRECT mANSWER m-Securities mand mExchange mCommission m(SEC) m


m



A mfederal magency mthat madministers mthe mSecurities mExchange mAct mof m1934 m- mCORRECT mANSWER m-SEC m
m



The mSEC mrequires mregistrants mto madhere mto m_____. m- mCORRECT mANSWER m-GAAP m
m



The mSEC mrelies mon m_____ mto mdevelop maccounting mstandards. m- mCORRECT mANSWER m-FASB m
m



The mnational mprofessional morganization mof mpracticing mCPAs mand man mimportant mcontributor mto mthe
mdevelopment mof mGAAP m- mCORRECT mANSWER m-American mInstitute mof mCertified mPublic mAccountants

m(AICPA) mA mgroup mappointed mby mthe mAICPA mthat mis mcomposed mto mpracticing mCPAs mwho missued m51


mAccounting m


Research mBulletins mduring mthe myears mof m1939 mto m1959 m- mCORRECT mANSWER m-Committee mon
mAccounting mProcedure m(CAP) m


m



Dealt mwith ma mvariety mof maccounting mproblems, mbut mfailed mto mprovide mthe mneeded mstructured mbody
mof maccounting mprinciples m- mCORRECT mANSWER m-Accounting mResearch mBulletins m


m