ACCT 2000 NEW EXAM QUESTIONS AND VERIFIED
ANSWERS 100% ACCURATE!!
Generally Accepted Accounting Principles (GAAP) - ANSWER Set of accounting
standards that have authorative support
The Securities and Exchange Commission - ANSWER Is the agency of the U.S.
government that oversees U.S. financial markets and accounting standard bodies
The International Accounting Standards Board - ANSWER issues standards called
international financial reporting standards
The Public Company Accounting Oversight Board - ANSWER Establishes auditing
standards and evaluates the performance of auditing firms
What are the two essential characteristics of useful information in accounting -
ANSWER Relevance and faithful representation
What is faithful representation - ANSWER Information that accurately reflects what
actually occurred
Comparability - ANSWER Occurs when different companies use the same accounting
principles
Consistency - ANSWER Means that a company uses the same accounting principles
and methods from year to year
Verifiable - ANSWER CPAs perform audits of financial statements to verify their
,accuracy
Timely - ANSWER Must be available to decision-makers before it loses it capacity to
influence decisions. SEC requires that large public companies provide their annual
reports to investors within 60 days of their year-end
Understandability - ANSWER Information is presented in a clear and concise fashion
Monetary - ANSWER only things that can be expressed in money are included in the
accounting records
Economic Entity Assumption - ANSWER States that every economic entity can be
separated indemnified and accounted
Going Concern assumption - ANSWER States that the business will remain in operation
for the foreseeable future
Periodicity Assumption - ANSWER States the life of a business can be divided into
artificial time periods and that useful reports covering those periods can be prepared
for the business
Historical cost Principle - ANSWER dictates that companies record assets at their cost
Fair Value Principle - ANSWER Indicates that assets and liabilities should be reported
at fair value
Two qualities to determine cost and fair value are - ANSWER -Weighing the factual
nature of cost figures versus the relevance of fair value
- Fasb indicates that most assets must follow the historical cost principle because
market values may not be representational faithful
, What situations are okay for fair value principle applied - ANSWER Only in situations
where assets are actively traded, such as investment securities
Full Disclosure Principle - ANSWER requires that companies disclose all
circumstances and events that would make a difference to financial statements users
Cost constraint - ANSWER Weighs the cost that companies will incur to provide the
information against the benefit the financial statement users will gain from having the
information available
Accounting Information System (AIS) - ANSWER System of collecting and processing
transaction data and communicating financial information to decision-makers
Factors that shape an accounting information system includes - ANSWER The nature
of the company's business
The size of the company
The type of transactions
The volume of data
The information demands of management others
Accounting transaction - ANSWER Economic events that require recording in the
financial statements
An Accounting Transaction occurs - ANSWER When assets liabilities, or stockholders
equity items change as a result of an economic event
Accounting equation - ANSWER Assets= liabilities + stockholder's equity
Stockholder's equity is comprised of two parts - ANSWER Common stock and retained
earnings
ANSWERS 100% ACCURATE!!
Generally Accepted Accounting Principles (GAAP) - ANSWER Set of accounting
standards that have authorative support
The Securities and Exchange Commission - ANSWER Is the agency of the U.S.
government that oversees U.S. financial markets and accounting standard bodies
The International Accounting Standards Board - ANSWER issues standards called
international financial reporting standards
The Public Company Accounting Oversight Board - ANSWER Establishes auditing
standards and evaluates the performance of auditing firms
What are the two essential characteristics of useful information in accounting -
ANSWER Relevance and faithful representation
What is faithful representation - ANSWER Information that accurately reflects what
actually occurred
Comparability - ANSWER Occurs when different companies use the same accounting
principles
Consistency - ANSWER Means that a company uses the same accounting principles
and methods from year to year
Verifiable - ANSWER CPAs perform audits of financial statements to verify their
,accuracy
Timely - ANSWER Must be available to decision-makers before it loses it capacity to
influence decisions. SEC requires that large public companies provide their annual
reports to investors within 60 days of their year-end
Understandability - ANSWER Information is presented in a clear and concise fashion
Monetary - ANSWER only things that can be expressed in money are included in the
accounting records
Economic Entity Assumption - ANSWER States that every economic entity can be
separated indemnified and accounted
Going Concern assumption - ANSWER States that the business will remain in operation
for the foreseeable future
Periodicity Assumption - ANSWER States the life of a business can be divided into
artificial time periods and that useful reports covering those periods can be prepared
for the business
Historical cost Principle - ANSWER dictates that companies record assets at their cost
Fair Value Principle - ANSWER Indicates that assets and liabilities should be reported
at fair value
Two qualities to determine cost and fair value are - ANSWER -Weighing the factual
nature of cost figures versus the relevance of fair value
- Fasb indicates that most assets must follow the historical cost principle because
market values may not be representational faithful
, What situations are okay for fair value principle applied - ANSWER Only in situations
where assets are actively traded, such as investment securities
Full Disclosure Principle - ANSWER requires that companies disclose all
circumstances and events that would make a difference to financial statements users
Cost constraint - ANSWER Weighs the cost that companies will incur to provide the
information against the benefit the financial statement users will gain from having the
information available
Accounting Information System (AIS) - ANSWER System of collecting and processing
transaction data and communicating financial information to decision-makers
Factors that shape an accounting information system includes - ANSWER The nature
of the company's business
The size of the company
The type of transactions
The volume of data
The information demands of management others
Accounting transaction - ANSWER Economic events that require recording in the
financial statements
An Accounting Transaction occurs - ANSWER When assets liabilities, or stockholders
equity items change as a result of an economic event
Accounting equation - ANSWER Assets= liabilities + stockholder's equity
Stockholder's equity is comprised of two parts - ANSWER Common stock and retained
earnings
