INTERMEDIATE ACCOUNTING EXAM
QUESTIONS WITH COMPLETE
ANSWERS
The process that culminates in the preparation of financial reports on the enterprise for
use by both internal and external parties - Answer-Financial accounting
The process of identifying, measuring, analyzing, and communicating financial
information needed by management to plan, control, and evaluate a company's
operations - Answer-Managerial accounting
What are the 4 types of financial statements? - Answer-1. Balance sheet
2. Income statement
3. Statement of cash flows
4. Statement of owners or stockholders equity
Examples include the president's letter or supplementary schedules in the corporate
annual report, prospectuses, reports filed with government agencies, news releases,
management's forecasts, and social or environmental impact statements - Answer-
Financial reporting
The financial information a company provides to help users with capital allocation
decisions about the company - Answer-Financial reporting
Investors and creditors use financial reports to make their capital allocation decisions -
Answer-Users
The process of determining how and at what cost is allocated among competing
interests - Answer-Capital allocation
What are the 3 steps of the Cost Allocation Process? - Answer-1. Financial reporting
2. Users
3. Capital allocation
What is the objective of financial reporting? - Answer-To provide financial information
about the reporting entity that is useful to present and potential equity investors,
lenders, and other creditors
Provide financial reporting information to a wide variety of users - Answer-General-
purpose financial statements
Provide at the least cost the most useful information possible - Answer-General-purpose
financial statements
, Identifies investors and creditors as the primary users for general-purpose financial
statements - Answer-The objective of financial reporting
A perspective of general-purpose financial reporting where companies are viewed as
separate and distinct from their owners or present shareholders - Answer-Entity
perspective
A perspective of general-purpose financial reporting that is focused only on the needs of
the shareholders - Answer-Proprietary perspective
An approach used when investors are interested in financial reporting because it
provides information that is careful for making decisions - Answer-Decision-usefulness
approach
Ensures that 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 - Answer-Accrual-basis accounting
Companies prepare these to meet the needs, and to satisfy the stewardship reporting
responsibility of management - Answer-General-purpose financial statements
The common set of accounting standards and procedures - Answer-Generally Accepted
Accounting Principles (GAAP)
Means either than an authoritative accounting rule-making body has established a
principle or reporting in a given area or that over time a given practice has been
accepted as appropriate because of its universal application - Answer-"Generally
accepted"
Who are the parties involved in standard-setting? - Answer-1. SEC
2. AICPA
3. FASB
Established by the federal government to help develop and standardize financial
information present to stockholders - Answer-Securities and Exchange Commission
(SEC)
A federal agency that administers the Securities Exchange Act of 1934 - Answer-SEC
The SEC requires registrants to adhere to _____. - Answer-GAAP
The SEC relies on _____ to develop accounting standards. - Answer-FASB
QUESTIONS WITH COMPLETE
ANSWERS
The process that culminates in the preparation of financial reports on the enterprise for
use by both internal and external parties - Answer-Financial accounting
The process of identifying, measuring, analyzing, and communicating financial
information needed by management to plan, control, and evaluate a company's
operations - Answer-Managerial accounting
What are the 4 types of financial statements? - Answer-1. Balance sheet
2. Income statement
3. Statement of cash flows
4. Statement of owners or stockholders equity
Examples include the president's letter or supplementary schedules in the corporate
annual report, prospectuses, reports filed with government agencies, news releases,
management's forecasts, and social or environmental impact statements - Answer-
Financial reporting
The financial information a company provides to help users with capital allocation
decisions about the company - Answer-Financial reporting
Investors and creditors use financial reports to make their capital allocation decisions -
Answer-Users
The process of determining how and at what cost is allocated among competing
interests - Answer-Capital allocation
What are the 3 steps of the Cost Allocation Process? - Answer-1. Financial reporting
2. Users
3. Capital allocation
What is the objective of financial reporting? - Answer-To provide financial information
about the reporting entity that is useful to present and potential equity investors,
lenders, and other creditors
Provide financial reporting information to a wide variety of users - Answer-General-
purpose financial statements
Provide at the least cost the most useful information possible - Answer-General-purpose
financial statements
, Identifies investors and creditors as the primary users for general-purpose financial
statements - Answer-The objective of financial reporting
A perspective of general-purpose financial reporting where companies are viewed as
separate and distinct from their owners or present shareholders - Answer-Entity
perspective
A perspective of general-purpose financial reporting that is focused only on the needs of
the shareholders - Answer-Proprietary perspective
An approach used when investors are interested in financial reporting because it
provides information that is careful for making decisions - Answer-Decision-usefulness
approach
Ensures that 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 - Answer-Accrual-basis accounting
Companies prepare these to meet the needs, and to satisfy the stewardship reporting
responsibility of management - Answer-General-purpose financial statements
The common set of accounting standards and procedures - Answer-Generally Accepted
Accounting Principles (GAAP)
Means either than an authoritative accounting rule-making body has established a
principle or reporting in a given area or that over time a given practice has been
accepted as appropriate because of its universal application - Answer-"Generally
accepted"
Who are the parties involved in standard-setting? - Answer-1. SEC
2. AICPA
3. FASB
Established by the federal government to help develop and standardize financial
information present to stockholders - Answer-Securities and Exchange Commission
(SEC)
A federal agency that administers the Securities Exchange Act of 1934 - Answer-SEC
The SEC requires registrants to adhere to _____. - Answer-GAAP
The SEC relies on _____ to develop accounting standards. - Answer-FASB
