INTERMEDIATE ACCOUNTING UPDATED
ACTUAL QUESTIONS AND CORRECT
ANSWERS
◉ Objective of Financial Reporting.
Answer: Provide information about the reporting entity that is
useful to present and potential to equity investors, lenders, and
others.
◉ Securities and Exchange Commission (SEC).
Answer: -Federal agency developed to help develop and standardize
financial information presented to stockholders
-Companies that issue securities to public are required to file with
SEC
-Have powers to prescribe auditing practices and standards to be
employed by companies that fall within its jurisdiction
-Requires registrants to adhere to GAAP
-Relies on FASB to develop accounting standards
-Mission to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation
-Regulations require filing of annual (10-K) & quarterly (10-Q)
reports and others
-Enforcement authority
,◉ American Institute of CPAs (AICPA).
Answer: -National professional org of CPAs
-Important to development of GAAP
-Established the Committee on Accounting Procedure (CAP) →
Accounting Principles Board (APB) → FASB
◉ Financial Accounting Standards Board (FASB).
Answer: -Major organization of the standard-setting structure for
financial accounting
-Wants to establish and improve standards of financial accounting
and reporting for the guidance and education of the public
-Accounting guidance issued by FASB is considered GAAP
-Issues: Accounting standards updates & financial accounting
concepts
◉ Generally Accepted Accounting Principles (GAAP).
Answer: common set of accounting standards and procedures for
which either an authoritative accounting rule making body has
established a principle of reporting in a given area, or over time, a
given practice has been accepted as appropriate because of its
universal application
◉ FASB Codification.
, Answer: -Provides all the authoritative literature related to a
particular topic in one place
-Topic → subtopics → sections → paragraphs
◉ Major Challenges in Financial Reporting.
Answer: GAAP is as much a product of political action as it is of
careful logic or empirical findings
◉ Measurement Principle.
Answer: Historical cost and fair value
◉ Revenue Recognition Principle.
Answer: Requires companies recognize revenue in the period
performance obligation is satisfied.
◉ Expense Recognition Principle.
Answer: Expenses follows the revenues.
◉ Full Disclosure Principle.
Answer: Providing information that is of sufficient importance to
influence the judgement and decisions of an informed user (financial
statements, notes to the statements, supplementary information).
ACTUAL QUESTIONS AND CORRECT
ANSWERS
◉ Objective of Financial Reporting.
Answer: Provide information about the reporting entity that is
useful to present and potential to equity investors, lenders, and
others.
◉ Securities and Exchange Commission (SEC).
Answer: -Federal agency developed to help develop and standardize
financial information presented to stockholders
-Companies that issue securities to public are required to file with
SEC
-Have powers to prescribe auditing practices and standards to be
employed by companies that fall within its jurisdiction
-Requires registrants to adhere to GAAP
-Relies on FASB to develop accounting standards
-Mission to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation
-Regulations require filing of annual (10-K) & quarterly (10-Q)
reports and others
-Enforcement authority
,◉ American Institute of CPAs (AICPA).
Answer: -National professional org of CPAs
-Important to development of GAAP
-Established the Committee on Accounting Procedure (CAP) →
Accounting Principles Board (APB) → FASB
◉ Financial Accounting Standards Board (FASB).
Answer: -Major organization of the standard-setting structure for
financial accounting
-Wants to establish and improve standards of financial accounting
and reporting for the guidance and education of the public
-Accounting guidance issued by FASB is considered GAAP
-Issues: Accounting standards updates & financial accounting
concepts
◉ Generally Accepted Accounting Principles (GAAP).
Answer: common set of accounting standards and procedures for
which either an authoritative accounting rule making body has
established a principle of reporting in a given area, or over time, a
given practice has been accepted as appropriate because of its
universal application
◉ FASB Codification.
, Answer: -Provides all the authoritative literature related to a
particular topic in one place
-Topic → subtopics → sections → paragraphs
◉ Major Challenges in Financial Reporting.
Answer: GAAP is as much a product of political action as it is of
careful logic or empirical findings
◉ Measurement Principle.
Answer: Historical cost and fair value
◉ Revenue Recognition Principle.
Answer: Requires companies recognize revenue in the period
performance obligation is satisfied.
◉ Expense Recognition Principle.
Answer: Expenses follows the revenues.
◉ Full Disclosure Principle.
Answer: Providing information that is of sufficient importance to
influence the judgement and decisions of an informed user (financial
statements, notes to the statements, supplementary information).
