ACCOUNTING EXAM FOR FDIC EXAM
QUESTIONS AND ANSWERS
Financial accounting - Answers -creates financial reports for the use of both internal and
external parties
managerial accounting - Answers -the internal use of accounting statements by
managers in planning and directing the organization's activities
financial statements - Answers -4 types: balance sheet, income statement, statement of
CFs and the statement of owners' equity
Objective of financial reporting - Answers -to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders, and
other creditors in decisions about providing resources to the entity
general purpose financial statements - Answers -provide general information to a wide
variety of users. It allows everyone to better understand its financial position
entity perspective - Answers -a perspective where companies are viewed as separate
and distinct from their owners'
proprietary perspective - Answers -a perspective that financial reporting should be
focused only on the needs of shareholders. Not considered appropriate
decision-usefulness - Answers -financial reporting provides information that is useful for
making decisions. Investors want to assess the company's ability to generate cash flows
and management's ability to protect capital investments
Accrual Basis Accounting - Answers -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 when it receives or pays cash. Recognizes revenue when it provides the
goods or services than when it receives the cash
GAAP (Generally Accepted Accounting Principles) - Answers -A single set of universal
rules in regards to creating financial statements. Allows the reviewers of statements to
understand without having to read a new set of rules each time
Parties involved in standard-setting - Answers -SEC, AICPA & FASB
,SEC - Answers -standardize financial information presented to stockholders. SEC
requires registrants to adhere to GAAP. The SEC relies on the FASB to develop
accounting standards. The companies listed on the stock exchange must submit their
financial statements to the SEC
American Institute of Certified Public Accountants (AICPA) - Answers -The Committee
on Accounting Procedures (CAP) was appointed by SEC. It issues accounting research
bulletins that dealt with a variety of accounting problems, but this structure ended up
failing. Later created the Accounting Principles Board
Accounting Principles Board - Answers -purposes were to advance the written
expression of accounting principles, determine appropriate practices and narrow the
areas of difference and inconsistency in practice. Has 18-21 members on the board.
Came under fire early because of a lack of productivity and failing to act promptly to
correct accounting abuses
The FASB came to replace the ___ - Answers -APB. Which also created the accounting
standards executive committee as the committee authorized to speak for the AICPA
Financial Accounting Standards Board - Answers -mission is to establish and improve
standards of financial accounting and reporting for the guidance and education of the
public. The financial accounting foundation, FASB and Financial Accounting Standards
Advisory Council fall under this
Financial Accounting Foundation - Answers -its purpose is to select members of the
FASB & GASB, fund their activities and have general oversight
FASB - Answers -purpose to establish and improve standards of financial accounting
and reporting
Financial Accounting Standards Advisory Council - Answers -purpose is to consult on
major policy issues, technical issues, project priorities and selection
Type of FASB pronouncements - Answers -1. Accounting Standards Updates
2. Financial Accounting Concepts
Accounting standards updates - Answers -The FASB issues accounting
pronouncements through accounting standards updates. These updates amend the
Accounting Standards Codification, which represents the source of authoritative
accounting standards
Emerging Issues Task Force (EITF) - Answers -comprised of representatives from CPA
firms and financial statement preparers. The purpose is to reach a consensus on how to
account for new and unusual financial transactions that may create differing financial
reporting practices. This helps the FASB in many ways because it identifies accounting
problems as they arise
, Statements of Financial Accounting Concepts - Answers -create fundamental objectives
and concepts that the board uses in developing future standards of financial accounting
and reporting. Intends to form a cohesive set of interrelated concepts that will serve as
tools for solving existing and emerging problems
Financial Accounting Standards Board Accounting Standards Codification - Answers -
created by the FASB. Goal is to provide one place where all the authoritative literature
related to a particular topic goes. The codification changes the way that GAAP is
documented and updated
Financial Accounting Standards Board Codification Research System (CRS) - Answers
-FASB developed this to provide easy access to the Codification. CRS is an online real
time database that provides easy access to the codification. They provide a topically
organized structure
Sarbanes-Oxley Act - Answers -passed in response to a string of accounting scandals.
The law increased the resources for the SEC to combat fraud and curb poor reporting
practices. The SEC increased its policing efforts.
Key provisions:
-establishes oversight board
-implements stronger independent rules for auditors
-requires CEO and CFO to personally certify financial statements
Internal Controls - Answers -are a system of checks and balances designed to prevent
and detect fraud and errors
expectations gap - Answers -what the public thinks accountants should do and what
accountants think they can do
International Account Standards Board (IASB) - Answers -issues the IFRS, standards
used on most foreign exchanges
International financial reporting standards - Answers -issued by the london-based
international accounting standards board. Foreign companies listed on US exchanges
are permitted to use IFRS
International Organization of Securities Commissions (IOSCO) - Answers -does not set
accounting standards, dedicated to ensuring that global markets can operate in an
efficient and effective basis
the purpose of information presented in notes to the financial statements is to provide...
- Answers -disclosure required by GAAP
QUESTIONS AND ANSWERS
Financial accounting - Answers -creates financial reports for the use of both internal and
external parties
managerial accounting - Answers -the internal use of accounting statements by
managers in planning and directing the organization's activities
financial statements - Answers -4 types: balance sheet, income statement, statement of
CFs and the statement of owners' equity
Objective of financial reporting - Answers -to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders, and
other creditors in decisions about providing resources to the entity
general purpose financial statements - Answers -provide general information to a wide
variety of users. It allows everyone to better understand its financial position
entity perspective - Answers -a perspective where companies are viewed as separate
and distinct from their owners'
proprietary perspective - Answers -a perspective that financial reporting should be
focused only on the needs of shareholders. Not considered appropriate
decision-usefulness - Answers -financial reporting provides information that is useful for
making decisions. Investors want to assess the company's ability to generate cash flows
and management's ability to protect capital investments
Accrual Basis Accounting - Answers -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 when it receives or pays cash. Recognizes revenue when it provides the
goods or services than when it receives the cash
GAAP (Generally Accepted Accounting Principles) - Answers -A single set of universal
rules in regards to creating financial statements. Allows the reviewers of statements to
understand without having to read a new set of rules each time
Parties involved in standard-setting - Answers -SEC, AICPA & FASB
,SEC - Answers -standardize financial information presented to stockholders. SEC
requires registrants to adhere to GAAP. The SEC relies on the FASB to develop
accounting standards. The companies listed on the stock exchange must submit their
financial statements to the SEC
American Institute of Certified Public Accountants (AICPA) - Answers -The Committee
on Accounting Procedures (CAP) was appointed by SEC. It issues accounting research
bulletins that dealt with a variety of accounting problems, but this structure ended up
failing. Later created the Accounting Principles Board
Accounting Principles Board - Answers -purposes were to advance the written
expression of accounting principles, determine appropriate practices and narrow the
areas of difference and inconsistency in practice. Has 18-21 members on the board.
Came under fire early because of a lack of productivity and failing to act promptly to
correct accounting abuses
The FASB came to replace the ___ - Answers -APB. Which also created the accounting
standards executive committee as the committee authorized to speak for the AICPA
Financial Accounting Standards Board - Answers -mission is to establish and improve
standards of financial accounting and reporting for the guidance and education of the
public. The financial accounting foundation, FASB and Financial Accounting Standards
Advisory Council fall under this
Financial Accounting Foundation - Answers -its purpose is to select members of the
FASB & GASB, fund their activities and have general oversight
FASB - Answers -purpose to establish and improve standards of financial accounting
and reporting
Financial Accounting Standards Advisory Council - Answers -purpose is to consult on
major policy issues, technical issues, project priorities and selection
Type of FASB pronouncements - Answers -1. Accounting Standards Updates
2. Financial Accounting Concepts
Accounting standards updates - Answers -The FASB issues accounting
pronouncements through accounting standards updates. These updates amend the
Accounting Standards Codification, which represents the source of authoritative
accounting standards
Emerging Issues Task Force (EITF) - Answers -comprised of representatives from CPA
firms and financial statement preparers. The purpose is to reach a consensus on how to
account for new and unusual financial transactions that may create differing financial
reporting practices. This helps the FASB in many ways because it identifies accounting
problems as they arise
, Statements of Financial Accounting Concepts - Answers -create fundamental objectives
and concepts that the board uses in developing future standards of financial accounting
and reporting. Intends to form a cohesive set of interrelated concepts that will serve as
tools for solving existing and emerging problems
Financial Accounting Standards Board Accounting Standards Codification - Answers -
created by the FASB. Goal is to provide one place where all the authoritative literature
related to a particular topic goes. The codification changes the way that GAAP is
documented and updated
Financial Accounting Standards Board Codification Research System (CRS) - Answers
-FASB developed this to provide easy access to the Codification. CRS is an online real
time database that provides easy access to the codification. They provide a topically
organized structure
Sarbanes-Oxley Act - Answers -passed in response to a string of accounting scandals.
The law increased the resources for the SEC to combat fraud and curb poor reporting
practices. The SEC increased its policing efforts.
Key provisions:
-establishes oversight board
-implements stronger independent rules for auditors
-requires CEO and CFO to personally certify financial statements
Internal Controls - Answers -are a system of checks and balances designed to prevent
and detect fraud and errors
expectations gap - Answers -what the public thinks accountants should do and what
accountants think they can do
International Account Standards Board (IASB) - Answers -issues the IFRS, standards
used on most foreign exchanges
International financial reporting standards - Answers -issued by the london-based
international accounting standards board. Foreign companies listed on US exchanges
are permitted to use IFRS
International Organization of Securities Commissions (IOSCO) - Answers -does not set
accounting standards, dedicated to ensuring that global markets can operate in an
efficient and effective basis
the purpose of information presented in notes to the financial statements is to provide...
- Answers -disclosure required by GAAP
