ACCOUNTING FOR DECISION
MAKERS - C213 EXAM QUESTIONS &
COMPLETE SOLUTIONS ALL
UPDATED
Bookkeeping - Correct Answer ✔✔ is the preservation of a systematic, quantitative
record of an activity
Accounting - Correct Answer ✔✔ A system of providing "quantitative information,
primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions."
The key features of this definition are the following:
Numbers: Accounting is quantitative. This is a strength because numbers can be easily
tabulated and summarized. It is a weakness because some important business events,
such as a toxic waste spill and the associated lawsuits and countersuits, cannot be
easily described by one or two numbers.
A financial dimension: The status and performance of a business is affected by and
reflected in many dimensions—financial, personal relationships, community and
environmental impact, and public image. Accounting focuses on just the financial
dimension.
Usefulness: The practice of accounting is supported by a long tradition of theory; U.S.
accounting rules in fact have a theoretical conceptual framework, and some people
actually make a living as accounting theorists. However, in spite of its theoretical
beauty, accounting exists only because it is useful.
Future decisions based on past information: Although accounting is the structured
reporting of what has already occurred, this past information can only be useful if it
impacts decisions about the future.
financial accounting - Correct Answer ✔✔ which is the name given to accounting
information provided for and used by external users.
Managerial accounting - Correct Answer ✔✔ the name given to accounting systems
designed for internal users
financial statements - Correct Answer ✔✔ The three primary financial information
documents: the balance sheet, income statement, and statement of cash flows.
,balance sheet - Correct Answer ✔✔ reports the resources of a company (the assets),
the company's obligations (the liabilities), and the owners' equity, which represents how
much money has been invested in the company by its owners.
income statement - Correct Answer ✔✔ This document reports the amount of net
income earned by a company during a period, with annual and quarterly income
statements being the most common.
statement of cash flows - Correct Answer ✔✔ This document reports the amount of
cash collected and paid out by a company in the following three types of activities:
operating, investing, and financing.
The emphasis in financial accounting is on which of the following external user groups?
- Correct Answer ✔✔ Investors and creditors
The primary internal group that uses accounting information is - Correct Answer ✔✔
Management
Internal reports are generally used by - Correct Answer ✔✔ Management
Which of the following is NOT an external user of financial information? - Correct
Answer ✔✔ Management
accounting standards are set by the? - Correct Answer ✔✔ Financial Accounting
Standards Board (FASB). The FASB is based in Norwalk, Connecticut; its seven full-
time members are selected from a variety of backgrounds—professional accounting,
business, government, and academia. FASB is not a government agency, it lacks the
legal power to enforce the accounting standards it sets.
Generally Accepted Accounting Principles (GAAP) - Correct Answer ✔✔ a set of
accounting standards that is used in the preparation of financial statements
Which of the following is NOT true of the Financial Accounting Standards Board
(FASB)? - Correct Answer ✔✔ It is a government agency
Generally accepted accounting principles are - Correct Answer ✔✔ Developed by
accounting rule makers
The initials GAAP stand for - Correct Answer ✔✔ Generally Accepted Accounting
Principles
The current standard-setting board for accounting in the private sector is the - Correct
Answer ✔✔ Financial Accounting Standards Board (FASB)
Securities and Exchange Commission (SEC) - Correct Answer ✔✔ Congress created
the Securities and Exchange Commission (SEC) to regulate U.S. stock exchanges.The
,SEC is not charged with protecting investors from losing money; instead, it seeks to
create a fair information environment in which investors can buy and sell stocks without
fear that companies are hiding or manipulating financial data.
What is corporate governance? - Correct Answer ✔✔ Corporate Governance is the set
of principles and practices that a corporation uses to regulate the relationship between
the shareholders and the professional managers hired by the board of directors.
The label "CPA" has two different uses - Correct Answer ✔✔ for individuals who are
CPAs and for CPA firms.CPA firms are also hired to perform independent audits of a
company's financial statements. The important role of an independent audit in ensuring
the reliability of financial statements is discussed in our "Overview of the Financial
Statements."not all CPAs work as accountants; they work in law firms or for the CIA and
as business consultants, corporate managers, and even accounting professors.
Certified Public Accountant (CPA) - Correct Answer ✔✔ A person who has taken a
minimum number of college-level accounting classes, has passed the dreaded CPA
exam, and has met other requirements set by his or her state.
American Institute of Certified Public Accountants (AICPA) - Correct Answer ✔✔ the
professional organizations of certified public accountants in the United States. Like
other professional organizations (e.g., the American Medical Association and the
American Bar Association), the AICPA provides continuing educational service to its
members and also acts as a political voice to lobby on behalf of its membership. The
AICPA is responsible for preparing and grading the CPA examination in addition to
maintaining the integrity of the accounting profession through its Code of Professional
Conduct.
Section 101 of the Sarbanes-Oxley Act created the Public Company Accounting
Oversight Board (PCAOB). - Correct Answer ✔✔ Public Company Accounting
Oversight Board (PCAOB)a private, non-profit organization, but it effectively serves as
an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly
traded companies. The SEC appoints the chairperson and members of the PCAOB.
Like the FASB, the PCAOB is funded by registration fees paid by all publicly traded
companies in the United States.
Internal Revenue Service (IRS) - Correct Answer ✔✔ The branch of the U.S. Treasury
Department in charge of collecting taxes
International Accounting Standards Board (IASB) - Correct Answer ✔✔ An international
accounting standard-setting body responsible for the convergence of accounting
standards worldwide.was formed in 1973 to develop worldwide accounting standards.In
2001, the IASB restructured itself as an independent body with closer links to national
standard-setting bodies. At that time the IASB adopted its current name and dropped its
original name, the International Accounting Standards Committee (IASC).
, International Accounting Standards Committee (IASC) - Correct Answer ✔✔
International Accounting Standards Board (IASB)
International Financial Reporting Standards (IFRS) - Correct Answer ✔✔ Accounting
standards, issued by the IASB, that have been adopted by many countries outside of
the United States.
Which of the following is the government agency that stipulates the rules and
regulations that govern the collection of taxes in the United States? - Correct Answer
✔✔ Internal Revenue Service
The organization that develops worldwide accounting standards is the - Correct Answer
✔✔ International Accounting Standards Board (IASB)
Standards established by the International Accounting Standards Board are referred to
as - Correct Answer ✔✔ International Financial Reporting Standards
Which of the following is NOT a service typically provided by large public accounting
firms? - Correct Answer ✔✔ Making management decisions
Which of the following organizations has specific legal authority to establish accounting
standards for publicly held companies? - Correct Answer ✔✔ Securities and Exchange
Commission (SEC)
Which of the following is NOT a reason for the integration of worldwide accounting
standards? - Correct Answer ✔✔ the theoretical necessity of a common set of
accounting standards
The International Accounting Standards Board (IASB) is charged with developing
worldwide accounting practices? - Correct Answer ✔✔ True
With the current state of information technology, investors outside a company are now
allowed access to a company's internal database of financial information and do their
own customized analysis of a firm's performance. - Correct Answer ✔✔ False - While
the technology may be available, companies are still not allowing outsiders access to
their internal accounting records.
Increased federal oversight of the audit process resulted from the passage of the
following act of Congress - - Correct Answer ✔✔ Sarbanes-Oxley Act
1.7 Review of Key Points - Correct Answer ✔✔ Accounting is the recording of the day-
to-day financial activities of a company and the organization of that information into
summary reports used to evaluate the company's financial status.
The focus of financial accounting is the three primary financial statements: the balance
sheet, the income statement, and the statement of cash flows.
MAKERS - C213 EXAM QUESTIONS &
COMPLETE SOLUTIONS ALL
UPDATED
Bookkeeping - Correct Answer ✔✔ is the preservation of a systematic, quantitative
record of an activity
Accounting - Correct Answer ✔✔ A system of providing "quantitative information,
primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions."
The key features of this definition are the following:
Numbers: Accounting is quantitative. This is a strength because numbers can be easily
tabulated and summarized. It is a weakness because some important business events,
such as a toxic waste spill and the associated lawsuits and countersuits, cannot be
easily described by one or two numbers.
A financial dimension: The status and performance of a business is affected by and
reflected in many dimensions—financial, personal relationships, community and
environmental impact, and public image. Accounting focuses on just the financial
dimension.
Usefulness: The practice of accounting is supported by a long tradition of theory; U.S.
accounting rules in fact have a theoretical conceptual framework, and some people
actually make a living as accounting theorists. However, in spite of its theoretical
beauty, accounting exists only because it is useful.
Future decisions based on past information: Although accounting is the structured
reporting of what has already occurred, this past information can only be useful if it
impacts decisions about the future.
financial accounting - Correct Answer ✔✔ which is the name given to accounting
information provided for and used by external users.
Managerial accounting - Correct Answer ✔✔ the name given to accounting systems
designed for internal users
financial statements - Correct Answer ✔✔ The three primary financial information
documents: the balance sheet, income statement, and statement of cash flows.
,balance sheet - Correct Answer ✔✔ reports the resources of a company (the assets),
the company's obligations (the liabilities), and the owners' equity, which represents how
much money has been invested in the company by its owners.
income statement - Correct Answer ✔✔ This document reports the amount of net
income earned by a company during a period, with annual and quarterly income
statements being the most common.
statement of cash flows - Correct Answer ✔✔ This document reports the amount of
cash collected and paid out by a company in the following three types of activities:
operating, investing, and financing.
The emphasis in financial accounting is on which of the following external user groups?
- Correct Answer ✔✔ Investors and creditors
The primary internal group that uses accounting information is - Correct Answer ✔✔
Management
Internal reports are generally used by - Correct Answer ✔✔ Management
Which of the following is NOT an external user of financial information? - Correct
Answer ✔✔ Management
accounting standards are set by the? - Correct Answer ✔✔ Financial Accounting
Standards Board (FASB). The FASB is based in Norwalk, Connecticut; its seven full-
time members are selected from a variety of backgrounds—professional accounting,
business, government, and academia. FASB is not a government agency, it lacks the
legal power to enforce the accounting standards it sets.
Generally Accepted Accounting Principles (GAAP) - Correct Answer ✔✔ a set of
accounting standards that is used in the preparation of financial statements
Which of the following is NOT true of the Financial Accounting Standards Board
(FASB)? - Correct Answer ✔✔ It is a government agency
Generally accepted accounting principles are - Correct Answer ✔✔ Developed by
accounting rule makers
The initials GAAP stand for - Correct Answer ✔✔ Generally Accepted Accounting
Principles
The current standard-setting board for accounting in the private sector is the - Correct
Answer ✔✔ Financial Accounting Standards Board (FASB)
Securities and Exchange Commission (SEC) - Correct Answer ✔✔ Congress created
the Securities and Exchange Commission (SEC) to regulate U.S. stock exchanges.The
,SEC is not charged with protecting investors from losing money; instead, it seeks to
create a fair information environment in which investors can buy and sell stocks without
fear that companies are hiding or manipulating financial data.
What is corporate governance? - Correct Answer ✔✔ Corporate Governance is the set
of principles and practices that a corporation uses to regulate the relationship between
the shareholders and the professional managers hired by the board of directors.
The label "CPA" has two different uses - Correct Answer ✔✔ for individuals who are
CPAs and for CPA firms.CPA firms are also hired to perform independent audits of a
company's financial statements. The important role of an independent audit in ensuring
the reliability of financial statements is discussed in our "Overview of the Financial
Statements."not all CPAs work as accountants; they work in law firms or for the CIA and
as business consultants, corporate managers, and even accounting professors.
Certified Public Accountant (CPA) - Correct Answer ✔✔ A person who has taken a
minimum number of college-level accounting classes, has passed the dreaded CPA
exam, and has met other requirements set by his or her state.
American Institute of Certified Public Accountants (AICPA) - Correct Answer ✔✔ the
professional organizations of certified public accountants in the United States. Like
other professional organizations (e.g., the American Medical Association and the
American Bar Association), the AICPA provides continuing educational service to its
members and also acts as a political voice to lobby on behalf of its membership. The
AICPA is responsible for preparing and grading the CPA examination in addition to
maintaining the integrity of the accounting profession through its Code of Professional
Conduct.
Section 101 of the Sarbanes-Oxley Act created the Public Company Accounting
Oversight Board (PCAOB). - Correct Answer ✔✔ Public Company Accounting
Oversight Board (PCAOB)a private, non-profit organization, but it effectively serves as
an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly
traded companies. The SEC appoints the chairperson and members of the PCAOB.
Like the FASB, the PCAOB is funded by registration fees paid by all publicly traded
companies in the United States.
Internal Revenue Service (IRS) - Correct Answer ✔✔ The branch of the U.S. Treasury
Department in charge of collecting taxes
International Accounting Standards Board (IASB) - Correct Answer ✔✔ An international
accounting standard-setting body responsible for the convergence of accounting
standards worldwide.was formed in 1973 to develop worldwide accounting standards.In
2001, the IASB restructured itself as an independent body with closer links to national
standard-setting bodies. At that time the IASB adopted its current name and dropped its
original name, the International Accounting Standards Committee (IASC).
, International Accounting Standards Committee (IASC) - Correct Answer ✔✔
International Accounting Standards Board (IASB)
International Financial Reporting Standards (IFRS) - Correct Answer ✔✔ Accounting
standards, issued by the IASB, that have been adopted by many countries outside of
the United States.
Which of the following is the government agency that stipulates the rules and
regulations that govern the collection of taxes in the United States? - Correct Answer
✔✔ Internal Revenue Service
The organization that develops worldwide accounting standards is the - Correct Answer
✔✔ International Accounting Standards Board (IASB)
Standards established by the International Accounting Standards Board are referred to
as - Correct Answer ✔✔ International Financial Reporting Standards
Which of the following is NOT a service typically provided by large public accounting
firms? - Correct Answer ✔✔ Making management decisions
Which of the following organizations has specific legal authority to establish accounting
standards for publicly held companies? - Correct Answer ✔✔ Securities and Exchange
Commission (SEC)
Which of the following is NOT a reason for the integration of worldwide accounting
standards? - Correct Answer ✔✔ the theoretical necessity of a common set of
accounting standards
The International Accounting Standards Board (IASB) is charged with developing
worldwide accounting practices? - Correct Answer ✔✔ True
With the current state of information technology, investors outside a company are now
allowed access to a company's internal database of financial information and do their
own customized analysis of a firm's performance. - Correct Answer ✔✔ False - While
the technology may be available, companies are still not allowing outsiders access to
their internal accounting records.
Increased federal oversight of the audit process resulted from the passage of the
following act of Congress - - Correct Answer ✔✔ Sarbanes-Oxley Act
1.7 Review of Key Points - Correct Answer ✔✔ Accounting is the recording of the day-
to-day financial activities of a company and the organization of that information into
summary reports used to evaluate the company's financial status.
The focus of financial accounting is the three primary financial statements: the balance
sheet, the income statement, and the statement of cash flows.
