Financial Acct Ch 1.2
Which of the following statements is true?
The FASB oversees the creation of accounting standards, GAAP are the accounting standards, and the SEC oversees the U.S. financial markets
Limited liability means the most a stockholder can lose is the amount they originally paid for the stock.
True
The Economic Entity Assumption draws boundaries around each entity to keep its affairs distinct from those of other entities and separate from its owners.
True
Corporate officers are appointed by the board of directors to manage a business and never run the business for their own benefit rather than the benefit of the company.
False
Which of the following statements describe a corporation.
*A corporation may enter into contracts *ownership interest is divided into shares of stock *a corporation can buy, own, and sell property
Disadvantages of the corporate form of a business include
*Government regulation-corporations are subjected to more government regulation than other forms of business *Corporation taxation-corporation pay a variety of taxes not paid by sole proprietorships or partnerships
Generally Accepted Accounting Principles (GAAP)
*Rests on the conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements *creates the acceptable accounting practices
Which of the following is a privately funded organization that oversees the creation and governance of accounting standards?
FASB
Which of the following statement is false regarding a corporation?
It is harder for corporation to raise capital compared to a sole proprietorship.
The objective to financial reporting is to
Provide information useful for making investment and lending decisions
A corporation is a business entity formed under state law and the state grants a charter which is the document that gives the state's permission to form a corporation.
True
Accounting information must be relevant and have faithful representation for investors and lenders to make sound business decisions
True
