Financial Accounting
Chapter 02
Worldwide Accounting Diversity
Multiple Choice Questions
1. What is the equivalent of U.S. balance sheet common stock on the balance sheet of a British company? A) Capital redemption reserve B) Share premium account C) Own shares held D) Called-up share capital
Answer: D Level: Medium LO: 1
2. Which of the following is not a problem caused by accounting diversity? A) Lack of qualified international auditors B) Preparation of consolidated financial statements C) Access to foreign capital markets D) Comparability of financial statements
Answer: A Level: Medium LO: 2
3. Differences in legal systems used in various countries have been cited as one reason for diversity in accounting practice. What are the major types of legal systems? A) commercial law and accounting law B) rules and regulations C) written law and unwritten law D) common law and code law
Answer: D Level: Easy LO: 3
4. The accounting standards in code law countries tend to be: A) very detailed. B) formulated by organizations such as the FASB. C) stated broadly without much guidance on accounting procedures. D) very conservative.
Answer: C Level: Medium LO: 3
5. What is likely to be the source of accounting standards in common law countries? A) Tax law B) Non-government entities such as the FASB C) Federal and local legislatures D) The International Accounting Standards Board
Answer: B Level: Medium LO: 3
6. When accounting rules are left up to professional associations rather than being legislated by governmental bodies, what is the likely result? A) Very general accounting rules are created, as in code law countries.
Worldwide Accounting Diversity
Multiple Choice Questions
1. What is the equivalent of U.S. balance sheet common stock on the balance sheet of a British company? A) Capital redemption reserve B) Share premium account C) Own shares held D) Called-up share capital
Answer: D Level: Medium LO: 1
2. Which of the following is not a problem caused by accounting diversity? A) Lack of qualified international auditors B) Preparation of consolidated financial statements C) Access to foreign capital markets D) Comparability of financial statements
Answer: A Level: Medium LO: 2
3. Differences in legal systems used in various countries have been cited as one reason for diversity in accounting practice. What are the major types of legal systems? A) commercial law and accounting law B) rules and regulations C) written law and unwritten law D) common law and code law
Answer: D Level: Easy LO: 3
4. The accounting standards in code law countries tend to be: A) very detailed. B) formulated by organizations such as the FASB. C) stated broadly without much guidance on accounting procedures. D) very conservative.
Answer: C Level: Medium LO: 3
5. What is likely to be the source of accounting standards in common law countries? A) Tax law B) Non-government entities such as the FASB C) Federal and local legislatures D) The International Accounting Standards Board
Answer: B Level: Medium LO: 3
6. When accounting rules are left up to professional associations rather than being legislated by governmental bodies, what is the likely result? A) Very general accounting rules are created, as in code law countries.