CPA - FAR EXAM WITH COMPLETE SOLUTIONS 100% CORRECT
What is included in United States generally accepted accounting principles? - ANSER
The FASB Accounting Standards Codification are the authoritative U.S. GAAP for
publicly traded companies. Also, various pronouncements of the SEC are considered to
be GAAP.
What is the American Institute of Certified Public Accountants? - ANSER The AICPA is
the professional organization for participating CPAs.
What are the first three steps taken by the Financial Accounting Standards Board
(FASB) when it issues a new standard in accounting? - ANSWER 1. Determines whether
to add the project to its agenda in consultation with the Financial Accounting
Foundation (FAF);
2. Does research;
3. Holds a public hearing regarding the topic.
What does the SEC do? - ANSWER It administers the US securities laws, most notably
the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.
What are the last three steps of the standard-setting process? - ANSWER 1. Review
research and respond to comments from interested parties, and issue an exposure
draft;
2. Invite additional comments;
3. Complete new accounting guidance and issue Accounting Standards Update (ASU).
How do user groups influence the output from the FASB standards? - ANSWER Users
influence standards by participating in due process process.
What is the mission of the Financial Accounting Advisory Council? - ANSWER The
FASAC counsels on major policy issues, project priorities, and the setting of task forces.
,What is the major purpose of the Securities and Exchange Commission (SEC)? -
ANSWER The major purpose of the SEC is to facilitate the efficient allocation of capital
through the maintenance of open, orderly, and fair securities markets.
What is the Financial Accounting Standards Board (FASB)? - ANSWER The FASB
establishes financial accounting standards for business entities.
What is the function of the Financial Accounting Foundation (FAF)? - ANSWER The FAF
is responsible for oversight for FASB including appointing members and funding.
What are the seven significant components of the general-purpose external financial
report? - ANSWER 1. Income Statement;
2. Balance Sheet;
3. Statement of Cash Flows;
4. Statement of Retained Earnings;
5. Statement of Comprehensive Income;
6. Footnote Disclosures;
7. Auditor's Opinion.
What is the purposed of the Financial Accounting Standards Board FASB Accounting
Standards Codification? - ANSWER The FASB Accounting Standards Codification is the
exclusive source of authoritative U.S. Generally Accepted Accounting Principles for
nongovernmental entities except for the Securities Exchange Commission guidance.
What does the Financial Accounting Standards Board FASB Accounting Standards
Codification exclude? - ANSWER Other comprehensive basis of accounting
Cash basis
Income tax basis
Regulatory accounting principles
, What are the main qualitative characteristics of financial information? - ANSWER
Faithful representation and relevance (FARR)
What are the ingredients of relevance? - ANSWER predictive value, confirmatory value,
materiality
List the enhancing qualitative characteristics of financial information. - ANSWER 1.
Comparability
2. Verifiability
3. Timeliness
4. Understandability
What does it mean to be free from error? - ANSWER Information is free from error if it is
truthful.
What is neutrality? - ANSWER Accounting information does not favour a particular
position
Neutrality
What are the ingredients of faithful representation? - ANSWER Completeness, Free from
material error, Neutrality.
Decision makers; mainly potential investors, creditors and regulators
What is confirmatory value? - ANSWER For accounting information to be relevant, it
should help decision makers confirm past predictions.
What is understandability? - ANS Information is understandable if the user comprehends
it with reasonable effort and diligence.
What are objectives of financial reporting? - ANS To provide information about the entity
to current and future users of the financial statements who are making credit and
investment decisions.
What is included in United States generally accepted accounting principles? - ANSER
The FASB Accounting Standards Codification are the authoritative U.S. GAAP for
publicly traded companies. Also, various pronouncements of the SEC are considered to
be GAAP.
What is the American Institute of Certified Public Accountants? - ANSER The AICPA is
the professional organization for participating CPAs.
What are the first three steps taken by the Financial Accounting Standards Board
(FASB) when it issues a new standard in accounting? - ANSWER 1. Determines whether
to add the project to its agenda in consultation with the Financial Accounting
Foundation (FAF);
2. Does research;
3. Holds a public hearing regarding the topic.
What does the SEC do? - ANSWER It administers the US securities laws, most notably
the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.
What are the last three steps of the standard-setting process? - ANSWER 1. Review
research and respond to comments from interested parties, and issue an exposure
draft;
2. Invite additional comments;
3. Complete new accounting guidance and issue Accounting Standards Update (ASU).
How do user groups influence the output from the FASB standards? - ANSWER Users
influence standards by participating in due process process.
What is the mission of the Financial Accounting Advisory Council? - ANSWER The
FASAC counsels on major policy issues, project priorities, and the setting of task forces.
,What is the major purpose of the Securities and Exchange Commission (SEC)? -
ANSWER The major purpose of the SEC is to facilitate the efficient allocation of capital
through the maintenance of open, orderly, and fair securities markets.
What is the Financial Accounting Standards Board (FASB)? - ANSWER The FASB
establishes financial accounting standards for business entities.
What is the function of the Financial Accounting Foundation (FAF)? - ANSWER The FAF
is responsible for oversight for FASB including appointing members and funding.
What are the seven significant components of the general-purpose external financial
report? - ANSWER 1. Income Statement;
2. Balance Sheet;
3. Statement of Cash Flows;
4. Statement of Retained Earnings;
5. Statement of Comprehensive Income;
6. Footnote Disclosures;
7. Auditor's Opinion.
What is the purposed of the Financial Accounting Standards Board FASB Accounting
Standards Codification? - ANSWER The FASB Accounting Standards Codification is the
exclusive source of authoritative U.S. Generally Accepted Accounting Principles for
nongovernmental entities except for the Securities Exchange Commission guidance.
What does the Financial Accounting Standards Board FASB Accounting Standards
Codification exclude? - ANSWER Other comprehensive basis of accounting
Cash basis
Income tax basis
Regulatory accounting principles
, What are the main qualitative characteristics of financial information? - ANSWER
Faithful representation and relevance (FARR)
What are the ingredients of relevance? - ANSWER predictive value, confirmatory value,
materiality
List the enhancing qualitative characteristics of financial information. - ANSWER 1.
Comparability
2. Verifiability
3. Timeliness
4. Understandability
What does it mean to be free from error? - ANSWER Information is free from error if it is
truthful.
What is neutrality? - ANSWER Accounting information does not favour a particular
position
Neutrality
What are the ingredients of faithful representation? - ANSWER Completeness, Free from
material error, Neutrality.
Decision makers; mainly potential investors, creditors and regulators
What is confirmatory value? - ANSWER For accounting information to be relevant, it
should help decision makers confirm past predictions.
What is understandability? - ANS Information is understandable if the user comprehends
it with reasonable effort and diligence.
What are objectives of financial reporting? - ANS To provide information about the entity
to current and future users of the financial statements who are making credit and
investment decisions.
