INTERMEDIATE ACCOUNTING 1: CH. 1-
8 EXAM QUESTIONS AND ANSWERS
GRADED A+ 2025/2026
Accounting - ANS a science of value creation, aggregation, measurement, and distribution;
this is a subset of info. and is useful towards our decision making
provide info. to users/investors/creditors - ANS What's the goal of accounting?
accounting uses a double entry bookkeeping system - ANS What makes a difference between
accounting and on-accounting info.?
provides financial info. about the reporting entity that's useful to present and potential equity
investors, lenders, and other creditors in making decisions in their capacity as capital providers.
REMEMBER:
A = L + SE
L: lenders, and other creditors
SE: present and potential equity investors9 - ANS Why do we need accounting?
promotes productivity
encourages innovation
provides an efficient and liquid market for buying and selling securities - ANS How/why is an
effective process of capital allocation critical to a healthy economy/what does it do for our
econ.?
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Luca Pacioli : Father ofAccounting - ANS Who invented double entry booking
Firms with bad accounting experience loose value on the disclosure of the restatement
indicating that investors took word of this and as a result would no longer invest in the co. -
ANS What happens to firm value if market discovers bad accounting?
Provide financial reporting information to a wide variety of users.
Provide the most useful information possible at the least cost - ANS What's the General
Purpose Financial Statements?
Generally Accepted Accounting Principles (GAAP) - ANS Dynamic set of both broad and
specific guidelines that companies should follow when measuring and reporting information in
their financial statements and in the accompanying disclosure notes. These guidelines,
concepts, principles, and procedures have been developed over time to meet the needs of
external users.Principles that have substantial authoritative support.
FASB Standards, Interpretations, and Staff Positions.
ASU (Accounting Standard Updates), Emerging Issues Task Force Updates
APB Opinions (predecessor of FASB).
CAP Accounting Research Bulletins - ANS What are major sources of GAAP?
Securities and Exchange Commission (SEC) - ANS Established by federal government; gov.
agency to provide accounting and report oversights. Accounting and reporting for public
companies.
Encouraged private standard-setting body.
requires public companies to adhere to GAAP
SEC Oversight Enforcement Authority.
Relies on the FASB to develop accounting standards.
Financial Accounting Standard Board (FASB) - ANS a private sector body established to set
U.S. accounting standards (1973)
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Supported by Financial AccountingFoundation (FAF)
Seven full-time members
EITF (Emerging Issues Task Force) - ANS Identifies financial reporting issues and attempts to
resolve them without involving the FASB (primarily addresses implementation issues speeding
up the standard-setting process)(Think PR to celebs)
Any updates are ratified by the FASB and are considered part of GAAP
Financial Accounting Foundation (FAF): selects members of FASB and their Advisory Councils
and exercises general oversight
FASB: Sets the standards
FASAC: consults on major policy and technical issues, project priorities, and selection and org. of
task forces - ANS What's the Organizational Structure for Setting Accounting Standards?
1. Identifies a financial reporting issues
2. Add a project to the technical agenda
3. One or more public meeting the various reporting issues identified and analyzed by the staff
4. Exposure draft
5. Public round table meeting
6. The board redeliberates the proposed provision, carefully considering the stakeholders input
received, at one or more public meetings
7. Board issues an accounting standards update amendment to the accounting standards
codification - ANS What are the steps to FASB due process?
Accounting Standards Updates (ASU) and Financial Accounting Concept (FAC) - ANS What are
the 2 types of procurements of FASB's standards?
GAAP Codificaiton - ANS Provide all the authoritative literature related to a topic. Simplify
user access to all authoritative U.S. GAAP.
Establish the way GAAP is documented, presented, and updated
Eliminate nonessential information
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Accounting Standards Updates (ASU) - ANS Update consists of the following:
An explanation of how the Codification has been amended.
Information to help the reader understand the changes.
A date for when the changes will be effective.
Common forms of amendments are accounting standards issued that address a broad area of
accounting practice (such as the accounting for leases) or interpretations that modify or extend
existing standards.
Statements of Financial Accounting Concepts (SFAC) - ANS part of its conceptual framework
project.
The series sets forth fundamental objectives and concepts that the Board uses in developing
standards of financial accounting and reporting. Does not establish GAAP; pass through the
same due process system (preliminary views, public hearing, exposure draft, etc.) as do
standards updates.
TRUE - ANS True or False: SFAC are NOT GAAP
- combined, it is a conceptual framework serving as a basis for FASB pronouncements (provides
basic reasoning)
American Institute of Certified Public Accountants (AICPA) - ANS the national organization of
practicing certified public accountants (CPAs); was recognized that broader representation
coupled with a full-time, well-paid organization like the FASB was needed; no longer has formal
involvement in the accounting standard setting process.
International Accounting Standards Board (IASB) - ANS An accounting standard-setting body
that issues standards adopted by many countries outside of the United States; sets the
International Financial Reporting Standards (IFRS); develop a single set of high-quality,
understandable, and enforceable global accounting standards and issued and endorsed 41
International Accounting Standards (IASs)
International Accounting Standards Committee (IASC) - ANS Formed in 1973 to develop
global accounting standards; Created a new standard-setting body called the International
Accounting Standards Board (IASB)(2001)
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
8 EXAM QUESTIONS AND ANSWERS
GRADED A+ 2025/2026
Accounting - ANS a science of value creation, aggregation, measurement, and distribution;
this is a subset of info. and is useful towards our decision making
provide info. to users/investors/creditors - ANS What's the goal of accounting?
accounting uses a double entry bookkeeping system - ANS What makes a difference between
accounting and on-accounting info.?
provides financial info. about the reporting entity that's useful to present and potential equity
investors, lenders, and other creditors in making decisions in their capacity as capital providers.
REMEMBER:
A = L + SE
L: lenders, and other creditors
SE: present and potential equity investors9 - ANS Why do we need accounting?
promotes productivity
encourages innovation
provides an efficient and liquid market for buying and selling securities - ANS How/why is an
effective process of capital allocation critical to a healthy economy/what does it do for our
econ.?
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Luca Pacioli : Father ofAccounting - ANS Who invented double entry booking
Firms with bad accounting experience loose value on the disclosure of the restatement
indicating that investors took word of this and as a result would no longer invest in the co. -
ANS What happens to firm value if market discovers bad accounting?
Provide financial reporting information to a wide variety of users.
Provide the most useful information possible at the least cost - ANS What's the General
Purpose Financial Statements?
Generally Accepted Accounting Principles (GAAP) - ANS Dynamic set of both broad and
specific guidelines that companies should follow when measuring and reporting information in
their financial statements and in the accompanying disclosure notes. These guidelines,
concepts, principles, and procedures have been developed over time to meet the needs of
external users.Principles that have substantial authoritative support.
FASB Standards, Interpretations, and Staff Positions.
ASU (Accounting Standard Updates), Emerging Issues Task Force Updates
APB Opinions (predecessor of FASB).
CAP Accounting Research Bulletins - ANS What are major sources of GAAP?
Securities and Exchange Commission (SEC) - ANS Established by federal government; gov.
agency to provide accounting and report oversights. Accounting and reporting for public
companies.
Encouraged private standard-setting body.
requires public companies to adhere to GAAP
SEC Oversight Enforcement Authority.
Relies on the FASB to develop accounting standards.
Financial Accounting Standard Board (FASB) - ANS a private sector body established to set
U.S. accounting standards (1973)
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Supported by Financial AccountingFoundation (FAF)
Seven full-time members
EITF (Emerging Issues Task Force) - ANS Identifies financial reporting issues and attempts to
resolve them without involving the FASB (primarily addresses implementation issues speeding
up the standard-setting process)(Think PR to celebs)
Any updates are ratified by the FASB and are considered part of GAAP
Financial Accounting Foundation (FAF): selects members of FASB and their Advisory Councils
and exercises general oversight
FASB: Sets the standards
FASAC: consults on major policy and technical issues, project priorities, and selection and org. of
task forces - ANS What's the Organizational Structure for Setting Accounting Standards?
1. Identifies a financial reporting issues
2. Add a project to the technical agenda
3. One or more public meeting the various reporting issues identified and analyzed by the staff
4. Exposure draft
5. Public round table meeting
6. The board redeliberates the proposed provision, carefully considering the stakeholders input
received, at one or more public meetings
7. Board issues an accounting standards update amendment to the accounting standards
codification - ANS What are the steps to FASB due process?
Accounting Standards Updates (ASU) and Financial Accounting Concept (FAC) - ANS What are
the 2 types of procurements of FASB's standards?
GAAP Codificaiton - ANS Provide all the authoritative literature related to a topic. Simplify
user access to all authoritative U.S. GAAP.
Establish the way GAAP is documented, presented, and updated
Eliminate nonessential information
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Accounting Standards Updates (ASU) - ANS Update consists of the following:
An explanation of how the Codification has been amended.
Information to help the reader understand the changes.
A date for when the changes will be effective.
Common forms of amendments are accounting standards issued that address a broad area of
accounting practice (such as the accounting for leases) or interpretations that modify or extend
existing standards.
Statements of Financial Accounting Concepts (SFAC) - ANS part of its conceptual framework
project.
The series sets forth fundamental objectives and concepts that the Board uses in developing
standards of financial accounting and reporting. Does not establish GAAP; pass through the
same due process system (preliminary views, public hearing, exposure draft, etc.) as do
standards updates.
TRUE - ANS True or False: SFAC are NOT GAAP
- combined, it is a conceptual framework serving as a basis for FASB pronouncements (provides
basic reasoning)
American Institute of Certified Public Accountants (AICPA) - ANS the national organization of
practicing certified public accountants (CPAs); was recognized that broader representation
coupled with a full-time, well-paid organization like the FASB was needed; no longer has formal
involvement in the accounting standard setting process.
International Accounting Standards Board (IASB) - ANS An accounting standard-setting body
that issues standards adopted by many countries outside of the United States; sets the
International Financial Reporting Standards (IFRS); develop a single set of high-quality,
understandable, and enforceable global accounting standards and issued and endorsed 41
International Accounting Standards (IASs)
International Accounting Standards Committee (IASC) - ANS Formed in 1973 to develop
global accounting standards; Created a new standard-setting body called the International
Accounting Standards Board (IASB)(2001)
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
