FDIC Accounting Exam 1 (Chapters 1–3): Questions, Answers & Study Guide
Chapter 1
1. The statement of retained earnings is one of the financial statements most frequently
provided by public companies.
A. True
B. False - correct answer ✔✔False
The financial statements most frequently provided by public companies include the balance
sheet, the statement of cash flows, and the statement of stockholder's equity.
Chapter 1
2. Capital allocation is the process of determining how and at what cost money is allocated
among competing interests.
A. True
B. False - correct answer ✔✔True.
Capital allocation is the process of determining how and at what cost money is allocated among
competing interests.
Chapter 1
3. Which of the following generally provides a better indication of an enterprise's present and
continuing ability to generate favorable cash flows?
A. Cash basis accounting.
B. Accrual basis accounting.
,C. Managerial basis accounting.
D. Financial basis accounting. - correct answer ✔✔B. Accrual basis accounting.
Accrual basis accounting better indicates present and continuing favorable cash flows for a
company.
Chapter 1
4. Accounting principles are "generally accepted" only when
I. an authoritative accounting rule-making body has established it in an official pronouncement.
II. it has been accepted as appropriate because of its universal application.
A. I only.
B. II only.
C. I or II.
D. Neither I nor II. - correct answer ✔✔C. I or II.
Accounting principles are "generally accepted" only when an authoritative accounting rule-
making body has established it in an official pronouncement or over time it has been accepted
as appropriate because of its universal application.
Chapter 1
5. The role of the Securities and Exchange Commission in the formulation of accounting
principles can be best described as
A. consistently primary.
B. consistently secondary.
C. sometimes primary and sometimes secondary.
,D. non-existent. - correct answer ✔✔C. sometimes primary and sometimes secondary.
The Securities and Exchange Commission has sometimes primary and sometimes secondary
roles in the formulation of accounting principles.
Chapter 1
6. Which of the following was established by the federal government to help develop and
standardize financial information presented to stockholders?
A. AICPA.
B. FASB.
C. GASB.
D. SEC. - correct answer ✔✔D. SEC.
As a result of the call for greater regulation after the stock market crash of 1929, the federal
government established the SEC to help develop and standardize financial information for
stockholders.
Chapter 1
7. The first step taken in the establishment of a typical FASB statement is:
A. the board conducts research and analysis and a discussion memorandum is issued.
B. a public hearing on the proposed standard is held.
C. the board evaluates the research and public response and issues an exposure draft.
D. topics are identified and placed on the board's agenda. - correct answer ✔✔D. topics are
identified and placed on the board's agenda.
, The first step taken in establishing financial accounting standards is a topic is identified and
placed on the board's agenda.
Chapter 1
8. Financial Accounting Concepts are a major type of pronouncement issued by the FASB.
A. True
B. False - correct answer ✔✔True
Financial Accounting Concepts are one of the two major types of pronouncements issued by the
FASB.
Chapter 1
9. Which of the following publications is not considered a GAAP document?
A. Statements of financial standards issued by the FASB
B. Accounting interpretations issued by the FASB
C. APB Opinions
D. Accounting research studies issued by the AICPA - correct answer ✔✔D. Accounting research
studies issued by the AICPA
The accounting research studies issued by the AICPA are not considered GAAP documents.
Chapter 1
10. Generally accepted accounting principles
A. include detailed practices and procedures as well as broad guidelines of general application.
Chapter 1
1. The statement of retained earnings is one of the financial statements most frequently
provided by public companies.
A. True
B. False - correct answer ✔✔False
The financial statements most frequently provided by public companies include the balance
sheet, the statement of cash flows, and the statement of stockholder's equity.
Chapter 1
2. Capital allocation is the process of determining how and at what cost money is allocated
among competing interests.
A. True
B. False - correct answer ✔✔True.
Capital allocation is the process of determining how and at what cost money is allocated among
competing interests.
Chapter 1
3. Which of the following generally provides a better indication of an enterprise's present and
continuing ability to generate favorable cash flows?
A. Cash basis accounting.
B. Accrual basis accounting.
,C. Managerial basis accounting.
D. Financial basis accounting. - correct answer ✔✔B. Accrual basis accounting.
Accrual basis accounting better indicates present and continuing favorable cash flows for a
company.
Chapter 1
4. Accounting principles are "generally accepted" only when
I. an authoritative accounting rule-making body has established it in an official pronouncement.
II. it has been accepted as appropriate because of its universal application.
A. I only.
B. II only.
C. I or II.
D. Neither I nor II. - correct answer ✔✔C. I or II.
Accounting principles are "generally accepted" only when an authoritative accounting rule-
making body has established it in an official pronouncement or over time it has been accepted
as appropriate because of its universal application.
Chapter 1
5. The role of the Securities and Exchange Commission in the formulation of accounting
principles can be best described as
A. consistently primary.
B. consistently secondary.
C. sometimes primary and sometimes secondary.
,D. non-existent. - correct answer ✔✔C. sometimes primary and sometimes secondary.
The Securities and Exchange Commission has sometimes primary and sometimes secondary
roles in the formulation of accounting principles.
Chapter 1
6. Which of the following was established by the federal government to help develop and
standardize financial information presented to stockholders?
A. AICPA.
B. FASB.
C. GASB.
D. SEC. - correct answer ✔✔D. SEC.
As a result of the call for greater regulation after the stock market crash of 1929, the federal
government established the SEC to help develop and standardize financial information for
stockholders.
Chapter 1
7. The first step taken in the establishment of a typical FASB statement is:
A. the board conducts research and analysis and a discussion memorandum is issued.
B. a public hearing on the proposed standard is held.
C. the board evaluates the research and public response and issues an exposure draft.
D. topics are identified and placed on the board's agenda. - correct answer ✔✔D. topics are
identified and placed on the board's agenda.
, The first step taken in establishing financial accounting standards is a topic is identified and
placed on the board's agenda.
Chapter 1
8. Financial Accounting Concepts are a major type of pronouncement issued by the FASB.
A. True
B. False - correct answer ✔✔True
Financial Accounting Concepts are one of the two major types of pronouncements issued by the
FASB.
Chapter 1
9. Which of the following publications is not considered a GAAP document?
A. Statements of financial standards issued by the FASB
B. Accounting interpretations issued by the FASB
C. APB Opinions
D. Accounting research studies issued by the AICPA - correct answer ✔✔D. Accounting research
studies issued by the AICPA
The accounting research studies issued by the AICPA are not considered GAAP documents.
Chapter 1
10. Generally accepted accounting principles
A. include detailed practices and procedures as well as broad guidelines of general application.
