CHAPTER 1
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS
IFRS questions are available at the end of this chapter.
MULTIPLE CHOICE—Conceptual
21. General-purpose financial statements are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.
22. Users of financial reports include all of the following except
a. creditors.
b. government agencies.
c. unions.
d. All of these are users.
23. The financial statements most frequently provided include all of the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
24. The information provided by financial reporting pertains to
a. individual business enterprises, rather than to industries or an economy as a whole or
to members of society as consumers.
b. business industries, rather than to individual enterprises or an economy as a whole or
to members of society as consumers.
c. individual business enterprises, industries, and an economy as a whole, rather than to
members of society as consumers.
d. an economy as a whole and to members of society as consumers, rather than to
individual enterprises or industries.
25. All the following are differences between financial and managerial accounting in how
accounting information is used except to
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
d. All the above.
26. Which of the following represents a form of communication through financial reporting but
not through financial statements?
a. Balance sheet.
b. President's letter.
c. Income statement.
,1-2 Test Bank for Intermediate Accounting, Thirteenth Edition
d. Notes to financial statements.
P
27. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is called
a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.
28. How does accounting help the capital allocation process attract investment capital?
a. Provides timely, relevant information.
b. Encourages innovation.
c. Promotes productivity.
d. a and b above.
29. Whether a business is successful and thrives is determined by
a. markets.
b. free enterprise.
c. competition.
d. all of these.
30. An effective capital allocation process
a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and selling securities.
d. all of these.
31. Financial statements in the early 2000s provide information related to
a. nonfinancial measurements.
b. forward-looking data.
c. hard assets (inventory and plant assets).
d. none of these.
32. Which of the following is not a major challenge facing the accounting profession?
a. Nonfinancial measurements.
b. Timeliness.
c. Accounting for hard assets.
d. Forward-looking information.
33. What is a major objective of financial reporting?
a. Provide information that is useful to management in making decisions.
b. Provide information that clearly portray nonfinancial transactions.
c. Provide information that is useful to assess the amounts, timing, and uncertainty of
perspective cash receipts.
d. Provide information that excludes claims to the resources.
34. What is a major objective of financial reporting?
a. Provide information that is useful to the Internal Revenue Service in determining the
amount of federal income taxes payable.
b. Provide information that is useful in assessing the amounts and timing of revenue.
c. Provide information that is comprehensible only by sophisticated investors.
d. Provide information that clearly portrays the economic resources of an enterprise.
, Financial Accounting and Accounting Standards 1-3
35. Which of the following statements is not an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those resources, and changes
to them.
c. Provide information on the liquidation value of an enterprise.
d. Provide information that is useful in assessing cash flow prospects.
36. Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. none of the above.
37. One objective of financial reporting is to provide
a. information about the investors in the business entity.
b. information about the liquidation values of the resources held by the enterprise.
c. information that is useful in assessing cash flow prospects.
d. information that will attract new investors.
38. Accounting principles are "generally accepted" only when
a. an authoritative accounting rule-making body has established it in an official pro-
nouncement.
b. it has been accepted as appropriate because of its universal application.
c. both a and b.
d. neither a nor b.
39. A common set of accounting standards and procedures are called
a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
, 1-4 Test Bank for Intermediate Accounting, Thirteenth Edition
40. Which of the following is a general limitation of "general purpose financial statements"?
a. General purpose financial statements may not be the most informative for a specific
enterprise.
b. General purpose financial statements are comparable.
c. General purpose financial statements are assumed to present fairly the company's
financial operations.
d. None of the above.
41. What is the relationship between the Securities and Exchange Commission and accounting
standard setting in the United States?
a. The SEC requires all companies listed on an exchange to submit their financial
statements to the SEC.
b. The SEC coordinates with the AICPA in establishing accounting standards.
c. The SEC has a mandate to establish accounting standards for enterprises under its
jurisdiction.
d. The SEC reviews financial statements for compliance.
42. What is due process in the context of standard setting at the FASB?
a. FASB operates in full view of the public.
b. Public hearings are held on proposed accounting standards.
c. Interested parties can make their views known.
d. All of the above.
43. Which of the following organizations has been responsible for setting U.S. accounting
standards?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. Financial Accounting Standards Board.
d. All of the above.
44. Why did the AICPA create the Accounting Principles Board?
a. The SEC disbanded the previous standard setting organization.
b. The previous standard setting organization did not provide a structured set of
accounting principles.
c. No such organization existed in the past.
d. None of the above.
45. Which organization was responsible for issuing Accounting Research Bulletins?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. The SEC.
d. AICPA.
46. A characteristic of generally accepted accounting principles include the following
a. common set of standards and principles.
b. standards and principles are based federal statutes.
c. acceptance requires an affirmative vote of Certified Public Accountants.
d. practices that become accepted for at least a year by all industry members.
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS
IFRS questions are available at the end of this chapter.
MULTIPLE CHOICE—Conceptual
21. General-purpose financial statements are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.
22. Users of financial reports include all of the following except
a. creditors.
b. government agencies.
c. unions.
d. All of these are users.
23. The financial statements most frequently provided include all of the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
24. The information provided by financial reporting pertains to
a. individual business enterprises, rather than to industries or an economy as a whole or
to members of society as consumers.
b. business industries, rather than to individual enterprises or an economy as a whole or
to members of society as consumers.
c. individual business enterprises, industries, and an economy as a whole, rather than to
members of society as consumers.
d. an economy as a whole and to members of society as consumers, rather than to
individual enterprises or industries.
25. All the following are differences between financial and managerial accounting in how
accounting information is used except to
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
d. All the above.
26. Which of the following represents a form of communication through financial reporting but
not through financial statements?
a. Balance sheet.
b. President's letter.
c. Income statement.
,1-2 Test Bank for Intermediate Accounting, Thirteenth Edition
d. Notes to financial statements.
P
27. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is called
a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.
28. How does accounting help the capital allocation process attract investment capital?
a. Provides timely, relevant information.
b. Encourages innovation.
c. Promotes productivity.
d. a and b above.
29. Whether a business is successful and thrives is determined by
a. markets.
b. free enterprise.
c. competition.
d. all of these.
30. An effective capital allocation process
a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and selling securities.
d. all of these.
31. Financial statements in the early 2000s provide information related to
a. nonfinancial measurements.
b. forward-looking data.
c. hard assets (inventory and plant assets).
d. none of these.
32. Which of the following is not a major challenge facing the accounting profession?
a. Nonfinancial measurements.
b. Timeliness.
c. Accounting for hard assets.
d. Forward-looking information.
33. What is a major objective of financial reporting?
a. Provide information that is useful to management in making decisions.
b. Provide information that clearly portray nonfinancial transactions.
c. Provide information that is useful to assess the amounts, timing, and uncertainty of
perspective cash receipts.
d. Provide information that excludes claims to the resources.
34. What is a major objective of financial reporting?
a. Provide information that is useful to the Internal Revenue Service in determining the
amount of federal income taxes payable.
b. Provide information that is useful in assessing the amounts and timing of revenue.
c. Provide information that is comprehensible only by sophisticated investors.
d. Provide information that clearly portrays the economic resources of an enterprise.
, Financial Accounting and Accounting Standards 1-3
35. Which of the following statements is not an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those resources, and changes
to them.
c. Provide information on the liquidation value of an enterprise.
d. Provide information that is useful in assessing cash flow prospects.
36. Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. none of the above.
37. One objective of financial reporting is to provide
a. information about the investors in the business entity.
b. information about the liquidation values of the resources held by the enterprise.
c. information that is useful in assessing cash flow prospects.
d. information that will attract new investors.
38. Accounting principles are "generally accepted" only when
a. an authoritative accounting rule-making body has established it in an official pro-
nouncement.
b. it has been accepted as appropriate because of its universal application.
c. both a and b.
d. neither a nor b.
39. A common set of accounting standards and procedures are called
a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
, 1-4 Test Bank for Intermediate Accounting, Thirteenth Edition
40. Which of the following is a general limitation of "general purpose financial statements"?
a. General purpose financial statements may not be the most informative for a specific
enterprise.
b. General purpose financial statements are comparable.
c. General purpose financial statements are assumed to present fairly the company's
financial operations.
d. None of the above.
41. What is the relationship between the Securities and Exchange Commission and accounting
standard setting in the United States?
a. The SEC requires all companies listed on an exchange to submit their financial
statements to the SEC.
b. The SEC coordinates with the AICPA in establishing accounting standards.
c. The SEC has a mandate to establish accounting standards for enterprises under its
jurisdiction.
d. The SEC reviews financial statements for compliance.
42. What is due process in the context of standard setting at the FASB?
a. FASB operates in full view of the public.
b. Public hearings are held on proposed accounting standards.
c. Interested parties can make their views known.
d. All of the above.
43. Which of the following organizations has been responsible for setting U.S. accounting
standards?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. Financial Accounting Standards Board.
d. All of the above.
44. Why did the AICPA create the Accounting Principles Board?
a. The SEC disbanded the previous standard setting organization.
b. The previous standard setting organization did not provide a structured set of
accounting principles.
c. No such organization existed in the past.
d. None of the above.
45. Which organization was responsible for issuing Accounting Research Bulletins?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. The SEC.
d. AICPA.
46. A characteristic of generally accepted accounting principles include the following
a. common set of standards and principles.
b. standards and principles are based federal statutes.
c. acceptance requires an affirmative vote of Certified Public Accountants.
d. practices that become accepted for at least a year by all industry members.
