INTERMEDIATE ACCOUNTING 4TH EDITION BY
ELIZABETH GORDON EXAM QUESTIONS AND
SOLUTIONS GRADED A+
◉ Objective of Financial Reporting.
Answer: Provide information about the reporting entity that is
useful to present and potential to equity investors, lenders, and
others.
◉ Securities and Exchange Commission (SEC).
Answer: -Federal agency developed to help develop and standardize
financial information presented to stockholders
-Companies that issue securities to public are required to file with
SEC
-Have powers to prescribe auditing practices and standards to be
employed by companies that fall within its jurisdiction
-Requires registrants to adhere to GAAP
-Relies on FASB to develop accounting standards
-Mission to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation
-Regulations require filing of annual (10-K) & quarterly (10-Q)
reports and others
-Enforcement authority
,◉ American Institute of CPAs (AICPA).
Answer: -National professional org of CPAs
-Important to development of GAAP
-Established the Committee on Accounting Procedure (CAP) →
Accounting Principles Board (APB) → FASB
◉ Financial Accounting Standards Board (FASB).
Answer: -Major organization of the standard-setting structure for
financial accounting
-Wants to establish and improve standards of financial accounting
and reporting for the guidance and education of the public
-Accounting guidance issued by FASB is considered GAAP
-Issues: Accounting standards updates & financial accounting
concepts
◉ Generally Accepted Accounting Principles (GAAP).
Answer: common set of accounting standards and procedures for
which either an authoritative accounting rule making body has
established a principle of reporting in a given area, or over time, a
given practice has been accepted as appropriate because of its
universal application
◉ FASB Codification.
, Answer: -Provides all the authoritative literature related to a
particular topic in one place
-Topic → subtopics → sections → paragraphs
◉ Major Challenges in Financial Reporting.
Answer: GAAP is as much a product of political action as it is of
careful logic or empirical findings
◉ Measurement Principle.
Answer: Historical cost and fair value
◉ Revenue Recognition Principle.
Answer: Requires companies recognize revenue in the period
performance obligation is satisfied.
◉ Expense Recognition Principle.
Answer: Expenses follows the revenues.
◉ Full Disclosure Principle.
Answer: Providing information that is of sufficient importance to
influence the judgement and decisions of an informed user (financial
statements, notes to the statements, supplementary information).
ELIZABETH GORDON EXAM QUESTIONS AND
SOLUTIONS GRADED A+
◉ Objective of Financial Reporting.
Answer: Provide information about the reporting entity that is
useful to present and potential to equity investors, lenders, and
others.
◉ Securities and Exchange Commission (SEC).
Answer: -Federal agency developed to help develop and standardize
financial information presented to stockholders
-Companies that issue securities to public are required to file with
SEC
-Have powers to prescribe auditing practices and standards to be
employed by companies that fall within its jurisdiction
-Requires registrants to adhere to GAAP
-Relies on FASB to develop accounting standards
-Mission to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation
-Regulations require filing of annual (10-K) & quarterly (10-Q)
reports and others
-Enforcement authority
,◉ American Institute of CPAs (AICPA).
Answer: -National professional org of CPAs
-Important to development of GAAP
-Established the Committee on Accounting Procedure (CAP) →
Accounting Principles Board (APB) → FASB
◉ Financial Accounting Standards Board (FASB).
Answer: -Major organization of the standard-setting structure for
financial accounting
-Wants to establish and improve standards of financial accounting
and reporting for the guidance and education of the public
-Accounting guidance issued by FASB is considered GAAP
-Issues: Accounting standards updates & financial accounting
concepts
◉ Generally Accepted Accounting Principles (GAAP).
Answer: common set of accounting standards and procedures for
which either an authoritative accounting rule making body has
established a principle of reporting in a given area, or over time, a
given practice has been accepted as appropriate because of its
universal application
◉ FASB Codification.
, Answer: -Provides all the authoritative literature related to a
particular topic in one place
-Topic → subtopics → sections → paragraphs
◉ Major Challenges in Financial Reporting.
Answer: GAAP is as much a product of political action as it is of
careful logic or empirical findings
◉ Measurement Principle.
Answer: Historical cost and fair value
◉ Revenue Recognition Principle.
Answer: Requires companies recognize revenue in the period
performance obligation is satisfied.
◉ Expense Recognition Principle.
Answer: Expenses follows the revenues.
◉ Full Disclosure Principle.
Answer: Providing information that is of sufficient importance to
influence the judgement and decisions of an informed user (financial
statements, notes to the statements, supplementary information).
