acct 330 ch 1
Terms in this set (103)
identification, measurement, and communication of financial info about economic entities to interested parties
the essential characteristics of accounting are
process of identifying, measuring, analyzing, and communicating financial info needed by management to plan, control, and evaluate a company's operations
balance sheet, income statement, statement of cash flows, statement of stockholders equity
financial statements are
financial information a company provides to help users with capital allocation decisions about the company
process of determining how and at what cost money is allocated among competing interests
provide financial info about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entity
objective of financial reporting
general purpose financial statements
provide financial reporting info to a wide variety of users
provide at the least cost the most useful info possible
general purpose financial statement provide
identifies investors and creditors as the primary users for general purpose financial statements
objective of financial reporting
companies are viewed as separate and distinct from their owners
perspective that financial reporting should be focused only on the needs of shareholders
why investors are interested in financial reporting
companies ability to generate cash flows, management's ability to protect and enhance capital providers investments,
when making decisions, investors are interested in assessing
ensures that a company records events that change its financial statements in periods in which events occur, rather than when cash is received
generally accepted accounting principles
common set of standard and procedures
after great depression, they helped develop and standardize financial info presented to stockholders, increased gov regulation
aicpa or fasb
accounting standards have developed in private sector
sec relies on who to develop accounting standards
accounting standards executive committee
committee authorized to speak for the AICPA in the area of financial accounting and reporting
audit and accounting guides
summarize the accounting practices of specific industries and provide specific guidance on matters no addressed by the FASB
financial accounting foundation
who selects the members of the fast and advisory council
accounting standards updates
amend the accounting standards codification, which represents the source of authoritative accounting standards, other than standards issued by the sec
financial accounting concepts
sets forth fundamental objectives and concepts that the board uses in developing future standards of financial accounting and reporting
promotes productivity, encourages innovation, provides an efficient market for buying and selling securities
an effective capital allocation process
companies are viewed as separate and distinct from their owners.
The objective of general purpose financial reporting adopts an entity perspective, which means that
TF The objective of financial statements emphasizes a stewardship approach for reporting financial information.
TF 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.
TF Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards.
TF The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.
TF To satisfy the stewardship reporting responsibility of management, companies prepare multiple sets of special-purpose financial statements to meet the information needs of a variety of financial statement users.
TF The passage new FASB guidance in the form of an Accounting Standards Update requires the support of four of the seven Board members.
provide the Accounting Standards Executive Committee's views on narrow financial reporting issues that have not been addressed by the FASB.
Which group selects members of the FASB?
greater autonomy, increased independence, broader representation
Which of the following are a significant difference between the FASB and its predecessor, the APB?
The organization whose purpose is to reach consensus on how to account for new and unusual financial transactions that have potential for creating differing financial reporting practices is the:
Which of the following was established by the federal government to help develop and standardize financial information presented to stockholders?
topics are identified and placed on the board's agenda.
The first step taken in the establishment of a typical FASB statement is:
TF he Financial Accounting Standards Board Accounting Standards Codification is the only authoritative accounting literature.
AICPA's Code of Professional Conduct.
requires that members prepare financial statements in accordance with GAAP.
TF GAAP is established strictly through the application of careful logic and empirical findings
has oversight and enforcement authority and establishes auditing, quality control, and independence standards and rules.
ensures that a company records events that change its financial statements in the periods in which hate events occur
what are more meaningful for accrual based than cash basis
general purpose financial statement
statements companies prepare that are clear and fair of company's financial operations
sec, aicpa, fasb
three organizations that are instrumental in the development of financial accounting standards in the us
help standardize financial info presented to stockholders
sec was made tp
who does the sec rely on to develop accounting standards
national professional organization of practicing cpas
advance written expression of accounting principles, determine appropriate practices, narrow the areas of difference and inconsistency in practice
major purposes of the accounting principles board
study group on establishment of accounting principles, group examines the organization and operation of the apb and determined the necessary changes to attain better results
Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control a company's operations.
Financial statements are the principal means through which a company communicates its financial information to those outside it
Users of financial reports of a company use the information provided by these reports to make their capital allocation decisions.
An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit
The objective of financial reporting is to report the plans made by a company to improve the productivity of its employees.
Investors are interested in financial reporting because it provides information that is useful for making decisions.
Users of financial accounting statements have both coinciding and conflicting needs for information of various types
The Securities and Exchange Commission appointed the Committee on Accounting Procedure.
The passage of a new FASB Accounting Standards Update requires the support of five of the seven board members
Statements of Financial Accounting Concepts set forth fundamental objectives and concepts that are used by the FASB in developing future standards of financial accounting and reporting.
The AICPA created the Accounting Principles Board in 1959
The FASB's Codification creates a new set of GAAP
The AICPA's Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles.
GAAP is a product of careful logic or empirical findings and is not influenced by political action
The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes auditing and independence standards and rules.
The expectations gap is due to the difference between what the public thinks accountants should do and what accountants think they can do
Financial reports in the early 21st century did not provide any information about a company's soft assets (intangibles).
Accounting standards are now less likely to require the recording or disclosure of fair value information
U.S. companies that list overseas are required to use International Financial Reporting Standards, issued by the International Accounting Standards Board.
Ethical issues in financial accounting are governed by the AICPA.
General-purpose financial statements are the product of
creditors, gov agencies, unions
which of the following is not a user of financial reports
statement of retained earnings
The financial statements most frequently provided include all of the following except the
individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers
The information provided by financial reporting pertains to
plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
All the following are differences between financial and managerial accounting in how accounting information is used except to
Which of the following represents a form of communication through financial reporting but not through financial statements?
The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations is called
by providing timely, relevant information
How does accounting help the capital allocation process attract investment capital?
markets, free enterprise, competition
Which of the following helps in determining whether a business thrives?
b. Encouraging innovation.
c. Providing an efficient market for buying and selling securities.
Which of the following is related to an effective capital allocation?
Financial statements in the early 2000s provide information related to
accounting for hard assets
Which of the following is not a major challenge facing the accounting profession?
Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.
What is the objective of financial reporting?
creditors and investors
Primary users for general-purpose financial statements include
Both assessing the company's ability to generate net cash inflows and assessing management's ability to protect and enhance the capital provider's investments.
Which of the following will be of interest to investors in decision-making?
it provides a better indication of a company's ability to generate cash flows than the cash basis.
Accrual accounting is used because
Which perspective is adopted as a part of the objective of general-purpose financial reporting?
An authoritative accounting rule-making body has established it and it has been accepted because of its universal application.
Which of the following is a requirement for an accounting principle to be called "generally accepted"?
generally accepted accounting principles.
A common set of accounting standards and procedures are called
General purpose financial statements may not be the most informative for a specific enterprise.
Which of the following is a general limitation of "general purpose financial statements"?
The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?
a. The FASB operates in full view of the public.
b. Public hearings are held on proposed accounting standards.
c. Interested parties can make their views known.
d. All of the answer choices are correct.
What is due process in the context of standard setting at the FASB?
a. The Accounting Principles Board.
b. The Committee on Accounting Procedure.
c. The Financial Accounting Standards Board.
d. All of the answer choices are correct.
Which of the following organizations has been responsible for setting U.S. accounting standards?
The previous standard setting organization did not provide a structured set of accounting principles.
Why did the AICPA create the Accounting Principles Board?
The Committee on Accounting Procedure.
Which organization was responsible for issuing Accounting Research Bulletins?
a common set of standards and principles.
A characteristic of generally accepted accounting principles include:
each principle is approved by the SEC.
Characteristics of generally accepted accounting principles include all of the following except
Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight?
four Board members.
The passage of a new FASB Accounting Standards Update requires the support of
Provide a consensus on how to account for new and unusual financial transactions.
What is the purpose of Emerging Issues Task Force?
Which organization is responsible for issuing Emerging Issues Task Force Statements?
sometimes primary and sometimes secondary.
The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as
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