Deck 1: Financial Accounting and Accounting Standards

Question 1

The essential characteristics of accounting include identification and measurement.

Answer 1

True

Question 2

The environment of accounting is unaffected by social-economic-political-legal conditions, restraints, and influences that vary from time to time.

Answer 2

False

Question 3

The principal role of accounting is to furnish investors and lenders information that is useful in assessing the prospective risks and returns associated with an investment.

Answer 3

True

Question 4

Accounting is responsible for providing standards that ensure accurate financial information that cannot be manipulated or improperly reported.

Question 5

The difference between generally accepted accounting principles (GAAP) and specifically accepted accounting principles concerns the degree of authority each possesses.

Question 6

The American Institute of Certified Public Accountants (AICPA) is the national professional organization of practicing Certified Public Accountants (CPAs).

Question 7

The SEC has been the principal organization in the development of accounting standards.

Question 8

The Securities and Exchange Commission (SEC) sets accounting standards for companies that do work for the government.

Question 9

The major purpose of the APB during its 13-year existence was to develop a single set of accounting standards useful to all business entities.

Question 10

All those who serve on the FASB must be Certified Public Accountants.

Question 11

FASB Interpretations represent modifications or extensions of existing FASB Standards and have the same authority as Standards.

Question 12

FASB Technical Bulletins are designed to provide guidance on the implementation or application of FASB Statements or Interpretations.

Question 13

A major role of the Accounting Standards Executive Committee (AcSEC) is to inform the FASB of financial reporting problems that are developing in practice.

Question 14

Generally accepted accounting principles (GAAP) are defined, in part, as those principles that have substantial authoritative support.

Question 15

The information provided by financial reporting pertains to

A) individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.
B) business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.
C) individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers.
D) an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

Question 16

Accounting principles are "generally accepted" only when

A) an authoritative accounting rule-making body has established it in an official pro-nouncement.
B) it has been accepted as appropriate because of its universal application.
C) both a and b.
D) neither a nor b.

Question 17

The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is

A) the FASB issues exposure drafts of proposed standards.
B) all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.
C) all members of the FASB possess extensive experience in financial reporting.
D) a majority of the members of the FASB are CPAs drawn from public practice.

Question 18

FASB Technical Bulletins

A) are similar to FASB Interpretations in that they establish enforceable standards under the AICPA's Code of Professional Ethics.
B) are issued monthly by the FASB to deal with current topics.
C) are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict with any broad fundamental accounting principle.
D) were recently discontinued by the FASB because they dealt with specialized topics having little impact on financial reporting in general.

Question 19

The following published documents are part of the "due process" system used by the FASB in the evolution of a typical FASB Statement of Financial Accounting Standards:
1) Exposure Draft
2) Statement of Financial Accounting Standards
3) Discussion Memorandum
The chronological order in which these items are released is as follows:

A) 1, 2, 3.
B) 1, 3, 2.
C) 2, 3, 1.
D) 3, 1, 2.

Question 20

In the House of GAAP, is the following on the highest level of authoritative status (meaning among the most authoritative)?