Financial Accounting & Accounting
Theory , All Chapters Included |Guide
A+|
What is the primary purpose of financial accounting? -
ANSWER -To provide useful information to external users for
decision making.
Which users rely most heavily on financial accounting
information? - ANSWER -Investors and creditors.
What does financial reporting include? - ANSWER -It includes
financial statements and related disclosures.
What does the income statement report? - ANSWER -
Profitability over a period of time.
When is revenue recognized under cash-basis accounting? -
ANSWER -When collected in cash.
pg. 1
,When are expenses recorded under accrual accounting? -
ANSWER -When they help generate revenue.
What best describes faithful representation? - ANSWER -Free
from error, neutral, complete.
What does information with predictive value do? - ANSWER -
Helps predict future outcomes.
Which is not an enhancing qualitative characteristic? - ANSWER
-Neutrality.
What does materiality depend on? - ANSWER -Professional
judgment.
What does the going concern assumption imply? - ANSWER -
The business will operate indefinitely.
What does the economic entity assumption require? - ANSWER
-Separation of business and owner transactions.
pg. 2
, What does the periodicity assumption allow? - ANSWER -
Business activities to be divided into reporting periods.
What are probable future economic benefits? - ANSWER -
Assets.
What are probable future sacrifices of economic benefits? -
ANSWER -Liabilities.
Which organization establishes U.S. GAAP? - ANSWER -FASB.
Which organization has legal authority over U.S. public
companies? - ANSWER -SEC.
What does the FASB Codification serve to do? - ANSWER -
Collect all authoritative GAAP in one place.
Why is standard-setting described as a political process? -
ANSWER -Different stakeholder groups lobby for preferred
outcomes.
pg. 3
Theory , All Chapters Included |Guide
A+|
What is the primary purpose of financial accounting? -
ANSWER -To provide useful information to external users for
decision making.
Which users rely most heavily on financial accounting
information? - ANSWER -Investors and creditors.
What does financial reporting include? - ANSWER -It includes
financial statements and related disclosures.
What does the income statement report? - ANSWER -
Profitability over a period of time.
When is revenue recognized under cash-basis accounting? -
ANSWER -When collected in cash.
pg. 1
,When are expenses recorded under accrual accounting? -
ANSWER -When they help generate revenue.
What best describes faithful representation? - ANSWER -Free
from error, neutral, complete.
What does information with predictive value do? - ANSWER -
Helps predict future outcomes.
Which is not an enhancing qualitative characteristic? - ANSWER
-Neutrality.
What does materiality depend on? - ANSWER -Professional
judgment.
What does the going concern assumption imply? - ANSWER -
The business will operate indefinitely.
What does the economic entity assumption require? - ANSWER
-Separation of business and owner transactions.
pg. 2
, What does the periodicity assumption allow? - ANSWER -
Business activities to be divided into reporting periods.
What are probable future economic benefits? - ANSWER -
Assets.
What are probable future sacrifices of economic benefits? -
ANSWER -Liabilities.
Which organization establishes U.S. GAAP? - ANSWER -FASB.
Which organization has legal authority over U.S. public
companies? - ANSWER -SEC.
What does the FASB Codification serve to do? - ANSWER -
Collect all authoritative GAAP in one place.
Why is standard-setting described as a political process? -
ANSWER -Different stakeholder groups lobby for preferred
outcomes.
pg. 3
