Intermediate Accounting Test Bank Chapter 1

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CHAPTER 1

FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS

IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual

AnswerNo.Description

F1.Definition of financial accounting.
T2.Purpose of financial statements.
T3.Definition of financial accounting.
T4.Capital allocation process.
F5.Financial reports.
F6.Fair value information.
F7.Objectives of financial reporting.
F8.Accrual accounting.
T9.Generally accepted accounting principles.
T10.Users of financial statements.
F11.Committee on Accounting Procedure.
F12.Passage of FASB standards.
T13.Financial Accounting Concepts.
T14.Creation of Accounting Principles Board.
F15.Definition of financial accounting.
T16.Code of Professional Conduct.
F17.Accounting standards.
T18.International standards.
T19.Expectations gap.
F20.Ethical issues.

Multiple Choice—Conceptual

AnswerNo.Description

a21.Financial accounting.
d22.Users of financial reports.
d23.Identify the major financial statements.
a24.Financial reporting entity.
d25.Differences between financial and managerial accounting.
b26.Financial reporting communication.
bP27.Managerial accounting.
a28.Capital allocation process.
d29.Efficient use of resources.
d30.Capital allocation process.
c31.Financial statement information.
c32.Accounting profession challenge.
c33.Financial reporting objective.
d34.Financial reporting objective.
c35.Objectives of financial reporting.
Multiple Choice—Conceptual (cont.)

AnswerNo.Description

b36.Accrual accounting.
cP37.Objectives of financial reporting.
c38.Meaning of “generally accepted.”
b39.Common set of standards and procedures.
a40.Limitation of general purpose financial statements.
c41.Securities and Exchange Commission and accounting standard setting.
d42.Due process in FASB standard setting.
d43.Organizations responsible for setting accounting standards.
b44.Reason for Accounting Principles Board creation
b45.Organization issuing Accounting Research Bulletins.
a46.Characteristic of GAAP.
c47.Characteristics of GAAP.
d48.FASB accounting standards.
b49.FASB standard passage.
b50.Purpose of Emerging Issues Task Force.
a51.AICPA role in standard setting.
c52.Role of SEC.
c53.Powers of the SEC.
d54.SEC enforcement.
d55.Creation of FASB.
d56.Appointment of FASB members.
a57.Purpose of the Financial Accounting Foundation.
b 58.Characteristics of FASB.
b59.FASB and "due process" system.
b60.Publications of FASB.
c61.Purpose of FASB Technical Bulletins.
d62.Purpose of Emerging Issues Task Force.
b63.Role of the AICPA.
b64.Pronouncement issued by the APB.
c65.Standard setting organizations.
d66.Identification of standard setting organizations.
c67.Statements of financial accounting concepts.
dP68.FASB members.
dP69.FASB statement process.
d70.Nature of GAAP.
d71.Body which promulgates GAAP.
d72.Publications which are not GAAP.
d73.Publications which are not GAAP.
b74.Code for Professional Conduct Rule 203.
c75.Purpose of FASB staff position.
c76.Components of GAAP.
a77.Political environment of standard setting.
c78.International Accounting Standards Board.

Multiple Choice—Conceptual (cont.)

AnswerNo.Description

d79.Standard setting process pressure.
a80.Danger of politics in standard setting
c81.Definition of "expectation gap".
b82.Reason accounting standards differ across countries.
d83.Advantage of countries adopting same accounting standards.
a84.Ethical concern of accountants.

P Note: these questions also appear in the Problem-Solving Survival Guide.

Exercises

ItemDescription

E1-85Objectives of financial reporting.
E1-86Development of accounting principles.
E1-87Publications and...
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