ACCT 311 midterm Test Questions Answered Correctly Latest Update 2025-2026
Financial statements are the principal means through which a company communicates its
financial information to those outside it. - Answers T
Investors are interested in financial reporting because it provides information that is useful for
making decisions. - Answers T
The FASB's Codification creates a new set of GAAP. - Answers F
The Public Company Accounting Oversight Board has oversight and enforcement authority and
establishes auditing and independence standards and rules. - Answers T
The expectations gap is due to the difference between what the public thinks accountants
should do and what accountants think they can do. - Answers T
The information provided by financial reporting pertains to - Answers individual business
enterprises, rather than to industries or an economy as a whole or to members of society as
consumers.
The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization's operations is called -
Answers managerial accounting.
Which of the following helps in determining whether a business thrives? - Answers d. All of
these answer choices are correct.
What is the objective of financial reporting? - Answers Provide information about the reporting
entity that is useful to present and potential equity investors, lenders, and other creditors.
Accrual accounting is used because - Answers it provides a better indication of a company's
ability to generate cash flows than the cash basis.
What is the relationship between the Securities and Exchange Commission and accounting
standard setting in the United States? - Answers The SEC has a mandate to establish
accounting standards for enterprises under its jurisdiction.
Which of the following organizations has been responsible for setting U.S. accounting
standards? - Answers d. All of the answer choices are correct.
Which organization was responsible for issuing Accounting Research Bulletins? - Answers The
Committee on Accounting Procedure.
Characteristics of generally accepted accounting principles include all of the following except -
Answers each principle is approved by the SEC.
Companies that are listed on a stock exchange are required to submit their financial statements
,to the - Answers SEC.
The Financial Accounting Standards Board (FASB) was proposed by the - Answers Study Group
on establishment of Accounting Principles (Wheat Committee).
Which of the following is true of the Financial Accounting Standards Board - Answers The
members of the FASB are appointed by the Financial Accounting Foundation.
The major distinction between the Financial Accounting Standards Board (FASB) and its
predecessor, the Accounting Principles Board (APB), is - Answers all members of the FASB are
fully remunerated, serve full time, and are independent of any companies or institutions.
The Financial Accounting Standards Board employs a "due process" system which - Answers
enables interested parties to express their views on issues under consideration.
Which of the following pronouncements were issued by the Accounting Principles Board? -
Answers APB Opinions
The most significant current source of generally accepted accounting principles is the -
Answers FASB.
Which of the following is not a part of generally accepted accounting principles? - Answers All
of these are part of generally accepted accounting principles.
Rule 203 of the Code of Professional Conduct addresses: - Answers financial statements being
based on generally accepted accounting principles.
Financial accounting standard-setting in the United States - Answers can be described as a
social process which reflects political actions of various interested user groups as well as a
product of research and logic.
The purpose of the International Accounting Standards Board is to - Answers promote uniform
accounting standards among countries of the world.
Which of the following is a source of pressure that may influence the accounting standard
setting process? - Answers All of these answers are correct.
What is the "expectations gap"? - Answers The difference between what the public thinks the
accountant should do and what the accountant thinks they can do.
What would be an advantage of having all countries adopt and follow the same accounting
standards? - Answers Comparability and lower preparation costs.
Which of the following is an ethical concern of accountants? - Answers Earnings manipulation.
What is the objective of financial reporting? How do general-purpose financial statements help
meet this objective. - Answers The objective of financial reporting is 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 provide financial reporting information to a wide variety of
users. They help shareholders, creditors, employees, and regulators to better understand a
company's financial position and related performance.
Significant accounting publications are listed below (1-8). Sources or sponsors of accounting
publications are identified next by alphabetical character (a-e). Match the publications with their
sources.
Publications
1. Accounting Research Bulletins (1953-1959)
2. Accounting Standards Updates
3. Statements of Position (SOPs)
4. Statements of Financial Accounting Concepts
5. Opinions (1962-1973)
Sources/Sponsors
a. Financial Accounting Standards Board d. Committee on Accounting Procedure
b. Accounting Standards Executive Committee e. Accounting Principles Board
c. The AICPA - Answers 1. d 4. a
2. a 5. e
3. b
IFRS includes both International Financial Reporting Standards and International Accounting
Standards. - Answers T
International Financial Reporting Standards preceded International Accounting Standards -
Answers F
The standard-setting structure used by the International Accounting Standards Board is very
similar to that used by the Financial Accounting Standards Board. - Answers T
The rules-based standards of IFRS are more detailed than the simpler, principles-based
standards of U.S. GAAP. - Answers F
, The International Accounting Standards Board has seven members. - Answers F
The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to large public
companies listed on U.S. exchanges. - Answers T
Relevance and faithful representation are the two primary qualities that make accounting
information useful for decision making. - Answers T
The expense recognition principle states that debits must equal credits in each transaction. -
Answers F
Revenues are recognized in the accounting period in which the performance obligation is
satisfied. - Answers T
Supplementary information may include details or amounts that present a different perspective
from that adopted in the financial statements. - Answers T
Which of the following is not true concerning a conceptual framework in accounting? - Answers
It should be based on fundamental truths that are derived from the laws of nature.
What is a purpose of having a conceptual framework? - Answers To enable the profession to
more quickly solve emerging practical problems and to provide a foundation from which to build
more useful standards.
What is the primary objective of financial reporting as indicated in the conceptual framework? -
Answers Provide information that is useful to those making investing and credit decisions.
The quality of information that means the numbers and descriptions match what really existed
or happened is - Answers faithful representation.
In classifying the elements of financial statements, the primary distinction between revenues
and gains is - Answers the nature of the activities that gave rise to the transactions involved.
A decrease in net assets arising from peripheral or incidental transactions is called a(n) -
Answers loss.
Which of the following elements of financial statements is not a component of comprehensive
income? - Answers Distributions to owners
Which basic element of financial statements arises from peripheral or incidental transactions? -
Answers Gains.
Preparation of consolidated financial statements when a parent-subsidiary relationship exists is
an example of the - Answers economic entity assumption.
The assumption that a company will not be sold or liquidated in the near future is known as the -
Answers None of these answer choices are correct.
Financial statements are the principal means through which a company communicates its
financial information to those outside it. - Answers T
Investors are interested in financial reporting because it provides information that is useful for
making decisions. - Answers T
The FASB's Codification creates a new set of GAAP. - Answers F
The Public Company Accounting Oversight Board has oversight and enforcement authority and
establishes auditing and independence standards and rules. - Answers T
The expectations gap is due to the difference between what the public thinks accountants
should do and what accountants think they can do. - Answers T
The information provided by financial reporting pertains to - Answers individual business
enterprises, rather than to industries or an economy as a whole or to members of society as
consumers.
The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization's operations is called -
Answers managerial accounting.
Which of the following helps in determining whether a business thrives? - Answers d. All of
these answer choices are correct.
What is the objective of financial reporting? - Answers Provide information about the reporting
entity that is useful to present and potential equity investors, lenders, and other creditors.
Accrual accounting is used because - Answers it provides a better indication of a company's
ability to generate cash flows than the cash basis.
What is the relationship between the Securities and Exchange Commission and accounting
standard setting in the United States? - Answers The SEC has a mandate to establish
accounting standards for enterprises under its jurisdiction.
Which of the following organizations has been responsible for setting U.S. accounting
standards? - Answers d. All of the answer choices are correct.
Which organization was responsible for issuing Accounting Research Bulletins? - Answers The
Committee on Accounting Procedure.
Characteristics of generally accepted accounting principles include all of the following except -
Answers each principle is approved by the SEC.
Companies that are listed on a stock exchange are required to submit their financial statements
,to the - Answers SEC.
The Financial Accounting Standards Board (FASB) was proposed by the - Answers Study Group
on establishment of Accounting Principles (Wheat Committee).
Which of the following is true of the Financial Accounting Standards Board - Answers The
members of the FASB are appointed by the Financial Accounting Foundation.
The major distinction between the Financial Accounting Standards Board (FASB) and its
predecessor, the Accounting Principles Board (APB), is - Answers all members of the FASB are
fully remunerated, serve full time, and are independent of any companies or institutions.
The Financial Accounting Standards Board employs a "due process" system which - Answers
enables interested parties to express their views on issues under consideration.
Which of the following pronouncements were issued by the Accounting Principles Board? -
Answers APB Opinions
The most significant current source of generally accepted accounting principles is the -
Answers FASB.
Which of the following is not a part of generally accepted accounting principles? - Answers All
of these are part of generally accepted accounting principles.
Rule 203 of the Code of Professional Conduct addresses: - Answers financial statements being
based on generally accepted accounting principles.
Financial accounting standard-setting in the United States - Answers can be described as a
social process which reflects political actions of various interested user groups as well as a
product of research and logic.
The purpose of the International Accounting Standards Board is to - Answers promote uniform
accounting standards among countries of the world.
Which of the following is a source of pressure that may influence the accounting standard
setting process? - Answers All of these answers are correct.
What is the "expectations gap"? - Answers The difference between what the public thinks the
accountant should do and what the accountant thinks they can do.
What would be an advantage of having all countries adopt and follow the same accounting
standards? - Answers Comparability and lower preparation costs.
Which of the following is an ethical concern of accountants? - Answers Earnings manipulation.
What is the objective of financial reporting? How do general-purpose financial statements help
meet this objective. - Answers The objective of financial reporting is 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 provide financial reporting information to a wide variety of
users. They help shareholders, creditors, employees, and regulators to better understand a
company's financial position and related performance.
Significant accounting publications are listed below (1-8). Sources or sponsors of accounting
publications are identified next by alphabetical character (a-e). Match the publications with their
sources.
Publications
1. Accounting Research Bulletins (1953-1959)
2. Accounting Standards Updates
3. Statements of Position (SOPs)
4. Statements of Financial Accounting Concepts
5. Opinions (1962-1973)
Sources/Sponsors
a. Financial Accounting Standards Board d. Committee on Accounting Procedure
b. Accounting Standards Executive Committee e. Accounting Principles Board
c. The AICPA - Answers 1. d 4. a
2. a 5. e
3. b
IFRS includes both International Financial Reporting Standards and International Accounting
Standards. - Answers T
International Financial Reporting Standards preceded International Accounting Standards -
Answers F
The standard-setting structure used by the International Accounting Standards Board is very
similar to that used by the Financial Accounting Standards Board. - Answers T
The rules-based standards of IFRS are more detailed than the simpler, principles-based
standards of U.S. GAAP. - Answers F
, The International Accounting Standards Board has seven members. - Answers F
The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to large public
companies listed on U.S. exchanges. - Answers T
Relevance and faithful representation are the two primary qualities that make accounting
information useful for decision making. - Answers T
The expense recognition principle states that debits must equal credits in each transaction. -
Answers F
Revenues are recognized in the accounting period in which the performance obligation is
satisfied. - Answers T
Supplementary information may include details or amounts that present a different perspective
from that adopted in the financial statements. - Answers T
Which of the following is not true concerning a conceptual framework in accounting? - Answers
It should be based on fundamental truths that are derived from the laws of nature.
What is a purpose of having a conceptual framework? - Answers To enable the profession to
more quickly solve emerging practical problems and to provide a foundation from which to build
more useful standards.
What is the primary objective of financial reporting as indicated in the conceptual framework? -
Answers Provide information that is useful to those making investing and credit decisions.
The quality of information that means the numbers and descriptions match what really existed
or happened is - Answers faithful representation.
In classifying the elements of financial statements, the primary distinction between revenues
and gains is - Answers the nature of the activities that gave rise to the transactions involved.
A decrease in net assets arising from peripheral or incidental transactions is called a(n) -
Answers loss.
Which of the following elements of financial statements is not a component of comprehensive
income? - Answers Distributions to owners
Which basic element of financial statements arises from peripheral or incidental transactions? -
Answers Gains.
Preparation of consolidated financial statements when a parent-subsidiary relationship exists is
an example of the - Answers economic entity assumption.
The assumption that a company will not be sold or liquidated in the near future is known as the -
Answers None of these answer choices are correct.
