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and Analysis Text and Cases, 13th Edition by
Richard G. Schroeder
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,Accounting Theory and Analysis
13th Edition
Test Bank
By
Richard G. Schroeder
University of North Carolina at Charlotte
Myrtle W. Clark
University of Kentucky
Jack M. Cathey
University of North Carolina at Charlotte
,Chapter 1
Multiple Choice:
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.
, d. Accounting standards can have detrimental impacts on the wealth levels of the providers of
financial information.
Answer d
20. Which of the following companies was involved in an accounting failure that caused the public
accounting firm Arthur Andersen to gout of business?
a. Goldman Sachs
b. Wachovia
c. Enron
d. AIG
Answer c
21. The mission of the International Accounting Standards Board (IASB) is to
a. Develop a uniform currency in which the financial transactions of companies throughout the
world would be measured.
b. Issue enforceable standards which regulate the financial accounting and reporting of
multinational corporations.
c. Develop a single set of high-quality and understandable IFRS for general-purpose financial
statements.
d. Arbitrate accounting disputes between auditors and international companies.
Answer c
22. The Financial Accounting Standards Board (FASB) was proposed by the
a. American Institute of Certified Public Accountants.
b. Study Group on establishment of Accounting Principles (Wheat Committee).
c. Accounting Principles Board.
d. Study Group on the Objectives of Financial Statements (Trueblood Committee)
Answer c
23. The body that has the ultimate power to prescribe the accounting practices and standards to be
employed by companies that fall under its jurisdiction is the
a. SEC
b. APB.
c. FASB.
d. AICPA.
Answer a
24. Which of the following organizations was established by the federal government to help develop
and standardize financial information presented to stockholders?
a. AICPA (American Institute of Certified Public Accountants).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
, d. CAP (Committee on Accounting Procedure)
Answer b
25. All the following are true regarding the FASB Accounting Standards Codification except:
a. The Codification changes the way GAAP is documented, presented, and updated.
b. The goal of the Codification was to provide one place where all authoritative literature about a
particular topic could be found.
c. The purpose of the Codification is to create new GAAP.
d. The Codification was created to simplify user access.
Answer c
26. International Financial Reporting Standards (IFRS) are issued by the:
a. EU (European Union).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
d. IASB (International Accounting Standards Board).
Answer d
Essay
1. What is the difference between normative and positive theory?
Normative theories explain what should be, whereas positive theories explain what is. Ideally, there
should be no such distinction, because a well-developed and complete theory encompasses both
what should be and what is.
2. Why is the development of a general theory of accounting important?
The development of a general theory of accounting is important because of the role accounting
plays in our economic society. We live in a capitalistic society, which is characterized by a self-
regulated market that operates through the forces of supply and demand. Goods and services are
available for purchase in markets, and individuals are free to enter or exit the market to pursue their
economic goals. All societies are constrained by scarce resources that limit the attainment of all
individual or group economic goals. In our society, the role of accounting is to report how
organizations use scarce resources and to report on the status of resources and claims to resources.
3. Discuss the evolution of accounting during the 1930s.
One of the first attempts to improve accounting began shortly after the inception of the Great
Depression with a series of meetings between representatives of the New York Stock Exchange
(NYSE) and the American Institute of Accountants. The purpose of these meetings was to discuss
problems pertaining to the interests of investors, the NYSE, and accountants in the preparation of
external financial statements.
, Similarly, in 1935 the American Association of University Instructors in Accounting changed its
name to the American Accounting Association (AAA) and announced its intention to expand its
activities in the research and development of accounting principles and standards. The first result
of these expanded activities was the publication, in 1936, of a brief report cautiously titled “A
Tentative Statement of Accounting Principles Underlying Corporate Financial Statements.” The
four-and-one-half-page document summarized the significant concepts underlying financial
statements at that time.
The cooperative efforts between the members of the NYSE and the AIA were well received.
However, the post-Depression atmosphere in the United States was characterized by regulation.
There was even legislation introduced that would have required auditors to be licensed by the
federal government after passing a civil service examination.
Two of the most important pieces of legislation passed at this time were the Securities Act of 1933
and the Securities Exchange Act of 1934, which established the Securities and Exchange
Commission (SEC). The SEC was created to administer various securities acts. Under powers
provided by Congress, the SEC was given the authority to prescribe accounting principles and
reporting practices. Nevertheless, because the SEC has acted as an overseer and allowed the private
sector to develop accounting principles, this authority has seldom been used. However, the SEC
has exerted pressure on the accounting profession and has been especially interested in narrowing
areas of difference in accounting practice.
From 1936 to 1938 the SEC was engaged in an internal debate over whether it should develop
accounting standards. Despite the fact that the then–SEC chairman, and later Supreme Court
justice, William O. Douglas disagreed, in 1938 the SEC decided in Accounting Series Release
(ASR) No. 4 to allow accounting principles to be set in the private sector. ASR No. 4 indicated that
reports filed with the SEC must be prepared in accordance with accounting principles that have
“substantial authoritative support.”
The profession was convinced that it did not have the time needed to develop a theoretical
framework of accounting. As a result, the AIA agreed to publish a study by Sanders, Hatfield, and
Moore titled A Statement of Accounting Principles. The publication of this work was quite
controversial in that it was simply a survey of existing practice that was seen as telling practicing
accountants “do what you think is best.” Some accountants also used the study as an authoritative
source that justified current practice.
In 1936 the AIA merged with the American Society of Certified Public Accountants, forming a
larger organization later named the American Institute of Certified Public Accountants (AICPA).
This organization has had increasing influence over the development of accounting theory. For
example, over the years, the AICPA established several committees and boards to deal with the
need to further develop accounting principles. The first was the Committee on Accounting
Procedure. It was followed by the Accounting Principles Board, which was replaced by the
Financial Accounting Standards Board. Each of these bodies has issued pronouncements on
and Analysis Text and Cases, 13th Edition by
Richard G. Schroeder
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
,Accounting Theory and Analysis
13th Edition
Test Bank
By
Richard G. Schroeder
University of North Carolina at Charlotte
Myrtle W. Clark
University of Kentucky
Jack M. Cathey
University of North Carolina at Charlotte
,Chapter 1
Multiple Choice:
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.
, d. Accounting standards can have detrimental impacts on the wealth levels of the providers of
financial information.
Answer d
20. Which of the following companies was involved in an accounting failure that caused the public
accounting firm Arthur Andersen to gout of business?
a. Goldman Sachs
b. Wachovia
c. Enron
d. AIG
Answer c
21. The mission of the International Accounting Standards Board (IASB) is to
a. Develop a uniform currency in which the financial transactions of companies throughout the
world would be measured.
b. Issue enforceable standards which regulate the financial accounting and reporting of
multinational corporations.
c. Develop a single set of high-quality and understandable IFRS for general-purpose financial
statements.
d. Arbitrate accounting disputes between auditors and international companies.
Answer c
22. The Financial Accounting Standards Board (FASB) was proposed by the
a. American Institute of Certified Public Accountants.
b. Study Group on establishment of Accounting Principles (Wheat Committee).
c. Accounting Principles Board.
d. Study Group on the Objectives of Financial Statements (Trueblood Committee)
Answer c
23. The body that has the ultimate power to prescribe the accounting practices and standards to be
employed by companies that fall under its jurisdiction is the
a. SEC
b. APB.
c. FASB.
d. AICPA.
Answer a
24. Which of the following organizations was established by the federal government to help develop
and standardize financial information presented to stockholders?
a. AICPA (American Institute of Certified Public Accountants).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
, d. CAP (Committee on Accounting Procedure)
Answer b
25. All the following are true regarding the FASB Accounting Standards Codification except:
a. The Codification changes the way GAAP is documented, presented, and updated.
b. The goal of the Codification was to provide one place where all authoritative literature about a
particular topic could be found.
c. The purpose of the Codification is to create new GAAP.
d. The Codification was created to simplify user access.
Answer c
26. International Financial Reporting Standards (IFRS) are issued by the:
a. EU (European Union).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
d. IASB (International Accounting Standards Board).
Answer d
Essay
1. What is the difference between normative and positive theory?
Normative theories explain what should be, whereas positive theories explain what is. Ideally, there
should be no such distinction, because a well-developed and complete theory encompasses both
what should be and what is.
2. Why is the development of a general theory of accounting important?
The development of a general theory of accounting is important because of the role accounting
plays in our economic society. We live in a capitalistic society, which is characterized by a self-
regulated market that operates through the forces of supply and demand. Goods and services are
available for purchase in markets, and individuals are free to enter or exit the market to pursue their
economic goals. All societies are constrained by scarce resources that limit the attainment of all
individual or group economic goals. In our society, the role of accounting is to report how
organizations use scarce resources and to report on the status of resources and claims to resources.
3. Discuss the evolution of accounting during the 1930s.
One of the first attempts to improve accounting began shortly after the inception of the Great
Depression with a series of meetings between representatives of the New York Stock Exchange
(NYSE) and the American Institute of Accountants. The purpose of these meetings was to discuss
problems pertaining to the interests of investors, the NYSE, and accountants in the preparation of
external financial statements.
, Similarly, in 1935 the American Association of University Instructors in Accounting changed its
name to the American Accounting Association (AAA) and announced its intention to expand its
activities in the research and development of accounting principles and standards. The first result
of these expanded activities was the publication, in 1936, of a brief report cautiously titled “A
Tentative Statement of Accounting Principles Underlying Corporate Financial Statements.” The
four-and-one-half-page document summarized the significant concepts underlying financial
statements at that time.
The cooperative efforts between the members of the NYSE and the AIA were well received.
However, the post-Depression atmosphere in the United States was characterized by regulation.
There was even legislation introduced that would have required auditors to be licensed by the
federal government after passing a civil service examination.
Two of the most important pieces of legislation passed at this time were the Securities Act of 1933
and the Securities Exchange Act of 1934, which established the Securities and Exchange
Commission (SEC). The SEC was created to administer various securities acts. Under powers
provided by Congress, the SEC was given the authority to prescribe accounting principles and
reporting practices. Nevertheless, because the SEC has acted as an overseer and allowed the private
sector to develop accounting principles, this authority has seldom been used. However, the SEC
has exerted pressure on the accounting profession and has been especially interested in narrowing
areas of difference in accounting practice.
From 1936 to 1938 the SEC was engaged in an internal debate over whether it should develop
accounting standards. Despite the fact that the then–SEC chairman, and later Supreme Court
justice, William O. Douglas disagreed, in 1938 the SEC decided in Accounting Series Release
(ASR) No. 4 to allow accounting principles to be set in the private sector. ASR No. 4 indicated that
reports filed with the SEC must be prepared in accordance with accounting principles that have
“substantial authoritative support.”
The profession was convinced that it did not have the time needed to develop a theoretical
framework of accounting. As a result, the AIA agreed to publish a study by Sanders, Hatfield, and
Moore titled A Statement of Accounting Principles. The publication of this work was quite
controversial in that it was simply a survey of existing practice that was seen as telling practicing
accountants “do what you think is best.” Some accountants also used the study as an authoritative
source that justified current practice.
In 1936 the AIA merged with the American Society of Certified Public Accountants, forming a
larger organization later named the American Institute of Certified Public Accountants (AICPA).
This organization has had increasing influence over the development of accounting theory. For
example, over the years, the AICPA established several committees and boards to deal with the
need to further develop accounting principles. The first was the Committee on Accounting
Procedure. It was followed by the Accounting Principles Board, which was replaced by the
Financial Accounting Standards Board. Each of these bodies has issued pronouncements on
