ACCOUNTING FOR DECISION MAKERS - C213
QUIZZES WITH ACTUAL SOLUTIONS.
Bookkeeping ANSWER : -is the preservation of a systematic, quantitative record of an activity
Accounting ANSWER : -A system of providing "quantitative information, primarily financial in nature,
about economic entities that is intended to be useful in making economic decisions."
The key features of this definition are the following:
Numbers: Accounting is quantitative. This is a strength because numbers can be easily tabulated and
summarized. It is a weakness because some important business events, such as a toxic waste spill and
the associated lawsuits and countersuits, cannot be easily described by one or two numbers.
A financial dimension: The status and performance of a business is affected by and reflected in many
dimensions—financial, personal relationships, community and environmental impact, and public image.
Accounting focuses on just the financial dimension.
Usefulness: The practice of accounting is supported by a long tradition of theory; U.S. accounting rules in
fact have a theoretical conceptual framework, and some people actually make a living as accounting
theorists. However, in spite of its theoretical beauty, accounting exists only because it is useful.
Future decisions based on past information: Although accounting is the structured reporting of what has
already occurred, this past information can only be useful if it impacts decisions about the future.
financial accounting ANSWER : -which is the name given to accounting information provided for and
used by external users.
Managerial accounting ANSWER : -the name given to accounting systems designed for internal users
financial statements ANSWER : -The three primary financial information documents: the balance
sheet, income statement, and statement of cash flows.
balance sheet ANSWER : -reports the resources of a company (the assets), the company's obligations
(the liabilities), and the owners' equity, which represents how much money has been invested in the
company by its owners.
,income statement ANSWER : -This document reports the amount of net income earned by a company
during a period, with annual and quarterly income statements being the most common.
statement of cash flows ANSWER : -This document reports the amount of cash collected and paid out
by a company in the following three types of activities: operating, investing, and financing.
The emphasis in financial accounting is on which of the following external user groups? ANSWER : -
Investors and creditors
The primary internal group that uses accounting information is ANSWER : -Management
Internal reports are generally used by ANSWER : -Management
Which of the following is NOT an external user of financial information? ANSWER : -Management
accounting standards are set by the? ANSWER : -Financial Accounting Standards Board (FASB). The
FASB is based in Norwalk, Connecticut; its seven full-time members are selected from a variety of
backgrounds—professional accounting, business, government, and academia. FASB is not a government
agency, it lacks the legal power to enforce the accounting standards it sets.
Generally Accepted Accounting Principles (GAAP) ANSWER : -a set of accounting standards that is used
in the preparation of financial statements
Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? ANSWER : -It
is a government agency
Generally accepted accounting principles are ANSWER : -Developed by accounting rule makers
The initials GAAP stand for ANSWER : -Generally Accepted Accounting Principles
,The current standard-setting board for accounting in the private sector is the ANSWER : -Financial
Accounting Standards Board (FASB)
Securities and Exchange Commission (SEC) ANSWER : -Congress created the Securities and Exchange
Commission (SEC) to regulate U.S. stock exchanges.The SEC is not charged with protecting investors
from losing money; instead, it seeks to create a fair information environment in which investors can buy
and sell stocks without fear that companies are hiding or manipulating financial data.
What is corporate governance? ANSWER : -Corporate Governance is the set of principles and practices
that a corporation uses to regulate the relationship between the shareholders and the professional
managers hired by the board of directors.
The label "CPA" has two different uses ANSWER : -for individuals who are CPAs and for CPA firms.CPA
firms are also hired to perform independent audits of a company's financial statements. The important
role of an independent audit in ensuring the reliability of financial statements is discussed in our
"Overview of the Financial Statements."not all CPAs work as accountants; they work in law firms or for
the CIA and as business consultants, corporate managers, and even accounting professors.
Certified Public Accountant (CPA) ANSWER : -A person who has taken a minimum number of college-
level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his
or her state.
American Institute of Certified Public Accountants (AICPA) ANSWER : -the professional organizations
of certified public accountants in the United States. Like other professional organizations (e.g., the
American Medical Association and the American Bar Association), the AICPA provides continuing
educational service to its members and also acts as a political voice to lobby on behalf of its
membership. The AICPA is responsible for preparing and grading the CPA examination in addition to
maintaining the integrity of the accounting profession through its Code of Professional Conduct.
Section 101 of the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board
(PCAOB). ANSWER : -Public Company Accounting Oversight Board (PCAOB)a private, non-profit
organization, but it effectively serves as an arm of the SEC in registering, inspecting, and disciplining the
auditors of all publicly traded companies. The SEC appoints the chairperson and members of the PCAOB.
Like the FASB, the PCAOB is funded by registration fees paid by all publicly traded companies in the
United States.
, Internal Revenue Service (IRS) ANSWER : -The branch of the U.S. Treasury Department in charge of
collecting taxes
International Accounting Standards Board (IASB) ANSWER : -An international accounting standard-
setting body responsible for the convergence of accounting standards worldwide.was formed in 1973 to
develop worldwide accounting standards.In 2001, the IASB restructured itself as an independent body
with closer links to national standard-setting bodies. At that time the IASB adopted its current name and
dropped its original name, the International Accounting Standards Committee (IASC).
International Accounting Standards Committee (IASC) ANSWER : -International Accounting Standards
Board (IASB)
International Financial Reporting Standards (IFRS) ANSWER : -Accounting standards, issued by the
IASB, that have been adopted by many countries outside of the United States.
Which of the following is the government agency that stipulates the rules and regulations that govern
the collection of taxes in the United States? ANSWER : -Internal Revenue Service
The organization that develops worldwide accounting standards is the ANSWER : -International
Accounting Standards Board (IASB)
Standards established by the International Accounting Standards Board are referred to as ANSWER : -
International Financial Reporting Standards
Which of the following is NOT a service typically provided by large public accounting firms? ANSWER :
-Making management decisions
Which of the following organizations has specific legal authority to establish accounting standards for
publicly held companies? ANSWER : -Securities and Exchange Commission (SEC)
Which of the following is NOT a reason for the integration of worldwide accounting standards?
ANSWER : -the theoretical necessity of a common set of accounting standards
QUIZZES WITH ACTUAL SOLUTIONS.
Bookkeeping ANSWER : -is the preservation of a systematic, quantitative record of an activity
Accounting ANSWER : -A system of providing "quantitative information, primarily financial in nature,
about economic entities that is intended to be useful in making economic decisions."
The key features of this definition are the following:
Numbers: Accounting is quantitative. This is a strength because numbers can be easily tabulated and
summarized. It is a weakness because some important business events, such as a toxic waste spill and
the associated lawsuits and countersuits, cannot be easily described by one or two numbers.
A financial dimension: The status and performance of a business is affected by and reflected in many
dimensions—financial, personal relationships, community and environmental impact, and public image.
Accounting focuses on just the financial dimension.
Usefulness: The practice of accounting is supported by a long tradition of theory; U.S. accounting rules in
fact have a theoretical conceptual framework, and some people actually make a living as accounting
theorists. However, in spite of its theoretical beauty, accounting exists only because it is useful.
Future decisions based on past information: Although accounting is the structured reporting of what has
already occurred, this past information can only be useful if it impacts decisions about the future.
financial accounting ANSWER : -which is the name given to accounting information provided for and
used by external users.
Managerial accounting ANSWER : -the name given to accounting systems designed for internal users
financial statements ANSWER : -The three primary financial information documents: the balance
sheet, income statement, and statement of cash flows.
balance sheet ANSWER : -reports the resources of a company (the assets), the company's obligations
(the liabilities), and the owners' equity, which represents how much money has been invested in the
company by its owners.
,income statement ANSWER : -This document reports the amount of net income earned by a company
during a period, with annual and quarterly income statements being the most common.
statement of cash flows ANSWER : -This document reports the amount of cash collected and paid out
by a company in the following three types of activities: operating, investing, and financing.
The emphasis in financial accounting is on which of the following external user groups? ANSWER : -
Investors and creditors
The primary internal group that uses accounting information is ANSWER : -Management
Internal reports are generally used by ANSWER : -Management
Which of the following is NOT an external user of financial information? ANSWER : -Management
accounting standards are set by the? ANSWER : -Financial Accounting Standards Board (FASB). The
FASB is based in Norwalk, Connecticut; its seven full-time members are selected from a variety of
backgrounds—professional accounting, business, government, and academia. FASB is not a government
agency, it lacks the legal power to enforce the accounting standards it sets.
Generally Accepted Accounting Principles (GAAP) ANSWER : -a set of accounting standards that is used
in the preparation of financial statements
Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? ANSWER : -It
is a government agency
Generally accepted accounting principles are ANSWER : -Developed by accounting rule makers
The initials GAAP stand for ANSWER : -Generally Accepted Accounting Principles
,The current standard-setting board for accounting in the private sector is the ANSWER : -Financial
Accounting Standards Board (FASB)
Securities and Exchange Commission (SEC) ANSWER : -Congress created the Securities and Exchange
Commission (SEC) to regulate U.S. stock exchanges.The SEC is not charged with protecting investors
from losing money; instead, it seeks to create a fair information environment in which investors can buy
and sell stocks without fear that companies are hiding or manipulating financial data.
What is corporate governance? ANSWER : -Corporate Governance is the set of principles and practices
that a corporation uses to regulate the relationship between the shareholders and the professional
managers hired by the board of directors.
The label "CPA" has two different uses ANSWER : -for individuals who are CPAs and for CPA firms.CPA
firms are also hired to perform independent audits of a company's financial statements. The important
role of an independent audit in ensuring the reliability of financial statements is discussed in our
"Overview of the Financial Statements."not all CPAs work as accountants; they work in law firms or for
the CIA and as business consultants, corporate managers, and even accounting professors.
Certified Public Accountant (CPA) ANSWER : -A person who has taken a minimum number of college-
level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his
or her state.
American Institute of Certified Public Accountants (AICPA) ANSWER : -the professional organizations
of certified public accountants in the United States. Like other professional organizations (e.g., the
American Medical Association and the American Bar Association), the AICPA provides continuing
educational service to its members and also acts as a political voice to lobby on behalf of its
membership. The AICPA is responsible for preparing and grading the CPA examination in addition to
maintaining the integrity of the accounting profession through its Code of Professional Conduct.
Section 101 of the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board
(PCAOB). ANSWER : -Public Company Accounting Oversight Board (PCAOB)a private, non-profit
organization, but it effectively serves as an arm of the SEC in registering, inspecting, and disciplining the
auditors of all publicly traded companies. The SEC appoints the chairperson and members of the PCAOB.
Like the FASB, the PCAOB is funded by registration fees paid by all publicly traded companies in the
United States.
, Internal Revenue Service (IRS) ANSWER : -The branch of the U.S. Treasury Department in charge of
collecting taxes
International Accounting Standards Board (IASB) ANSWER : -An international accounting standard-
setting body responsible for the convergence of accounting standards worldwide.was formed in 1973 to
develop worldwide accounting standards.In 2001, the IASB restructured itself as an independent body
with closer links to national standard-setting bodies. At that time the IASB adopted its current name and
dropped its original name, the International Accounting Standards Committee (IASC).
International Accounting Standards Committee (IASC) ANSWER : -International Accounting Standards
Board (IASB)
International Financial Reporting Standards (IFRS) ANSWER : -Accounting standards, issued by the
IASB, that have been adopted by many countries outside of the United States.
Which of the following is the government agency that stipulates the rules and regulations that govern
the collection of taxes in the United States? ANSWER : -Internal Revenue Service
The organization that develops worldwide accounting standards is the ANSWER : -International
Accounting Standards Board (IASB)
Standards established by the International Accounting Standards Board are referred to as ANSWER : -
International Financial Reporting Standards
Which of the following is NOT a service typically provided by large public accounting firms? ANSWER :
-Making management decisions
Which of the following organizations has specific legal authority to establish accounting standards for
publicly held companies? ANSWER : -Securities and Exchange Commission (SEC)
Which of the following is NOT a reason for the integration of worldwide accounting standards?
ANSWER : -the theoretical necessity of a common set of accounting standards
