Chapter 1: Financial Accounting and Accounting Standards Verified
Exam Questions and Answers Latest update 2026/2027
Question:
Accounting Principles Board (APB)
Answer:
Private standard-setting organization from 1959 to 1973, whose mission was to develop an overall
conceptual framework. Its official pronouncements, called APB Opinions, were to be based mainly on
research studies and be supported by reasons and analysis. The APB issued 31 opinions in its lifetime.
(p. 9).
Question:
Accounting Research Bulletins
Answer:
Fifty-one bulletins from the Committee on Accounting Procedure (CAP) during the years 1939 to
1959, issued to deal with accounting problems as they arose. Subsequently, the AICPA created the
Accounting Principles Board to provide a structured body of accounting principles. (p. 9).
Question:
Accounting Standards Updates
Answer:
The products of standard-setting (e.g., FASB standards, staff positions, EITF consensuses) included in
the FASB Codification. The Updates include the background and basis for conclusions for the new
pronouncement in a common format, regardless of the form in which such guidance may have been
issued. Updates are also issued for amendments to the SEC content in the Codification. (p.
12).
Question:
accrual-basis accounting
Answer:
Accounting approach, in which a company records events that change its financial statements in the
periods in which the events occur, rather than only in the periods in which it receives or pays cash.
Thus, a company recognizes revenue when it satisfies a performance obligation rather than when it
receives cash, and it recognizes
, Question:
American Institute of Certified Public Accountants (AICPA)
Answer:
expenses when it incurs them rather than when it pays them. (p. 6). The national professional
organization of practicing Certified Public Accountants (CPAs), whose various committees and
boards have been an important contributor to the development of GAAP. (p. 9).
Question:
APB Opinions
Answer:
The official pronouncements of the Accounting Principles Board, intended to be based mainly on
research studies and be supported by reasons and analysis. Between its inception in 1959 and its
dissolution in 1973, the APB issued 31 opinions. (p. 9).
Question:
Auditing Standards Board
Answer:
The arm of the AICPA that had been responsible for developing auditing standards. The Public
Company Accounting Oversight Board, established by the Sarbanes- Oxley Act, now oversees the
development of auditing standards. (p. 10).
Question:
Committee on Accounting Procedure (CAP)
Answer:
Committee established by the AICPA in 1939 at the urging of the SEC to deal with accounting
problems. The CAP issued 51 Accounting Research Bulletins and was replaced by the Accounting
Principles Board in 1959. (p. 9).
Question:
decision-usefulness
Answer:
Approach that requires that financial reporting be useful to investors by helping them assess (1) the
company's ability to generate net cash inflows and (2) management's ability to protect and enhance the
capital providers' investments. (p.
6).
Exam Questions and Answers Latest update 2026/2027
Question:
Accounting Principles Board (APB)
Answer:
Private standard-setting organization from 1959 to 1973, whose mission was to develop an overall
conceptual framework. Its official pronouncements, called APB Opinions, were to be based mainly on
research studies and be supported by reasons and analysis. The APB issued 31 opinions in its lifetime.
(p. 9).
Question:
Accounting Research Bulletins
Answer:
Fifty-one bulletins from the Committee on Accounting Procedure (CAP) during the years 1939 to
1959, issued to deal with accounting problems as they arose. Subsequently, the AICPA created the
Accounting Principles Board to provide a structured body of accounting principles. (p. 9).
Question:
Accounting Standards Updates
Answer:
The products of standard-setting (e.g., FASB standards, staff positions, EITF consensuses) included in
the FASB Codification. The Updates include the background and basis for conclusions for the new
pronouncement in a common format, regardless of the form in which such guidance may have been
issued. Updates are also issued for amendments to the SEC content in the Codification. (p.
12).
Question:
accrual-basis accounting
Answer:
Accounting approach, in which a company records events that change its financial statements in the
periods in which the events occur, rather than only in the periods in which it receives or pays cash.
Thus, a company recognizes revenue when it satisfies a performance obligation rather than when it
receives cash, and it recognizes
, Question:
American Institute of Certified Public Accountants (AICPA)
Answer:
expenses when it incurs them rather than when it pays them. (p. 6). The national professional
organization of practicing Certified Public Accountants (CPAs), whose various committees and
boards have been an important contributor to the development of GAAP. (p. 9).
Question:
APB Opinions
Answer:
The official pronouncements of the Accounting Principles Board, intended to be based mainly on
research studies and be supported by reasons and analysis. Between its inception in 1959 and its
dissolution in 1973, the APB issued 31 opinions. (p. 9).
Question:
Auditing Standards Board
Answer:
The arm of the AICPA that had been responsible for developing auditing standards. The Public
Company Accounting Oversight Board, established by the Sarbanes- Oxley Act, now oversees the
development of auditing standards. (p. 10).
Question:
Committee on Accounting Procedure (CAP)
Answer:
Committee established by the AICPA in 1939 at the urging of the SEC to deal with accounting
problems. The CAP issued 51 Accounting Research Bulletins and was replaced by the Accounting
Principles Board in 1959. (p. 9).
Question:
decision-usefulness
Answer:
Approach that requires that financial reporting be useful to investors by helping them assess (1) the
company's ability to generate net cash inflows and (2) management's ability to protect and enhance the
capital providers' investments. (p.
6).
