Chapter 1
Financial Reporting
MULTIPLE CHOICE
1. The overall objective of financial reporting is to provide information
a. that is useful for decision making.
b. about an enterprise's assets, liabilities, and owners' equity.
c. about an enterprise's financial performance during a period.
d. that allows owners to assess management's performance.
ANS: A PTS: 1 DIF: Easy OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
2. Which of the following statements is not normally an objective of financial reporting?
a. To provide information about an entity's assets and claims against those assets.
b. To provide information that is useful in assessing an entity's sources and uses of cash.
c. To provide information that is useful in lending and investing decisions.
d. To provide information about an entity's liquidation value.
ANS: D PTS: 1 DIF: Medium OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
, 3. Financial accounting is the area of accounting that emphasizes reporting to
a. management.
b. regulatory bodies.
c. internal auditors.
d. creditors and investors.
ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
4. Management accounting is the area of accounting that emphasizes
a. reporting financial information to external users.
b. reporting to the SEC.
c. combining accounting knowledge with an expertise in data processing.
d. developing accounting information for use within a company.
ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
5. The responsibility to review the work of the accountants and issue opinions as to the
fairness of the financial statements rests with
a. the external auditor.
b. the board of directors.
c. the internal auditors.
d. management.
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
, 6. As independent (or external) auditors, CPAs are primarily responsible for
a. preparing financial statements in conformity with GAAP.
b. certifying the accuracy of financial statements.
c. expressing an opinion as to the fairness of financial statements.
d. filing financial statements with the SEC.
ANS: C PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
7. Which of the following is an internal user of a company's financial information?
a. Board of directors.
b. Stockholders in the company.
c. Holders of the company's bonds.
d. Creditors with long-term contracts with the company.
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
8. Prior to 1973, generally accepted accounting principles were established
a. by the Financial Accounting Foundation.
b. by the Securities and Exchange Commission.
c. under the direction of the American Institute of Certified Public Accountants.
d. by the individual states.
ANS: C PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
, 9. Members of the Financial Accounting Standards Board are appointed by the
a. American Accounting Association.
b. Financial Accounting Foundation.
c. Securities and Exchange Commission.
d. American Institute of Certified Public Accountants.
ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
10. The Financial Accounting Foundation
a. oversees the operations of the AICPA.
b. oversees the operations of the FASB.
c. oversees the AAA.
d. oversees the financial reporting arm of the SEC.
ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
11. A major difference between the Financial Accounting Standards Board (FASB) and its
predecessor, the Accounting Principles Board (APB), is
a. all members of the FASB serve full time, are paid a salary, and are independent of any
public or private enterprises.
b. over 50 percent of the members of the FASB are required to be Certified Public
Accountants.
c. the FASB issues exposure drafts of proposed standards.
d. all members of the FASB possess experience in both public and corporate accounting.
ANS: A PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
Financial Reporting
MULTIPLE CHOICE
1. The overall objective of financial reporting is to provide information
a. that is useful for decision making.
b. about an enterprise's assets, liabilities, and owners' equity.
c. about an enterprise's financial performance during a period.
d. that allows owners to assess management's performance.
ANS: A PTS: 1 DIF: Easy OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
2. Which of the following statements is not normally an objective of financial reporting?
a. To provide information about an entity's assets and claims against those assets.
b. To provide information that is useful in assessing an entity's sources and uses of cash.
c. To provide information that is useful in lending and investing decisions.
d. To provide information about an entity's liquidation value.
ANS: D PTS: 1 DIF: Medium OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
, 3. Financial accounting is the area of accounting that emphasizes reporting to
a. management.
b. regulatory bodies.
c. internal auditors.
d. creditors and investors.
ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
4. Management accounting is the area of accounting that emphasizes
a. reporting financial information to external users.
b. reporting to the SEC.
c. combining accounting knowledge with an expertise in data processing.
d. developing accounting information for use within a company.
ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
5. The responsibility to review the work of the accountants and issue opinions as to the
fairness of the financial statements rests with
a. the external auditor.
b. the board of directors.
c. the internal auditors.
d. management.
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
, 6. As independent (or external) auditors, CPAs are primarily responsible for
a. preparing financial statements in conformity with GAAP.
b. certifying the accuracy of financial statements.
c. expressing an opinion as to the fairness of financial statements.
d. filing financial statements with the SEC.
ANS: C PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
7. Which of the following is an internal user of a company's financial information?
a. Board of directors.
b. Stockholders in the company.
c. Holders of the company's bonds.
d. Creditors with long-term contracts with the company.
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
8. Prior to 1973, generally accepted accounting principles were established
a. by the Financial Accounting Foundation.
b. by the Securities and Exchange Commission.
c. under the direction of the American Institute of Certified Public Accountants.
d. by the individual states.
ANS: C PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
, 9. Members of the Financial Accounting Standards Board are appointed by the
a. American Accounting Association.
b. Financial Accounting Foundation.
c. Securities and Exchange Commission.
d. American Institute of Certified Public Accountants.
ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
10. The Financial Accounting Foundation
a. oversees the operations of the AICPA.
b. oversees the operations of the FASB.
c. oversees the AAA.
d. oversees the financial reporting arm of the SEC.
ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
11. A major difference between the Financial Accounting Standards Board (FASB) and its
predecessor, the Accounting Principles Board (APB), is
a. all members of the FASB serve full time, are paid a salary, and are independent of any
public or private enterprises.
b. over 50 percent of the members of the FASB are required to be Certified Public
Accountants.
c. the FASB issues exposure drafts of proposed standards.
d. all members of the FASB possess experience in both public and corporate accounting.
ANS: A PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking
