FINANCIAL REPORTING I EXAM ONE
MULTIPLE CHOICE QUESTIONS &
VERIFIED COMPLETE SOLUTIONS
What is the purpose of information presented in notes to the financial statements? -
Correct Answer ✔✔ To provide disclosure required by generally accepted accounting
principles
What group currently writes generally accepted accounting principles? - Correct Answer
✔✔ Financial Accounting Standards Board
In analyzing a company's financial statements, which financial statement would a
potential investor primarily use to assess the company's liquidity and financial flexibility?
- Correct Answer ✔✔ Balance Sheet
Which of the following is true regarding the comparison of managerial to financial
accounting? - Correct Answer ✔✔ Managerial accounting need not follow GAAP while
financial accounting must follow them
What has the FASB maintained regarding new GAAP? - Correct Answer ✔✔ New
GAAP should be neutral and not favor any particular reporting objective
Which companies violate SEC regulations by a departure from GAAP? - Correct Answer
✔✔ Publicly traded companies
According to the FASB conceptual framework, what are the objectives of financial
reporting for business enterprises based on? - Correct Answer ✔✔ The needs of the
users of the information
According to the conceptual framework, the process of reporting an item in the financial
statements of an entity is what? - Correct Answer ✔✔ Recognition
Conceptually, interim financial statements can be described as emphasizing - Correct
Answer ✔✔ Timeliness over faithful representation
According to the conceptual framework, the usefulness of providing information in
financial statements is subject to the constraint of - Correct Answer ✔✔ Cost-benefit
What is conceptual framework intended to establish? - Correct Answer ✔✔ The
objectives and concepts for use in developing the standards of financial accounting
, When a parent-subsidiary relationship exists, consolidated financial statements are
prepared in recognition of the accounting concept of - Correct Answer ✔✔ Economic
entity
According to the FASB conceptual framework, predictive value is an ingredient of
relevance, representation, both, or neither? - Correct Answer ✔✔ Relevance
Is the FASB a private sector body, governmental unit, international organization, or
group of accounting firms? - Correct Answer ✔✔ Private sector body
Which of the following accounts is not closed?
A. Common stock
B. Dividends
C. Interest Income
D. Profit Summary - Correct Answer ✔✔ Common Stock
What is the correct sequence of accounting procedures? - Correct Answer ✔✔ Journal,
ledger, trial balance, financial statements
What is the principle purpose of posting? - Correct Answer ✔✔ To enter transactions
into the ledger
What is the correct order to present current assets? - Correct Answer ✔✔ Cash,
accounts receivables, inventories, prepaid items (order of liquidity)
Reporting accounts receivable at net realizable value is a departure from the accounting
principle of - Correct Answer ✔✔ Historical Cost
Which of the following accounts is a contra account?
A. Accumulated depreciation, Equipment
B. Depreciation expense, Office equipment
C. Dividends
D. Unearned Revenue - Correct Answer ✔✔ Accumulated depreciation, Equipment
In analyzing an entity's annual financial report, which financial statement would an
analyst primarily use to assess the entity's liquidity? - Correct Answer ✔✔ Balance
Sheet
Which pronouncement provides additional guidelines on implementing or applying
FASB Standards or interpretations? - Correct Answer ✔✔ Staff Positions
Which pronouncements represent extensions of modifications of existing standards? -
Correct Answer ✔✔ Interpretations (FASB)
Which pronouncement is the primary document of the FASB that establishes GAAP? -
Correct Answer ✔✔ Statement of Financial Accounting
MULTIPLE CHOICE QUESTIONS &
VERIFIED COMPLETE SOLUTIONS
What is the purpose of information presented in notes to the financial statements? -
Correct Answer ✔✔ To provide disclosure required by generally accepted accounting
principles
What group currently writes generally accepted accounting principles? - Correct Answer
✔✔ Financial Accounting Standards Board
In analyzing a company's financial statements, which financial statement would a
potential investor primarily use to assess the company's liquidity and financial flexibility?
- Correct Answer ✔✔ Balance Sheet
Which of the following is true regarding the comparison of managerial to financial
accounting? - Correct Answer ✔✔ Managerial accounting need not follow GAAP while
financial accounting must follow them
What has the FASB maintained regarding new GAAP? - Correct Answer ✔✔ New
GAAP should be neutral and not favor any particular reporting objective
Which companies violate SEC regulations by a departure from GAAP? - Correct Answer
✔✔ Publicly traded companies
According to the FASB conceptual framework, what are the objectives of financial
reporting for business enterprises based on? - Correct Answer ✔✔ The needs of the
users of the information
According to the conceptual framework, the process of reporting an item in the financial
statements of an entity is what? - Correct Answer ✔✔ Recognition
Conceptually, interim financial statements can be described as emphasizing - Correct
Answer ✔✔ Timeliness over faithful representation
According to the conceptual framework, the usefulness of providing information in
financial statements is subject to the constraint of - Correct Answer ✔✔ Cost-benefit
What is conceptual framework intended to establish? - Correct Answer ✔✔ The
objectives and concepts for use in developing the standards of financial accounting
, When a parent-subsidiary relationship exists, consolidated financial statements are
prepared in recognition of the accounting concept of - Correct Answer ✔✔ Economic
entity
According to the FASB conceptual framework, predictive value is an ingredient of
relevance, representation, both, or neither? - Correct Answer ✔✔ Relevance
Is the FASB a private sector body, governmental unit, international organization, or
group of accounting firms? - Correct Answer ✔✔ Private sector body
Which of the following accounts is not closed?
A. Common stock
B. Dividends
C. Interest Income
D. Profit Summary - Correct Answer ✔✔ Common Stock
What is the correct sequence of accounting procedures? - Correct Answer ✔✔ Journal,
ledger, trial balance, financial statements
What is the principle purpose of posting? - Correct Answer ✔✔ To enter transactions
into the ledger
What is the correct order to present current assets? - Correct Answer ✔✔ Cash,
accounts receivables, inventories, prepaid items (order of liquidity)
Reporting accounts receivable at net realizable value is a departure from the accounting
principle of - Correct Answer ✔✔ Historical Cost
Which of the following accounts is a contra account?
A. Accumulated depreciation, Equipment
B. Depreciation expense, Office equipment
C. Dividends
D. Unearned Revenue - Correct Answer ✔✔ Accumulated depreciation, Equipment
In analyzing an entity's annual financial report, which financial statement would an
analyst primarily use to assess the entity's liquidity? - Correct Answer ✔✔ Balance
Sheet
Which pronouncement provides additional guidelines on implementing or applying
FASB Standards or interpretations? - Correct Answer ✔✔ Staff Positions
Which pronouncements represent extensions of modifications of existing standards? -
Correct Answer ✔✔ Interpretations (FASB)
Which pronouncement is the primary document of the FASB that establishes GAAP? -
Correct Answer ✔✔ Statement of Financial Accounting
