TEST BANK
FINANCIAL ACCOUNTING THEORY AND ANALYSIS
14TH EDITION
CHAPTER NO. 01: THE DEVELOPMENT OF ACCOUNTING THEORY
MULTIPLE CHOICE QUESTION & ANSWERS
1. Which of the following bodies has the ultimate authority to issue accounting pronouncements in
the United States?
a. Securities and Exchange Commission
b. Financial Accounting Standards Board
c. International Accounting Standards Committee
d. Internal Revenue Service
Answer a
2. What historical evidence of the business operations of the private estate of Apollonius was
discovered early in the 20th century?
a. The Iliad
b. Plato's Republic
c. The Zenon papyri
d. Pacioli’s work, Summa de Arithmetica Geometria Proportioni et Proportionalita,
Answer c
3. Who has been given credit or developing the double-entry system of bookkeeping?
a. Francis Wheat
b. Fra Luca Pacioli
c. A. C. Littleton
d. William Paton
Answer b
4. Which organization was responsible for issuing Accounting Research Bulletins?
a. The Committee on Accounting Procedure
b. The Accounting Principles board
c. The Financial Accounting Standards Board
d. The Securities and Exchange Commission
Answer a
5. Which of the following pronouncements were issued by the Accounting Principles Board?
a. Accounting Research Bulletins
b. APB Opinions
c. Statements of Financial Accounting Concepts
d. Accounting Standards Updates
,Answer b
6. Which of the following was not a criticism of the development of accounting standards by the
Accounting Principles Board?
a. The independence of the members of the APB. The individuals serving on the board had full-
time responsibilities elsewhere that might influence their views of certain issues.
b. The structure of the board. The largest eight public accounting firms (at that time) were
automatically awarded one member, and there were usually five or six other public accountants
on the APB.
c. Harmonization. The accounting standards developed were dissimilar to those developed by the
International Accounting Standards Committee.
d. Response time. The emerging accounting problems were not being investigated and solved
quickly enough by the part-time members.
Answer c
7. Which of the following is the professional organization of university accounting professors?
a. American Accounting Association
b. American Institute of Certified Public Accountants
c. American Institute of Accountants
d. Financial Executives Institute
Answer a
8. What controversy originally highlighted the need for standard setting groups to have more
authority?
a. Accounting for stock options
b. Accounting for derivatives
c. Accounting for marketable securities
d. Accounting for the investment tax credit
Answer d
9. Which of the following committees recommended abolishing the Accounting Principles Board and
replacing it with the Financial Accounting Board?
a. Wheat
b. Cohen
c. Trueblood
d. Anderson
Answer a
10. Which of the following is a public sector accounting standard setter?
a. FASB
, b. SEC
c. APB
d. CAP
Answer b
11. Which of the following types of pronouncements now establishes generally accepted accounting
principles?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer d
12. Which of the following types of pronouncements are intended to establish the objectives and
concepts that the FASB will use in developing standards of financial accounting and reporting?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer a
13. What is the purpose of Emerging Issues Task Force?
a. Provide interpretation of existing standards.
b. Provide timely guidance on select issues.
c. Provide implementation guidance within the Codification framework to reduce diversity in
practice on a timely basis.
d. Provide interpretive guidance
Answer c
14. Which of the following is not a consequence of the standards overload problem to small businesses?
a. If a small business omits a GAAP requirement from audited financial statements, a qualified
or adverse opinion may be rendered.
b. Small businesses do not need to keep financial records
c. The cost of complying with GAAP requirements may cause a small business to forgo the
development of other, more relevant information.
d. Small CPA firms that audit smaller companies must keep up to date on all the same
requirements as large international firms, but they cannot afford the specialists that are
available on a centralized basis in the large firms.
, Answer b
15. Some accountants maintain that accounting standards are as much a product of political action as
they are of careful logic or empirical findings. This belief is an example of the concept of
a. Standard setting as a political process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer a
16. Financial accounting standard-setting in the United States can be described as:
a. A democratic process in the sense that a majority of accountants must agree with a standard
before it becomes enforceable.
b. A research process based on empirical findings
c. A political process which reflects actions of various interested user groups as well as a product
of research and logic.
d. A legalistic process based on rules promulgated by governmental agencies
Answer c
17. The impact of accounting reports on various segments of our economic society is the definition of
the concept of
a. Standard setting as apolitical process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer c
18. Considering and understanding how business decisions affect the financial statements is
a. The sole responsibility of the Securities and Exchange Commission.
b. Provided in the auditor’s report.
c. Referred to as an economic consequence perspective.
d. Interpreted strictly by the company’s suppliers.
Answer c
19. Economic consequences of accounting standard-setting means:
a. Standard-setters must give first priority to ensuring that companies do not suffer any adverse
effect as a result of a new standard.
b. Standard-setters must ensure that no new costs are incurred when a new standard is issued.
c. The objective of financial reporting should be politically motivated to ensure acceptance by the
general public.
FINANCIAL ACCOUNTING THEORY AND ANALYSIS
14TH EDITION
CHAPTER NO. 01: THE DEVELOPMENT OF ACCOUNTING THEORY
MULTIPLE CHOICE QUESTION & ANSWERS
1. Which of the following bodies has the ultimate authority to issue accounting pronouncements in
the United States?
a. Securities and Exchange Commission
b. Financial Accounting Standards Board
c. International Accounting Standards Committee
d. Internal Revenue Service
Answer a
2. What historical evidence of the business operations of the private estate of Apollonius was
discovered early in the 20th century?
a. The Iliad
b. Plato's Republic
c. The Zenon papyri
d. Pacioli’s work, Summa de Arithmetica Geometria Proportioni et Proportionalita,
Answer c
3. Who has been given credit or developing the double-entry system of bookkeeping?
a. Francis Wheat
b. Fra Luca Pacioli
c. A. C. Littleton
d. William Paton
Answer b
4. Which organization was responsible for issuing Accounting Research Bulletins?
a. The Committee on Accounting Procedure
b. The Accounting Principles board
c. The Financial Accounting Standards Board
d. The Securities and Exchange Commission
Answer a
5. Which of the following pronouncements were issued by the Accounting Principles Board?
a. Accounting Research Bulletins
b. APB Opinions
c. Statements of Financial Accounting Concepts
d. Accounting Standards Updates
,Answer b
6. Which of the following was not a criticism of the development of accounting standards by the
Accounting Principles Board?
a. The independence of the members of the APB. The individuals serving on the board had full-
time responsibilities elsewhere that might influence their views of certain issues.
b. The structure of the board. The largest eight public accounting firms (at that time) were
automatically awarded one member, and there were usually five or six other public accountants
on the APB.
c. Harmonization. The accounting standards developed were dissimilar to those developed by the
International Accounting Standards Committee.
d. Response time. The emerging accounting problems were not being investigated and solved
quickly enough by the part-time members.
Answer c
7. Which of the following is the professional organization of university accounting professors?
a. American Accounting Association
b. American Institute of Certified Public Accountants
c. American Institute of Accountants
d. Financial Executives Institute
Answer a
8. What controversy originally highlighted the need for standard setting groups to have more
authority?
a. Accounting for stock options
b. Accounting for derivatives
c. Accounting for marketable securities
d. Accounting for the investment tax credit
Answer d
9. Which of the following committees recommended abolishing the Accounting Principles Board and
replacing it with the Financial Accounting Board?
a. Wheat
b. Cohen
c. Trueblood
d. Anderson
Answer a
10. Which of the following is a public sector accounting standard setter?
a. FASB
, b. SEC
c. APB
d. CAP
Answer b
11. Which of the following types of pronouncements now establishes generally accepted accounting
principles?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer d
12. Which of the following types of pronouncements are intended to establish the objectives and
concepts that the FASB will use in developing standards of financial accounting and reporting?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer a
13. What is the purpose of Emerging Issues Task Force?
a. Provide interpretation of existing standards.
b. Provide timely guidance on select issues.
c. Provide implementation guidance within the Codification framework to reduce diversity in
practice on a timely basis.
d. Provide interpretive guidance
Answer c
14. Which of the following is not a consequence of the standards overload problem to small businesses?
a. If a small business omits a GAAP requirement from audited financial statements, a qualified
or adverse opinion may be rendered.
b. Small businesses do not need to keep financial records
c. The cost of complying with GAAP requirements may cause a small business to forgo the
development of other, more relevant information.
d. Small CPA firms that audit smaller companies must keep up to date on all the same
requirements as large international firms, but they cannot afford the specialists that are
available on a centralized basis in the large firms.
, Answer b
15. Some accountants maintain that accounting standards are as much a product of political action as
they are of careful logic or empirical findings. This belief is an example of the concept of
a. Standard setting as a political process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer a
16. Financial accounting standard-setting in the United States can be described as:
a. A democratic process in the sense that a majority of accountants must agree with a standard
before it becomes enforceable.
b. A research process based on empirical findings
c. A political process which reflects actions of various interested user groups as well as a product
of research and logic.
d. A legalistic process based on rules promulgated by governmental agencies
Answer c
17. The impact of accounting reports on various segments of our economic society is the definition of
the concept of
a. Standard setting as apolitical process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer c
18. Considering and understanding how business decisions affect the financial statements is
a. The sole responsibility of the Securities and Exchange Commission.
b. Provided in the auditor’s report.
c. Referred to as an economic consequence perspective.
d. Interpreted strictly by the company’s suppliers.
Answer c
19. Economic consequences of accounting standard-setting means:
a. Standard-setters must give first priority to ensuring that companies do not suffer any adverse
effect as a result of a new standard.
b. Standard-setters must ensure that no new costs are incurred when a new standard is issued.
c. The objective of financial reporting should be politically motivated to ensure acceptance by the
general public.
