Chapter 1 Exam Questions And Answers

Financial accounting is the process that culminates in the preparation of financial reports on the enterprise for use by: - ANS Both internal and external users Capital allocation - ANS The process of determining how and at what cost money is allocated among competing interests The objective of financial reporting identifies ________ as the primary users for general purpose financial statements. - ANS Investors and creditors A common set of accounting standards and procedures are called: - ANS Generally Accepted Accounting Principles (T or F) Corporations whose securities are listed on a US stock exchange are required to file audited financial statements with the Securities Exchange Commission. - ANS True The _______ requires that members prepare financial statements in accordance with GAAP. - ANS AICPAs Code of Conduct List user groups that influence the formation of accounting standards. - ANS -CPAs and accounting firms -Government -Academicians The failure of financials reports to provide info on customer satisfaction indexes, reject rates, and company sustainability efforts described the financial reporting challenge of: - ANS Nonfinancial measurements List 3 fundamental considerations FASB must keep in mind for its rule-making activities: - ANS 1. Improvement in financial reporting 2. International convergence 3. Simplification of the accounting literature (T or F) The SEC established PCAOB (Public Company Accounting Oversight Board. - ANS False (T or F) The statement of retained earnings is one of the financial statements most frequently provided by public companies. - ANS False - it's the SSE Which "basis" generally provides a better indication of an enterprise's present and continuing ability to generate favorable cash flows? - ANS Accrual basis accounting Securities and Exchange Commission (SEC) - ANS relies on FASB to develop standards but gives advice and recommendations to the private sector as needed First step in establishment of a FASB statement? - ANS topics are identifies and placed on the boards agenda List 3 GAAP documents, and 1 that isn't. - ANS 1. APB Opinions 2. FASB Standards 3. AICPA Research Bulletins 1. Statements of Financial Accounting Concepts (T or F) Politics play no role in establishing GAAP. - ANS False (T or F) Technical competence is not enough when encountering ethical decisions - ANS True (T or F) The pressures to "bend the rules," "to play the game," "to just ignore it," can be considerable. - ANS True (T or F) IFRS is more "rule based" in its approach to standards than GAAP. - ANS False - GAAP is more rule based An effective capital allocation process will: (there's 3) - ANS 1. promote productivity 2. encourage innovation de an efficient market for buying and selling securities (T or F) The Financial Accounting Standards Advisory Council (FASAC) consults with FASB on major policy and technical issues and helps select task force members. - ANS True