Accounting

CHAPTER 1

FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS

IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual

Answer No. Description

F 1. Definition of financial accounting.
T 2. Purpose of financial statements.
T 3. Definition of financial accounting.
T 4. Capital allocation process.
F 5. Financial reports.
F 6. Fair value information.
F 7.Objectives of financial reporting.
F 8. Accrual accounting.
T 9. Generally accepted accounting principles.
T 10. Users of financial statements.
F 11. Committee on Accounting Procedure.
F 12. Passage of FASB standards.
T 13. Financial Accounting Concepts.
T 14. Creation of Accounting Principles Board.
F 15. Definition of financial accounting.
T 16. Code of Professional Conduct.
F17. Accounting standards.
T 18. International standards.
T 19. Expectations gap.
F 20. Ethical issues.

Multiple Choice—Conceptual

Answer No. Description

a 21. Financial accounting.
d 22. Users of financial reports.
d 23. Identify the major financial statements.
a 24. Financial reporting entity.
d 25. Differences between financial and managerial accounting.
b 26.Financial reporting communication.
b P27. Managerial accounting.
a 28. Capital allocation process.
d 29. Efficient use of resources.
d 30. Capital allocation process.
c 31. Financial statement information.
c 32. Accounting profession challenge.
c 33. Financial reporting objective.
d 34. Financial reporting objective.
c 35. Objectives of financial reporting.
Multiple Choice—Conceptual(cont.)

Answer No. Description

b 36. Accrual accounting.
c P37. Objectives of financial reporting.
c 38. Meaning of “generally accepted.”
b 39. Common set of standards and procedures.
a 40. Limitation of general purpose financial statements.
c 41. Securities and Exchange Commission and accounting standard setting.
d 42. Due process in FASB standard setting.
d 43. Organizationsresponsible for setting accounting standards.
b 44. Reason for Accounting Principles Board creation
b 45. Organization issuing Accounting Research Bulletins.
a 46. Characteristic of GAAP.
c 47. Characteristics of GAAP.
d 48. FASB accounting standards.
b 49. FASB standard passage.
b 50. Purpose of Emerging Issues Task Force.
a 51. AICPA role in standard setting.
c 52. Role of SEC.c 53. Powers of the SEC.
d 54. SEC enforcement.
d 55. Creation of FASB.
d 56. Appointment of FASB members.
a 57. Purpose of the Financial Accounting Foundation.
b 58. Characteristics of FASB.
b 59. FASB and "due process" system.
b 60. Publications of FASB.
c 61. Purpose of FASB Technical Bulletins.
d 62. Purpose of Emerging Issues Task Force.
b 63. Role of the AICPA.
b64. Pronouncement issued by the APB.
c 65. Standard setting organizations.
d 66. Identification of standard setting organizations.
c 67. Statements of financial accounting concepts.
d P68. FASB members.
d P69. FASB statement process.
d 70. Nature of GAAP.
d 71. Body which promulgates GAAP.
d 72. Publications which are not GAAP.
d 73. Publications which are not GAAP.
b 74. Codefor Professional Conduct Rule 203.
c 75. Purpose of FASB staff position.
c 76. Components of GAAP.
a 77. Political environment of standard setting.
c 78. International Accounting Standards Board.

Multiple Choice—Conceptual (cont.)

Answer No. Description

d 79. Standard setting process pressure.
a 80. Danger of politics in standard setting
c 81. Definition of "expectation gap".b 82. Reason accounting standards differ across countries.
d 83. Advantage of countries adopting same accounting standards.
a 84. Ethical concern of accountants.

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

Exercises

Item Description

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