Intermediate Accounting Chapter 1
1. Summary of Learning Objectives
Identify the major financial statements and other means of financial reporting - ANS-Companies
most frequently provide (l) the balance sheet, (2) the income statement, (3) the statement of
cash flows, and (4) the statement of owners' or stockholders' equity.
\2. Summary of Learning Objectives
Explain how accounting assists in the efficient use of scarce resources. - ANS-Accounting
provides reliable, relevant, and timely information to managers, investors, and creditors to allow
resource allocation to the most efficient enterprises. Accounting also provides measurements of
efficiency (profitability) and financial soundness.
\3. Summary of Learning Objectives
Identify the objective of financial reporting. - ANS-he objective of general-purpose financial
reporting is to provide financial information about the reporting entity that is useful to present
and potential equity investors, lenders, and other creditors in decisions about providing
resources to the entity through equity investments and loans or corms of credit. Information that
is decision-useful to investors may also be helpful to ther users of financial reporting who are
not investors.
\4. Summary of Learning Objectives
Explain the need for accounting standards. - ANS-The accounting profession has atmpted to
develop a set of standards that is generally accepted and universally practiced. Readers of
financial statements would have to familiarize themselves with every company's peculiar
accounting and reporting practices. As a result, it would be alm.ost lmpossible to prepare
statements that could be compared.
\5. Summary of Learning Objectives
Identify the major policy-setting bodies and their role in the standard-setting process. - ANS-The
Securities and Exchange Commission (SEC) is a federal agency that has the broad powers to
prescribe, in whatever detail it desires, the accounting standards to be employed by companles
that fall within its jurisdiction. The American Institute of Certified Public Accountants (AICPA)
issued standards through its Committee on Accounting Procedure and Accounting Principles
Board. The financial Accounting Standards Board (FASB) establishes and improves standards
of financial accounting and reporting for the guidance and education of the public.
\6. Summary of Learning Objectives
Explain the meaning of generally accepted accounting principles (GAAP) and the role of the
Codification for GAAP. - ANS-Generally accepted accounting principles GAAP) are those
principles that have substantial authoritative support, such as FASB Sandards, interpretations,
and staff positions, APB Opinions and interpretations, AICPA Accounting Research Bulletins,
and other authoritative pronouncements. All these docments and others are now classified in
one document referred to as the Codification. rhe purpose of the Codification is to simplify user
access to all authoritative U.S. GAAP. rhe Codification changes the way GAAP is documented,
presented, and updated.
\7. Summary of Learning Objectives
1. Summary of Learning Objectives
Identify the major financial statements and other means of financial reporting - ANS-Companies
most frequently provide (l) the balance sheet, (2) the income statement, (3) the statement of
cash flows, and (4) the statement of owners' or stockholders' equity.
\2. Summary of Learning Objectives
Explain how accounting assists in the efficient use of scarce resources. - ANS-Accounting
provides reliable, relevant, and timely information to managers, investors, and creditors to allow
resource allocation to the most efficient enterprises. Accounting also provides measurements of
efficiency (profitability) and financial soundness.
\3. Summary of Learning Objectives
Identify the objective of financial reporting. - ANS-he objective of general-purpose financial
reporting is to provide financial information about the reporting entity that is useful to present
and potential equity investors, lenders, and other creditors in decisions about providing
resources to the entity through equity investments and loans or corms of credit. Information that
is decision-useful to investors may also be helpful to ther users of financial reporting who are
not investors.
\4. Summary of Learning Objectives
Explain the need for accounting standards. - ANS-The accounting profession has atmpted to
develop a set of standards that is generally accepted and universally practiced. Readers of
financial statements would have to familiarize themselves with every company's peculiar
accounting and reporting practices. As a result, it would be alm.ost lmpossible to prepare
statements that could be compared.
\5. Summary of Learning Objectives
Identify the major policy-setting bodies and their role in the standard-setting process. - ANS-The
Securities and Exchange Commission (SEC) is a federal agency that has the broad powers to
prescribe, in whatever detail it desires, the accounting standards to be employed by companles
that fall within its jurisdiction. The American Institute of Certified Public Accountants (AICPA)
issued standards through its Committee on Accounting Procedure and Accounting Principles
Board. The financial Accounting Standards Board (FASB) establishes and improves standards
of financial accounting and reporting for the guidance and education of the public.
\6. Summary of Learning Objectives
Explain the meaning of generally accepted accounting principles (GAAP) and the role of the
Codification for GAAP. - ANS-Generally accepted accounting principles GAAP) are those
principles that have substantial authoritative support, such as FASB Sandards, interpretations,
and staff positions, APB Opinions and interpretations, AICPA Accounting Research Bulletins,
and other authoritative pronouncements. All these docments and others are now classified in
one document referred to as the Codification. rhe purpose of the Codification is to simplify user
access to all authoritative U.S. GAAP. rhe Codification changes the way GAAP is documented,
presented, and updated.
\7. Summary of Learning Objectives
