Intermediate Accounting Exam 1 Study Guide Questions With 100% Correct Answers

Intermediate Accounting Exam 1 Study Guide Questions With 100% Correct Answers What is GAAP? - answerStandards by which accounting info is prepared and presented to external users. (FASB is source for GAAP through Accounting Standards Codification) What are the means of Financial Reporting except Financial Statements? - answerTo provide financial information about the reporting entity that is useful to present/potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers (can be done through President's letter, prospectuses, reports filed with the SEC & other gov't agencies, news releases & management forecasts, and social/environmental impact statements) What are the major financial statements (5) and their purpose? - answer-Income Statement: Ultimately shows net income by providing revenues, expenses, gains, losses, and profitability -Statement of Changes in Stockholders' Equity: Prepares retained earnings, changes in equity -Balance sheet: Shows Assets= Liability + Owner's Equity ( resources and sources of assets) -Statement of Cash Flow -Statement of Comprehensive Income: Shows ALL gains and losses What organizations were responsible for setting US accounting standards? - answer-SEC (Security & Exchange Commission): Federal agency w/ authority to prescribe accounting standards to be employed by companies that fall within its jurisdiction -CAP (Committee on Accounting Procedure): Issued standards from AICPA -APB (The Accounting Principles Board): Issued standards from AICPA -FASB (Financial Accounting Standards Board): Establishes and improves standards of financial accounting and reporting for the guidance and education of the public Who sets US and IFRS accounting standards now? - answerFASB & IASB Are there global accounting standards in the world? - answerGAAP & International Financial Reporting Standards (IFRS) which is issued by the International Accounting Standards Board (IASB) What were the main changes introduced in accounting by Sarbanes-Oxley act? - answerEstablished the Public Company Accounting Oversight Board (PCAOB), stronger independent rules for auditors, requires CEOs and CFOs to perosnaly sign off on financial statements, audit committees to be made up of independent members and members with financial expertise, and requires code of ethics for senior officers What is the main objective of financial reporting? - answerTo provide information that is useful to present and potential investors, l