Acc 231- Exam 1 (Ch.1, 2, 3, 4)
Question and answers correctly
solved 2025/2026
Financial accounting - correct answer ✔process that culminates in the preparation of financial reports
on the enterprise for use by both internal and external parties. EX: investors, governement
Managerial accounting - correct answer ✔process of identifying, measuring, analyzing, and
communicating financial information needed by management to plan, control, and evaluate a
company's operations. (within the business for manager use)
Financial statements - correct answer ✔1. the balance sheet
2. the income statement
3. the statement of cash flows
4. the statements of owners' or stockholders' equity
Financial reporting - correct answer ✔Ex: reports filed with government agencies, news releases, social
and environmental impact statements
Objective of financial reporting - correct answer ✔provide financial information about the reporting
entity that is useful to present and potential equity investors, lenders, and other creditors
General- Purpose financial statements - correct answer ✔provide at the least cost the most useful
information possible
Entity perspective - correct answer ✔companies are viewed as separate and distinct from their owners.
EX: assets of Hershey are viewed as assets of the company and not of a specific creditor or shareholder
,Proprietary perspective - correct answer ✔financial reporting is focused only on the needs of the
shareholders. It is not considered appropriate
Decision-usefulness - correct answer ✔1. the company's ability to generate net cash inflows
2. Management's ability to protect and enhance the capital providers' investments
Accrual-basis accounting - correct answer ✔ensures that a company records events that change its
financial statements in the periods in which the events occur, rather than only in the periods in which it
receives or pays cash
Generally Accepted Accounting Principles (GAAP) - correct answer ✔"generally accepted"-
authoritative accounting rule-making body has established a principle of reporting that is been accepted
because of its universal application
Three organizations under GAAP - correct answer ✔1. Securities and Exchange Commission (SEC)
2. American Institute of Certified Public Accountants (AICPA)
3. Financial Accounting Standards Board (FASB)
SEC requires registrants to adhere to GAAP - correct answer ✔
the SEC relies on the FASB to develop accounting standards - correct answer ✔
Accounting Principles Board (APB) - correct answer ✔1. advance the written expression of accounting
principles
2. determine appropriate practices
3. narrow the areas of difference and inconsistency in practice
, Differences between FASB and APB - correct answer ✔1. Smaller membership- The FASB has 7
members, replacing the relatively large 18-member APB
2. Full-time, remunerated membership- FASB members are well-paid, full-time members appointed for
renewable 5-year terms. APB volunteered their part-time work.
3. Greater autonomy- APB was a senior committee of the AICPA. FASB is not part of any single
professional organization.
4. Increased independence- APB members retained their private positons with firms. FASB members
must sever all such ties.
5. Broader representation- All APB members were required to be CPAs and members of the AICPA. Not
necessary to be a CPA to be a member of FASB
FASB issues 2 major types of pronouncements: - correct answer ✔1. Accounting Standards Updates
2. Financial Accounting Concepts
Financial Accounting Standards Board Accounting Standards Codification "Codification" - correct answer
✔proivde in one place all authoritative literature related to a particular topic
GAAP is as much a product of political action as it is of careful logic or empirical findings - correct
answer ✔
Sarbanes-Oxley Act (SOX) - correct answer ✔increased the resources for the SEC to combat fraud and
curb poor reporting practices
Internal control - correct answer ✔system of checks and balances designed to prevent and detect fraud
and errors
IFRS stands for - correct answer ✔International Fiancial Reporting Standards
The major key players on the international side are the - correct answer ✔IASB and IOSCO
Question and answers correctly
solved 2025/2026
Financial accounting - correct answer ✔process that culminates in the preparation of financial reports
on the enterprise for use by both internal and external parties. EX: investors, governement
Managerial accounting - correct answer ✔process of identifying, measuring, analyzing, and
communicating financial information needed by management to plan, control, and evaluate a
company's operations. (within the business for manager use)
Financial statements - correct answer ✔1. the balance sheet
2. the income statement
3. the statement of cash flows
4. the statements of owners' or stockholders' equity
Financial reporting - correct answer ✔Ex: reports filed with government agencies, news releases, social
and environmental impact statements
Objective of financial reporting - correct answer ✔provide financial information about the reporting
entity that is useful to present and potential equity investors, lenders, and other creditors
General- Purpose financial statements - correct answer ✔provide at the least cost the most useful
information possible
Entity perspective - correct answer ✔companies are viewed as separate and distinct from their owners.
EX: assets of Hershey are viewed as assets of the company and not of a specific creditor or shareholder
,Proprietary perspective - correct answer ✔financial reporting is focused only on the needs of the
shareholders. It is not considered appropriate
Decision-usefulness - correct answer ✔1. the company's ability to generate net cash inflows
2. Management's ability to protect and enhance the capital providers' investments
Accrual-basis accounting - correct answer ✔ensures that a company records events that change its
financial statements in the periods in which the events occur, rather than only in the periods in which it
receives or pays cash
Generally Accepted Accounting Principles (GAAP) - correct answer ✔"generally accepted"-
authoritative accounting rule-making body has established a principle of reporting that is been accepted
because of its universal application
Three organizations under GAAP - correct answer ✔1. Securities and Exchange Commission (SEC)
2. American Institute of Certified Public Accountants (AICPA)
3. Financial Accounting Standards Board (FASB)
SEC requires registrants to adhere to GAAP - correct answer ✔
the SEC relies on the FASB to develop accounting standards - correct answer ✔
Accounting Principles Board (APB) - correct answer ✔1. advance the written expression of accounting
principles
2. determine appropriate practices
3. narrow the areas of difference and inconsistency in practice
, Differences between FASB and APB - correct answer ✔1. Smaller membership- The FASB has 7
members, replacing the relatively large 18-member APB
2. Full-time, remunerated membership- FASB members are well-paid, full-time members appointed for
renewable 5-year terms. APB volunteered their part-time work.
3. Greater autonomy- APB was a senior committee of the AICPA. FASB is not part of any single
professional organization.
4. Increased independence- APB members retained their private positons with firms. FASB members
must sever all such ties.
5. Broader representation- All APB members were required to be CPAs and members of the AICPA. Not
necessary to be a CPA to be a member of FASB
FASB issues 2 major types of pronouncements: - correct answer ✔1. Accounting Standards Updates
2. Financial Accounting Concepts
Financial Accounting Standards Board Accounting Standards Codification "Codification" - correct answer
✔proivde in one place all authoritative literature related to a particular topic
GAAP is as much a product of political action as it is of careful logic or empirical findings - correct
answer ✔
Sarbanes-Oxley Act (SOX) - correct answer ✔increased the resources for the SEC to combat fraud and
curb poor reporting practices
Internal control - correct answer ✔system of checks and balances designed to prevent and detect fraud
and errors
IFRS stands for - correct answer ✔International Fiancial Reporting Standards
The major key players on the international side are the - correct answer ✔IASB and IOSCO
