Chapter 1

Question 1

The 5 statements are:

Answer 1

1) balance sheet
2) income statement
3) statement of cash flows
4) stock holders equity
5) statement of comprehensive income

Question 2

GAAP stands for…..

Answer 2

Generally Accepted Accounting Principles

Question 3

S.EC stands for…..

Answer 3

Securities and exchange

Question 4

What is FASB?

Answer 4

Financial Accounting Standards Board

Question 5

What is IASB?

Answer 5

International Accounting Standards Board

Question 6

What is IFRS?

Answer 6

International Financial Reporting Standards

Question 7

Objective of financial reporting:

Answer 7

Provide useful financial information about the reporting entity to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entity.

Identifies investors and creditors as the primary users for general-purpose financial statements.

Question 8

What is the GAAP?

Answer 8

It is the common set of standards and procedures of Accounting.

Question 9

What does the securities and exchange do?

Answer 9

Help develop and standardize financial information presented to stockholders.

Established by federal government.

Relies on Financial Accounting Standard Board (FASB) to develop accounting standards.

Question 10

What is AICPA?

Answer 10

American Institute of Certified Public Accountants, a national professional organization of practicing CPA’s

Question 11

Capital allocation is…

Answer 11

The process of determining how and what cost money is allocated among competing interests.

Question 12

APB Opinions:

Answer 12

Opinions intended to be mainly based on research studies and be supported by reason and analysis.

Question 13

Decision usefulness:

Answer 13

Investors are interested in financial reporting that is useful in making decisions.

Investors are interested in:
1) company’s ability to generate net cash flows
2) managements ability to protect and enhance the capital providers investments.

Question 14

What is Financial Accounting?

Answer 14

Process that culminates in the preparation of financial reports on the enterprise for use by both internal and external reports.

Question 15

GAAP was issued by:

Answer 15

Financial Accounting Standards Board and governmental Accounting Standards Board

Question 16

Who exercises oversight of FASB?

Answer 16

Securities and Exchange (SEC)

Question 17

Who has oversight of the actions of IASB?

Answer 17

IOSCO (international organization of securities commissions)

Question 18

What similarities does IASB and FASB have?

Answer 18

Governance structure, foundation that provides oversight, a board, advisory council, and interpretations committee.

Question 19

True or false: AAP is the term used to indicate the whole body of FASB literature

Answer 19

TRUE

Question 20

True or false: any company claiming compliance with gap must comply with most standards and interpretations but does not have to follow the disclosure agreements

Answer 20

FALSE

Question 21

True or false: the primary governmental body that has influence over the FASB is the SEC

Answer 21

TRUE

Question 22

The FASB has a government mandate and therefore dues not have to follow due process in issuing a standard

Answer 22

FALSE

Question 23

Identity if statements are true on false:
1.) The objective of financial statements emphasizes a stewardship approach for reporting financial information.
2.) the purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners’ or stockholders’ equity.
3.) because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards.
4.) The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.

Answer 23

1.) FALSE
2.) FALSE
3.) FALSE
4.) TRUE

Question 24

Accounting standards setters use the following process in establishing accounting standards.

Answer 24

Research, exposure draft, discussion paper, standard.

Question 25

GAAP is compromised of:

Answer 25

Any accounting guidance included in the FASB codification.

Question 26

The authoritative status of the conceptual framework is as follows:

Answer 26

It it’s used when there is no standard or interpretation related to the reporting issues under consideration.