ACCT 3001 Ch. 1 Exam Questions And Answers

Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control a company's operations. - ANS FALSE Financial statements are the principal means through which a company communicates its financial information to those outside it. - ANS TRUE Users of financial reports provided by a company use that information to make their capital allocation decisions. - ANS TRUE An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit. - ANS TRUE The objective of financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, but not to users who are not investors. - ANS FALSE Investors are interested in financial reporting because it provides information that is useful for making decisions (decision-usefulness approach). - ANS TRUE Users of financial accounting statements have both coinciding and conflicting needs for information of various types. - ANS TRUE The Securities and Exchange Commission appointed the Committee on Accounting Procedure. - ANS FALSE The passage of a new FASB Standards Statement requires the support of five of the seven board members. - ANS FALSE Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of financial accounting and reporting. - ANS TRUE The AICPA created the Accounting Principles Board in 1959. - ANS TRUE The FASB's Codification integrates existing GAAP, and creates new GAAP. - ANS FALSE The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles. - ANS TRUE GAAP is a product of careful logic or empirical findings and are not influenced by political action. - ANS FALSE The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes auditing and independence standards and rules. - ANS TRUE The expectations gap is caused by what the public thinks accountants should do and what accountants think they can do. - ANS TRUE Financial reports in the early 21st century did not provide any information about a company's soft assets (intangibles). - ANS FALSE Accounting standards are now less likely to require the recording or disclosure of fair value information. - ANS FALSE U.S. companies that list overseas are required to use International Financial Reporting Standards, issued by the International Accounting Standards Board. - ANS FALSE Ethical issues in financial accounting are governed by the AICPA. - ANS FALSE General-purpose financial statements are the product of a. financial accounting. b. managerial accounting. c. both financial and managerial accounting. d. neither financial nor managerial accounting. - ANS a. financial accounting Users of financial reports include all of the following except a. creditors. b. government agencies. c. unions. d. All of these are users. - ANS d. All of these are users. The financial statements most frequently provided include all of the following except the a. balance sheet. b. income statement. c. statement of cash flows. d. statement of retained earnings. - ANS d. statement of retained earnings. The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries. - ANS a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. All the following are differences between financial and managerial accounting in how accounting information is used except to a. plan and control company's operations. b. decide whether to invest in the company. c. evaluate borrowing capacity to determine the extent of a loan to grant. d. All the above. - ANS d. All the above. Which of the following represents a form of communication through financial reporting but not through financial statements? a. Balance sheet. b. President's letter. c. Income statement. d. Notes to financial statements. - ANS b. President's letter.