Intermediate Accounting Chapter
1 Questions with Accurate
Answers
1. Summary of Learning Objectives
Identify the major financial statements and other means of financial reporting
correct answer Companies most frequently provide (l) the balance sheet, (2) the
income statement, (3) the statement of cash flows, and (4) the statement of
owners' or stockholders' equity.
2. Summary of Learning Objectives
Explain how accounting assists in the efficient use of scarce resources. correct
answer Accounting provides reliable, relevant, and timely information to
managers, investors, and creditors to allow resource allocation to the most
efficient enterprises. Accounting also provides measurements of efficiency
(profitability) and financial soundness.
3. Summary of Learning Objectives
Identify the objective of financial reporting. correct answer he objective of
general-purpose financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders,
and other creditors in decisions about providing resources to the entity through
equity investments and loans or corms of credit. Information that is decision-
useful to investors may also be helpful to ther users of financial reporting who are
not investors.
4. Summary of Learning Objectives
Explain the need for accounting standards. correct answer The accounting
profession has atmpted to develop a set of standards that is generally accepted
, and universally practiced. Readers of financial statements would have to
familiarize themselves with every company's peculiar accounting and reporting
practices. As a result, it would be alm.ost lmpossible to prepare statements that
could be compared.
5. Summary of Learning Objectives
Identify the major policy-setting bodies and their role in the standard-setting
process. correct answer The Securities and Exchange Commission (SEC) is a
federal agency that has the broad powers to prescribe, in whatever detail it
desires, the accounting standards to be employed by companles that fall within its
jurisdiction. The American Institute of Certified Public Accountants (AICPA) issued
standards through its Committee on Accounting Procedure and Accounting
Principles Board. The financial Accounting Standards Board (FASB) establishes and
improves standards of financial accounting and reporting for the guidance and
education of the public.
6. Summary of Learning Objectives
Explain the meaning of generally accepted accounting principles (GAAP) and the
role of the Codification for GAAP. correct answer Generally accepted accounting
principles GAAP) are those principles that have substantial authoritative support,
such as FASB Sandards, interpretations, and staff positions, APB Opinions and
interpretations, AICPA Accounting Research Bulletins, and other authoritative
pronouncements. All these docments and others are now classified in one
document referred to as the Codification. rhe purpose of the Codification is to
simplify user access to all authoritative U.S. GAAP. rhe Codification changes the
way GAAP is documented, presented, and updated.
7. Summary of Learning Objectives
lescribe the impact of user groups on the rule-making process. correct answer er
groups lay want particular economic events accounted for or reported in a
particular way, and ley fight hard to get what they want. They especially target
1 Questions with Accurate
Answers
1. Summary of Learning Objectives
Identify the major financial statements and other means of financial reporting
correct answer Companies most frequently provide (l) the balance sheet, (2) the
income statement, (3) the statement of cash flows, and (4) the statement of
owners' or stockholders' equity.
2. Summary of Learning Objectives
Explain how accounting assists in the efficient use of scarce resources. correct
answer Accounting provides reliable, relevant, and timely information to
managers, investors, and creditors to allow resource allocation to the most
efficient enterprises. Accounting also provides measurements of efficiency
(profitability) and financial soundness.
3. Summary of Learning Objectives
Identify the objective of financial reporting. correct answer he objective of
general-purpose financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders,
and other creditors in decisions about providing resources to the entity through
equity investments and loans or corms of credit. Information that is decision-
useful to investors may also be helpful to ther users of financial reporting who are
not investors.
4. Summary of Learning Objectives
Explain the need for accounting standards. correct answer The accounting
profession has atmpted to develop a set of standards that is generally accepted
, and universally practiced. Readers of financial statements would have to
familiarize themselves with every company's peculiar accounting and reporting
practices. As a result, it would be alm.ost lmpossible to prepare statements that
could be compared.
5. Summary of Learning Objectives
Identify the major policy-setting bodies and their role in the standard-setting
process. correct answer The Securities and Exchange Commission (SEC) is a
federal agency that has the broad powers to prescribe, in whatever detail it
desires, the accounting standards to be employed by companles that fall within its
jurisdiction. The American Institute of Certified Public Accountants (AICPA) issued
standards through its Committee on Accounting Procedure and Accounting
Principles Board. The financial Accounting Standards Board (FASB) establishes and
improves standards of financial accounting and reporting for the guidance and
education of the public.
6. Summary of Learning Objectives
Explain the meaning of generally accepted accounting principles (GAAP) and the
role of the Codification for GAAP. correct answer Generally accepted accounting
principles GAAP) are those principles that have substantial authoritative support,
such as FASB Sandards, interpretations, and staff positions, APB Opinions and
interpretations, AICPA Accounting Research Bulletins, and other authoritative
pronouncements. All these docments and others are now classified in one
document referred to as the Codification. rhe purpose of the Codification is to
simplify user access to all authoritative U.S. GAAP. rhe Codification changes the
way GAAP is documented, presented, and updated.
7. Summary of Learning Objectives
lescribe the impact of user groups on the rule-making process. correct answer er
groups lay want particular economic events accounted for or reported in a
particular way, and ley fight hard to get what they want. They especially target
