ADVANCED INTERMEDIATE
ACCOUNTING EXAM #1
The process that culminates in the preparation of financial reports on the enterprise for use by both
internal and external parties - CORRECT ANSWER -Financial accounting
The process of identifying, measuring, analyzing, and communicating financial information needed by
management to plan, control, and evaluate a company's operations - CORRECT ANSWER -Managerial
accounting
What are the 4 types of financial statements? - CORRECT ANSWER -1. Balance sheet
2. Income statement
3. Statement of cash flows
4. Statement of owners or stockholders equity
Examples include the president's letter or supplementary schedules in the corporate annual report,
prospectuses, reports filed with government agencies, news releases, management's forecasts, and
social or environmental impact statements - CORRECT ANSWER -Financial reporting
The financial information a company provides to help users with capital allocation decisions about the
company - CORRECT ANSWER -Financial reporting
Investors and creditors use financial reports to make their capital allocation decisions - CORRECT
ANSWER -Users
The process of determining how and at what cost is allocated among competing interests - CORRECT
ANSWER -Capital allocation
,What are the 3 steps of the Cost Allocation Process? - CORRECT ANSWER -1. Financial reporting
2. Users
3. Capital allocation
What is the objective of financial reporting? - CORRECT ANSWER -To provide financial information about
the reporting entity that is useful to present and potential equity investors, lenders, and other creditors
Provide financial reporting information to a wide variety of users - CORRECT ANSWER -General-purpose
financial statements
Provide at the least cost the most useful information possible - CORRECT ANSWER -General-purpose
financial statements
Identifies investors and creditors as the primary users for general-purpose financial statements -
CORRECT ANSWER -The objective of financial reporting
A perspective of general-purpose financial reporting where companies are viewed as separate and
distinct from their owners or present shareholders - CORRECT ANSWER -Entity perspective
A perspective of general-purpose financial reporting that is focused only on the needs of the
shareholders - CORRECT ANSWER -Proprietary perspective
An approach used when investors are interested in financial reporting because it provides information
that is careful for making decisions - CORRECT ANSWER -Decision-usefulness approach
Ensures that a company records events that change its financial statements in the periods in which the
events occur, rather than only in the periods in which it receives or pays cash - CORRECT ANSWER -
Accrual-basis accounting
, Companies prepare these to meet the needs, and to satisfy the stewardship reporting responsibility of
management - CORRECT ANSWER -General-purpose financial statements
The common set of accounting standards and procedures - CORRECT ANSWER -Generally Accepted
Accounting Principles (GAAP)
Means either than an authoritative accounting rule-making body has established a principle or reporting
in a given area or that over time a given practice has been accepted as appropriate because of its
universal application - CORRECT ANSWER -"Generally accepted"
Who are the parties involved in standard-setting? - CORRECT ANSWER -1. SEC
2. AICPA
3. FASB
Established by the federal government to help develop and standardize financial information present to
stockholders - CORRECT ANSWER -Securities and Exchange Commission (SEC)
A federal agency that administers the Securities Exchange Act of 1934 - CORRECT ANSWER -SEC
The SEC requires registrants to adhere to . - CORRECT ANSWER -GAAP
The SEC relies on to develop accounting standards. - CORRECT ANSWER -FASB
The national professional organization of practicing CPAs and an important contributor to the
development of GAAP - CORRECT ANSWER -American Institute of Certified Public Accountants (AICPA)
ACCOUNTING EXAM #1
The process that culminates in the preparation of financial reports on the enterprise for use by both
internal and external parties - CORRECT ANSWER -Financial accounting
The process of identifying, measuring, analyzing, and communicating financial information needed by
management to plan, control, and evaluate a company's operations - CORRECT ANSWER -Managerial
accounting
What are the 4 types of financial statements? - CORRECT ANSWER -1. Balance sheet
2. Income statement
3. Statement of cash flows
4. Statement of owners or stockholders equity
Examples include the president's letter or supplementary schedules in the corporate annual report,
prospectuses, reports filed with government agencies, news releases, management's forecasts, and
social or environmental impact statements - CORRECT ANSWER -Financial reporting
The financial information a company provides to help users with capital allocation decisions about the
company - CORRECT ANSWER -Financial reporting
Investors and creditors use financial reports to make their capital allocation decisions - CORRECT
ANSWER -Users
The process of determining how and at what cost is allocated among competing interests - CORRECT
ANSWER -Capital allocation
,What are the 3 steps of the Cost Allocation Process? - CORRECT ANSWER -1. Financial reporting
2. Users
3. Capital allocation
What is the objective of financial reporting? - CORRECT ANSWER -To provide financial information about
the reporting entity that is useful to present and potential equity investors, lenders, and other creditors
Provide financial reporting information to a wide variety of users - CORRECT ANSWER -General-purpose
financial statements
Provide at the least cost the most useful information possible - CORRECT ANSWER -General-purpose
financial statements
Identifies investors and creditors as the primary users for general-purpose financial statements -
CORRECT ANSWER -The objective of financial reporting
A perspective of general-purpose financial reporting where companies are viewed as separate and
distinct from their owners or present shareholders - CORRECT ANSWER -Entity perspective
A perspective of general-purpose financial reporting that is focused only on the needs of the
shareholders - CORRECT ANSWER -Proprietary perspective
An approach used when investors are interested in financial reporting because it provides information
that is careful for making decisions - CORRECT ANSWER -Decision-usefulness approach
Ensures that a company records events that change its financial statements in the periods in which the
events occur, rather than only in the periods in which it receives or pays cash - CORRECT ANSWER -
Accrual-basis accounting
, Companies prepare these to meet the needs, and to satisfy the stewardship reporting responsibility of
management - CORRECT ANSWER -General-purpose financial statements
The common set of accounting standards and procedures - CORRECT ANSWER -Generally Accepted
Accounting Principles (GAAP)
Means either than an authoritative accounting rule-making body has established a principle or reporting
in a given area or that over time a given practice has been accepted as appropriate because of its
universal application - CORRECT ANSWER -"Generally accepted"
Who are the parties involved in standard-setting? - CORRECT ANSWER -1. SEC
2. AICPA
3. FASB
Established by the federal government to help develop and standardize financial information present to
stockholders - CORRECT ANSWER -Securities and Exchange Commission (SEC)
A federal agency that administers the Securities Exchange Act of 1934 - CORRECT ANSWER -SEC
The SEC requires registrants to adhere to . - CORRECT ANSWER -GAAP
The SEC relies on to develop accounting standards. - CORRECT ANSWER -FASB
The national professional organization of practicing CPAs and an important contributor to the
development of GAAP - CORRECT ANSWER -American Institute of Certified Public Accountants (AICPA)
