Deck 1: Financial Accounting and Accounting Standards

Question 1

The passage of a new FASB Standards Statement requires the support of five of the seven board members.

Answer 1

False

Question 2

The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles.

Answer 2

True

Question 3

Financial reports in the early 21st century did not provide any information about a company's soft assets.

Answer 3

False

Question 4

Users of financial accounting statements have both coinciding and conflicting needs for information of various types.

Question 5

An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit.

Question 6

The Securities and Exchange Commission appointed the Committee on Accounting Procedure.

Question 7

The expectations gap is caused by what the public thinks accountants should be doing and what accountants think they can do.

Question 8

Accounting standards are a product of careful logic or empirical findings and are not influenced by political action.

Question 9

FASB Technical Bulletins are more authoritative than FASB Standards and Interpretations.

Question 10

Users of the financial information provided by a company use that information to make capital allocation decisions.

Question 11

Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of financial accounting and reporting.

Question 12

Ethical issues in financial accounting are governed by the AICPA.

Question 13

Accounting standards are now less likely to require the recording or disclosure of fair value information due to its inherent subjectivity.

Question 14

The SEC relies on the AICPA and FASB to regulate the accounting profession and develop and enforce accounting standards.

Question 15

Some generally accepted accounting principles have simply been accepted as appropriate because of their universal application rather than due to the action of an authoritative accounting rule-making body.

Question 16

While objectives for financial reporting exist on an informal basis, no formal objectives have been adopted.

Question 17

Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organiza-tion's operations.

Question 18

One weakness of accrual accounting is that it does not provide a good indication of the enterprise's present and continuing ability to generate favorable cash flows.

Question 19

Currently, both U.S.GAAP and the International Financial Reporting Standards are acceptable for international use.

Question 20

Financial statements are the principal means through which financial information is communicated to those outside an enterprise.

Question 21

Companies that are listed on a stock exchange are required to submit their financial statements to the

A)AICPA.
B)APB
C)FASB.
D)SEC.

Question 22

An effective capital allocation process

A)promotes productivity.
B)encourages innovation.
C)provides an efficient market for buying and selling securities.
D)all of these.

Question 23

Financial statements in the early 2000s provide information related to

A)non-financial measurements.
B)forward-looking data.
C)hard assets (inventory and plant assets).
D)none of these.

Question 24

The Financial Accounting Foundation

A)oversees the operations of the FASB.
B)oversees the operations of the AICPA.
C)provides information to interested parties on financial reporting issues.
D)works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.

Question 25

The Financial Accounting Standards Board

A)has issued a series of pronouncements entitled Statements on Auditing Standards.
B)was the forerunner of the current Accounting Principles Board.
C)is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards.
D)is appointed by the Financial Accounting Foundation.

Question 26

Whether a business is successful and thrives is determined by

A)markets.
B)free enterprise.
C)competition.
D)all of these.

Question 27

Which of the following statements is not an objective of financial reporting?

A)Provide information that is useful in investment and credit decisions.
B)Provide information about enterprise resources, claims to those resources, and changes to them.
C)Provide information on the liquidation value of an enterprise.
D)Provide information that is useful in assessing cash flow prospects.

Question 28

Accrual accounting is used because

A)cash flows are considered less important.
B)it provides a better indication of ability to generate cash flows than the cash basis.
C)it recognizes revenues when cash is received and expenses when cash is paid.
D)none of the above.

Question 29

The Financial Accounting Standards Board employs a "due process" system which

A)is an efficient system for collecting dues from members.
B)enables interested parties to express their views on issues under consideration.
C)identifies the accounting issues that are the most important.
D)requires that all accountants must receive a copy of financial standards.

Question 30

The financial statements most frequently provided include all of the following except the

A)balance sheet.
B)income statement.
C)statement of cash flows.
D)statement of retained earnings.

Question 31

The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations is called

A)financial accounting.
B)managerial accounting.
C)tax accounting.
D)auditing.

Question 32

The Financial Accounting Standards Board (FASB) was proposed by the

A)American Institute of Certified Public Accountants.
B)Accounting Principles Board.
C)Study Group on the Objectives of Financial Statements.
D)Special Study Group on establishment of Accounting Principles (Wheat Committee).

Question 33

Users of financial reports include all of the following except

A)creditors.
B)government agencies.
C)unions.
D)All of these are users.

Question 34

One objective of financial reporting is to provide

A)information about the investors in the business entity.
B)information about the liquidation values of the resources held by the enterprise.
C)information that is useful in assessing cash flow prospects.
D)information that will attract new investors.

Question 35

The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as

A)consistently primary.
B)consistently secondary.
C)sometimes primary and sometimes secondary.
D)non-existent.

Question 36

The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the

A)FASB.
B)AICPA.
C)SEC.
D)APB.

Question 37

A common set of accounting standards and procedures are called

A)financial accounting standards.
B)generally accepted accounting principles.
C)objectives of financial reporting.
D)statements of financial accounting concepts.

Question 38

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 39

General-purpose financial statements are the product of

A)financial accounting.
B)managerial accounting.
C)both financial and managerial accounting.
D)neither financial nor managerial accounting.

Question 40

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 41

Financial accounting standard-setting in the United States

A)can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.
B)is based solely on research and empirical findings.
C)is a legalistic process based on rules promulgated by governmental agencies.
D)is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.

Question 42

Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States?

A)AICPA
B)FASB
C)IASB
D)SEC

Question 43

Which of the following is not a publication of the FASB?

A)Statements of Financial Accounting Concepts
B)Accounting Research Bulletins
C)Interpretations
D)Technical Bulletins

Question 44

Generally Accepted Accounting Principles include: 1) FASB Technical Bulletins, 2) APB Opinions, and 3) Widely-accepted industry practices.These three items rank from most authoritative to least authoritative as follows:

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

Question 45

The purpose of the Emerging Issues Task Force is to

A)develop a conceptual framework as a frame of reference for the solution of future problems.
B)lobby the FASB on issues that affect a particular industry.
C)do research on issues that relate to long-term accounting problems.
D)issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.

Question 46

Which of the following is not a part of generally accepted accounting principles?

A)FASB Interpretations
B)CAP Accounting Research Bulletins
C)APB Opinions
D)All of these are part of generally accepted accounting principles.

Question 47

The Governmental Accounting Standards Board's main purpose is to develop standards for

A)the General Accounting Office.
B)the Federal government.
C)state and local government.
D)the Internal Revenue Service.

Question 48

An organization that has not published accounting standards is the

A)American Institute of Certified Public Accountants.
B)Securities and Exchange Commission.
C)Financial Accounting Standards Board.
D)All of these have published accounting standards.

Question 49

Which of the following publications does not qualify as a statement of generally accepted accounting principles?

A)Statements of financial standards issued by the FASB
B)Accounting interpretations issued by the FASB
C)APB Opinions
D)Accounting research studies issued by the AICPA

Question 50

Members of the Financial Accounting Standards Board are

A)employed by the American Institute of Certified Public Accountants (AICPA).
B)part-time employees.
C)required to hold a CPA certificate.
D)independent of any other organization.

Question 51

The purpose of Statements of Financial Accounting Concepts is to

A)establish GAAP.
B)modify or extend the existing FASB Standards Statement.
C)form a conceptual framework for solving existing and emerging problems.
D)determine the need for FASB involvement in an emerging issue.

Question 52

The most significant current source of generally accepted accounting principles is the

A)AICPA.
B)SEC.
C)APB.
D)FASB.

Question 53

Generally accepted accounting principles

A)include detailed practices and procedures as well as broad guidelines of general application.
B)are influenced by pronouncements of the SEC and IRS.
C)change over time as the nature of the business environment changes.
D)all of these.

Question 54

The most authoritative category of generally accepted accounting principles includes all of the following except

A)Accounting Research Bulletins.
B)APB Opinions.
C)FASB Standards.
D)FASB Technical Bulletins.

Question 55

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 56

The Governmental Accounting Standards Board

A)oversees the activities of the SEC.
B)is a private-sector body, which addresses state and local governmental reporting issues.
C)is a division of the Securities and Exchange Commission, which oversees the corpo-rate accounting in annual reports.
D)was terminated when the Financial Accounting Standards Board was created.