ACC 231 EXAM 1 ch 1-4 Question and
answers correctly solved 2025/2026
4 financial statements of financial reporting - correct answer ✔balance sheet, income statement,
statement of cash flows, statement if owner's equity/stockholder's equity
financial reporting definition - correct answer ✔provide financial information that is useful ti
stockholders, investors, lenders, etc.
Securities and Exchange Commission (SEC) - correct answer ✔agency of the U.S. government that
oversees financial markets and accounting standard-setting bodies
Financial Accounting Standards Board (FASB) - correct answer ✔the private board that establishes the
generally accepted accounting principles (GAAP) used in the practice of financial accounting
American Institute of Certified Public Accountants (AICPA) - correct answer ✔gaap
Generally Accepted Accounting Principles (GAAP) - correct answer ✔a set of accounting standards that
is used in the preparation of financial statements, held by FASB & AICPA
Relevance: Predictive Value - correct answer ✔helps provide accurate expectations about the future
Relevance: Confirmatory Value - correct answer ✔helps users confirm or correct prior expectations
Relevance: Materiality - correct answer ✔relative size and importance
Faithful Representation - correct answer ✔#s and descriptions that match real life, ARE TRUE
, Faithful Representation: completeness - correct answer ✔All info received
Faithful Representation: Neutrality - correct answer ✔unbiased
Faithful Representation: free from error - correct answer ✔accurate
Enhancing Qualities - correct answer ✔Comparability, verifiability, timeliness, and understandability
Investment by owners - correct answer ✔increase in net assets (Equity) resulting from a transfer to the
company by an owner
Distribution by owners - correct answer ✔decrease in net assets (equity) of a particular enterprise
resulting from transfers to owners
Comprehensive Income - correct answer ✔change in equity/net assets from transactions or events
Includes ALL changes in equity (distribution by owners & investment by owners)
Economic entity assumptions - correct answer ✔all economic events with a SEPERATE particular
economic entity can be identified
Going Concern Assumption - correct answer ✔assume company will have a long life, not assumed
when liquidation (bankruptcy) occurs
Monetary Unit Assumption - correct answer ✔all transactions measured in terms of $ money
answers correctly solved 2025/2026
4 financial statements of financial reporting - correct answer ✔balance sheet, income statement,
statement of cash flows, statement if owner's equity/stockholder's equity
financial reporting definition - correct answer ✔provide financial information that is useful ti
stockholders, investors, lenders, etc.
Securities and Exchange Commission (SEC) - correct answer ✔agency of the U.S. government that
oversees financial markets and accounting standard-setting bodies
Financial Accounting Standards Board (FASB) - correct answer ✔the private board that establishes the
generally accepted accounting principles (GAAP) used in the practice of financial accounting
American Institute of Certified Public Accountants (AICPA) - correct answer ✔gaap
Generally Accepted Accounting Principles (GAAP) - correct answer ✔a set of accounting standards that
is used in the preparation of financial statements, held by FASB & AICPA
Relevance: Predictive Value - correct answer ✔helps provide accurate expectations about the future
Relevance: Confirmatory Value - correct answer ✔helps users confirm or correct prior expectations
Relevance: Materiality - correct answer ✔relative size and importance
Faithful Representation - correct answer ✔#s and descriptions that match real life, ARE TRUE
, Faithful Representation: completeness - correct answer ✔All info received
Faithful Representation: Neutrality - correct answer ✔unbiased
Faithful Representation: free from error - correct answer ✔accurate
Enhancing Qualities - correct answer ✔Comparability, verifiability, timeliness, and understandability
Investment by owners - correct answer ✔increase in net assets (Equity) resulting from a transfer to the
company by an owner
Distribution by owners - correct answer ✔decrease in net assets (equity) of a particular enterprise
resulting from transfers to owners
Comprehensive Income - correct answer ✔change in equity/net assets from transactions or events
Includes ALL changes in equity (distribution by owners & investment by owners)
Economic entity assumptions - correct answer ✔all economic events with a SEPERATE particular
economic entity can be identified
Going Concern Assumption - correct answer ✔assume company will have a long life, not assumed
when liquidation (bankruptcy) occurs
Monetary Unit Assumption - correct answer ✔all transactions measured in terms of $ money
