Accounting Chapter 1

FASB Statement of Financial Accounting Standards Exposure Draft Statement of Financial Accounting Standards Preliminary Views The chronological order in which these items are released is as follows: 123 132 231 312

312

The passage of a new FASB Standards Statements requires the support of all board members 3 board members 4 board members 5 board members

4 board members

Which of the following is not a publication of FASB Statements of Financial Accounting Concepts Accounting Research Bulletins Interpretations Technical Bulletins

Accounting Research Bulletins

Which of the following is not a part of generally accepted accounting principles FASB Interpretations CAP Accounting Research Bulletins APB Opinions All of these are part of generally accepted accounting principles

All of these are part of generally accepted accounting principles

Which organization was responsible for issuing Accounting Research Bulletins? Accounting Principles Board Committee of Accounting Procedure SEC AICPA

Committee of Accounting Procedure

The most significant current source of generally accepted accounting principles is the AICPA SEC APB FASB

FASB

Which organization is responsible for issuing Emerging Issues Task Force Statements? FASB CAP APB SEC

FASB

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

IASB

Which of the following pronouncements were issued by the APB? Accounting Research Bulletins Opinions Statements of Position Statements of Financial Accounting Concepts

Opinions

Companies that are listed on a stock exchange are required to submit their financial statements to the AICPA APB FASB SEC

SEC

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 FASB AICPA SEC APB

SEC

The Financial Accounting Standards Board was proposed by the American Institute of Certified Public Accountants Accounting Principles Board Study Group on the Objectives of Financial Statements Special Study Group on establishment of Accounting Principles (Wheat Committee)

Special Study Group on establishment of Accounting Principles (Wheat Committee)

. What is "expectation gap"? The difference between what the public thinks the accountant is not doing and what the accountant knows they don't do The difference between what the public thinks the accountant is doing and what Congress says the accountant is doing. The difference between what the public thinks the accountant is doing and what the accountant thinks they can do. The difference between what the accountant is doing and what the Courts say the accountant should be doing.

The difference between what the public thinks the accountant is doing and what the accountant thinks they can do.

Which of the following is not a major challenge facing the accounting profession? nonfinancial measurements. timeliness. accounting for hard assets (inventory and plant assets). forward-looking information.

accounting for hard assets

Which of the following publications does not qualify as a statement of generally accepted accounting principles? statements of financial standards issued by the FASB accounting interpretations issued by the FASB APB Opinions accounting research studies issued by the AICPA

accounting research studies issued by the AICPA

The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is the FASB issues exposure drafts of proposed standards all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions all members of the FASB possess extensive experience in financial reporting a majority of the members of the FASB are CPAs drawn from public practice

all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions

What is due process in the context of standard setting at the FASB? FASB operates in full view of the public public hearings are held on proposed accounting standards interested parties can make their views known all of the above

all of the above

Which of the following organizations has been responsible for setting U.S. accounting standards? Accounting Principles Board Committee on Accounting Procedure Financial Accounting Standards Board All of the above

all of the above

An effective capital allocation process promotes productivity encourages innovation. provides an efficient market for buying and selling securities all of these

all of these

Generally accepted accounting principles include detailed practices and procedures as well as broad guidelines of general application are influenced by pronouncements of SEC and IRS change over time as the nature of the business environment changes all of these

all of these

Users of financial reports include all of the following except creditors government agencies unions all of these are users

all of these are users

Which of the following is not considered a component of generally accepted accounting principles? FASB Implementation Guides widely recognized industry practices articles published in CPA journals AICPA Accounting Interpretations

articles published in CPA journals

What would be an advantage of having all countries adopt and follow the same accounting standards? consistency comparability lower preparation costs b and c

b and c

Accounting principles are "generally accepted" only when an authoritative accounting rule-making body has established it in a official pronouncement it has been accepted as appropriate because of its universal application both a and b neither a nor b

both a and b

Primary users for general purpose financial statements include creditors employees investors both creditors and investors

both creditors and investors

Financial accounting standard-setting in the United States 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 is based solely on research and empirical findings is a legalistic process based on rules promulgated by governmental agencies. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.

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

A characteristic of generally accepted accounting principles include the following common set of standards and principles standards and principles are based federal statutes acceptance requires an affirmative vote of Certified Public Accountants practices that become accepted for at least a year by all industry members

common set of standards and principles

The AICPA continues to be involved in all of the following except developing and enforcing ethics developing auditing standards providing professional education programs all of the above

developing auditing standards

Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight? smaller membership FASB board members are well-paid FASB board members must be CPAs due process

due process

The Financial Accounting Standards Board employs a "due process" system which is an efficient system for collecting dues from members enables interested parties to express their views on issues under consideration identifies the accounting issues that are the most important requires that all accountants must receive a copy of financial standards

enables interested parties to express their views on issues under consideration

Which perspective is adopted as part of the objective of general-purpose financial reporting? decision-usefulness perspective proprietary perspective entity perspective financial reporting perspective

entity perspective

The purpose of Statements of Financial Accounting Concepts is to establish GAAP modify or extend the existing FASB Standards Statement form a conceptual framework for solving existing and emerging problems determine the need for FASB involvement in an emerging issue

form a conceptual framework for solving existing and emerging problems

A common set of accounting standards and procedures are called financial accounting standards generally accepted accounting principles objectives of financial reporting statements of financial accounting concepts

generally accepted accounting principles

Members of the Financial Accounting Standards Board are employed by the American Institute of Certified Public Accountants (AICPA) part-time employees required to hold a CPA certificate independent of any other organization

independent of any other organization

The information provided by financial reporting pertains to individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers

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

is appointed by the Financial Accounting Foundation

Accrual accounting is used because cash flows are considered less important it provides a better indication of ability to generate cash flows than the cash basis it recognizes revenues when cash is received and expense when cash is paid none of the above

it provides a better indication of ability to generate cash flows than the cash basis

The Financial Accounting Foundation oversees the operations of FASB oversees the operations of the AICPA provides information to interest parties on financial reporting issues works with the Financial Accounting Standards

oversees the operations of FASB

Which of the following represents a form of communication through financial reporting but not through financial statements? balance sheet. president's letter. income statement. notes to financial statements.

presidents letter

The purpose of the International Accounting Standards Board is to issue enforceable standards which regulate the financial accounting and reporting of multinational corporations develop a uniform currency in which the financial transactions of companies through-out the world would be measured promote uniform accounting standards among countries of the world arbitrate accounting disputes between auditors and international companies

promote uniform accounting standards among countries of the world

What is the purpose of Emerging Issues Task Force? provide interpretation of existing standards provide a consensus on how to account for new and unusual financial transactions provide interpretive guidance provide timely guidance on select issues

provide a consensus on how to account for new and unusual financial transactions

What is the objective of financial reporting? provide information that is useful to management in making decisions provide information that clearly portray nonfinancial transactions provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors provide information that excludes claims to the resources

provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors

What is the purpose of a FASB Staff Position? provide interpretation of existing standards provide a consensus on how to account for new and unusual financial transactions provide interpretive guidance provide timely guidance on select issues

provide interpretive guidance

How does accounting help the capital allocation process attract investment capital? provides timely, relevant information. encourages innovation. promotes productivity. a and b above.

provides timely, relevant information

The financial statements most frequently provided include all of the following except the balance sheet income statement statement of cash flows statement of retained earnings

statement of retained earnings

Why did the AICPA create the Accounting Principles Board? the SEC disbanded previous standard setting organization the previous standard setting organization did not provide a structured set of accounting principles no such organization existed in the past none of the above

the previous standard setting organization did not provide a structured set of accounting principles