LSUS MHA 706 TEST BANK FULL SOLUTION
100 PERCENT CORRECT
●● Do not for profit organizations have to prepare financial statements?
Answer: Yes- they also have stakeholders and managers that have an
interest in financial reporting
●● Should the preparation and presentation of financial accounting data
be regulated?
Answer: Yes, it is important to have financial reporting that is accurate
and based on reliable data.
●● SEC
Answer: has legal authority to regulate the form and content of financial
statements
●● GAAP- applies only to financial accounting statements
Answer: The conventions that have evolved from the pronouncements
and rulings of the implementing organizations constitute a set of
guidelines for the preparation of financial accounting statements
●● Does GAAP remain static over time?
,Answer: no, because business practices are continuously evolving, so
GAAP also has to adapt accordingly.
●● Assumptions
Answer: accounting entity, going concern, periodicity, and monetary unit
●● Accounting entity
Answer: the specific entity for which the statements apply can be
defined
●● Going concern
Answer: it is assumed that the entity will have an indefinite lifetime
rather than be liquidated in the near future
●● Monetary unit
Answer: in the US, the unit is the US dollar, unadjusted for inflation and
deflation
●● Historical costs
Answer: Requires most assets to be valued at acquisition (historical)
costs rather than fair market (current) value
●● Revenue recognition
, Answer: Revenues must be recognized in the period in which they are
realizable and earned
●● Expense matching
Answer: Expenses must be matched (in time) to the related revenues
●● Full disclosure
Answer: Financial statements must contain a complete picture of the
economic (financial) events of the organization
●● Which two principles are related?
Answer: Revenue recognition and full disclosure- financial statements
must capture a complete picture of the economic or financial events of
the organization
●● Materiality
Answer: To keep statements manageable, only entries that are important
to the operational and financial status of the organization need be
separately identified
●● Cost Benefit
Answer: Financial statements cannot report all possible information that
every potential user might find relevant. When deciding what
100 PERCENT CORRECT
●● Do not for profit organizations have to prepare financial statements?
Answer: Yes- they also have stakeholders and managers that have an
interest in financial reporting
●● Should the preparation and presentation of financial accounting data
be regulated?
Answer: Yes, it is important to have financial reporting that is accurate
and based on reliable data.
●● SEC
Answer: has legal authority to regulate the form and content of financial
statements
●● GAAP- applies only to financial accounting statements
Answer: The conventions that have evolved from the pronouncements
and rulings of the implementing organizations constitute a set of
guidelines for the preparation of financial accounting statements
●● Does GAAP remain static over time?
,Answer: no, because business practices are continuously evolving, so
GAAP also has to adapt accordingly.
●● Assumptions
Answer: accounting entity, going concern, periodicity, and monetary unit
●● Accounting entity
Answer: the specific entity for which the statements apply can be
defined
●● Going concern
Answer: it is assumed that the entity will have an indefinite lifetime
rather than be liquidated in the near future
●● Monetary unit
Answer: in the US, the unit is the US dollar, unadjusted for inflation and
deflation
●● Historical costs
Answer: Requires most assets to be valued at acquisition (historical)
costs rather than fair market (current) value
●● Revenue recognition
, Answer: Revenues must be recognized in the period in which they are
realizable and earned
●● Expense matching
Answer: Expenses must be matched (in time) to the related revenues
●● Full disclosure
Answer: Financial statements must contain a complete picture of the
economic (financial) events of the organization
●● Which two principles are related?
Answer: Revenue recognition and full disclosure- financial statements
must capture a complete picture of the economic or financial events of
the organization
●● Materiality
Answer: To keep statements manageable, only entries that are important
to the operational and financial status of the organization need be
separately identified
●● Cost Benefit
Answer: Financial statements cannot report all possible information that
every potential user might find relevant. When deciding what
