ACCT 3366 - FINANCIAL REPORTING FRAMEWORKS EXAM QUESTIONS ANSWERED CORRECTLY LATEST
UPDATE 2026
Visualize the Important Role of Accounting - Answers 1. Produce good decisions
2. Foster a prosperous society
Financial information to various external users - Answers - Investors
- Creditors
- Other external users
Financial Information is a - Answers Key component of that information set
Investors and creditors - Answers -To predict the future risk and potential return of investments or
loans
-Before supplying capital to businesses
Financial Information is conveyed through financial statements - Answers - Balance Sheet, - Income
Statement (and the statement of comprehensive income), - Statement of cash flows, - Statement of
shareholders' equity
financial reporting - Answers Refers to the process of providing financial information to external users
Capital Markets - Answers provide a mechanism to help our economy allocate resources efficiently
Corporations acquire capital from: - Answers - Investors in exchange for ownership interest
- Creditors by borrowing
- Either through individual loans or publicly traded debt such as bonds
Key variables in investment decision - Answers rate of return and uncertainty/risk
Why do investors and creditors provide capital? - Answers They want to earn a fair return on the
resources they provide
Shareholders receive cash from:
Sale of the ownership shares of stock
Periodic dividends
Rate of Return equation - Answers (dividends + share price appreciation) / initial investment
Cash Basis Accounting - Answers -Measurement of cash receipts and cash payments from
transactions related to providing goods and service
-Difference is net operating cash flow
Accrual Basis Accounting - Answers Measurement of revenues and expenses, regardless of when cash
is received or paid
Difference is net income or net loss
Which of the following is not an advantage of accrual accounting? - Answers Highlights cash effects of
operations
Generally Accepted Accounting Principles (GAAP) - Answers GAAP is a dynamic set of both broad and
specific guidelines that companies should follow when measuring and reporting the information in
their financial statements and related notes.
Generally Accepted Accounting Principles (GAAP) facilitates, what? - Answers Decision making by
investors and creditors by allowing them to compare financial information among companies.
Securities and Exchange Commission (SEC) - Answers - Created by Congress in response to the stock
market crash of 1929
- Goal: To restore investor confidence
1933 Securities Act - Answers Applies to initial offerings of securities (stocks and bonds)
1934 Securities Exchange Act - Answers -Applies to secondary market transactions
-Mandates reporting requirements for companies whose securities are publicly traded
Committee on Accounting Procedure (CAP) (1938 to 1959) - Answers -First private sector standard-
setting body
-Committee of the American Institute of Accountants (AIA)
-AIA: National professional organization for certified professional public accountants
-AIA: Renamed as American Institute of Certified Public Accountants (AICPA)
-Issued 51 Accounting Research Bulletins (ARBs)
Accounting Principles Board (APB) (1959- 1973) - Answers -Issued 31 Accounting Principles Board
Opinions (APBOs), various Interpretations, and four Statements
-Replaced by Financial Accounting Standards Board (FASB)
FASB created in 1973 - Answers -Established to set U.S. accounting standards
-Supported by Financial Accounting Foundation (FAF)
UPDATE 2026
Visualize the Important Role of Accounting - Answers 1. Produce good decisions
2. Foster a prosperous society
Financial information to various external users - Answers - Investors
- Creditors
- Other external users
Financial Information is a - Answers Key component of that information set
Investors and creditors - Answers -To predict the future risk and potential return of investments or
loans
-Before supplying capital to businesses
Financial Information is conveyed through financial statements - Answers - Balance Sheet, - Income
Statement (and the statement of comprehensive income), - Statement of cash flows, - Statement of
shareholders' equity
financial reporting - Answers Refers to the process of providing financial information to external users
Capital Markets - Answers provide a mechanism to help our economy allocate resources efficiently
Corporations acquire capital from: - Answers - Investors in exchange for ownership interest
- Creditors by borrowing
- Either through individual loans or publicly traded debt such as bonds
Key variables in investment decision - Answers rate of return and uncertainty/risk
Why do investors and creditors provide capital? - Answers They want to earn a fair return on the
resources they provide
Shareholders receive cash from:
Sale of the ownership shares of stock
Periodic dividends
Rate of Return equation - Answers (dividends + share price appreciation) / initial investment
Cash Basis Accounting - Answers -Measurement of cash receipts and cash payments from
transactions related to providing goods and service
-Difference is net operating cash flow
Accrual Basis Accounting - Answers Measurement of revenues and expenses, regardless of when cash
is received or paid
Difference is net income or net loss
Which of the following is not an advantage of accrual accounting? - Answers Highlights cash effects of
operations
Generally Accepted Accounting Principles (GAAP) - Answers GAAP is a dynamic set of both broad and
specific guidelines that companies should follow when measuring and reporting the information in
their financial statements and related notes.
Generally Accepted Accounting Principles (GAAP) facilitates, what? - Answers Decision making by
investors and creditors by allowing them to compare financial information among companies.
Securities and Exchange Commission (SEC) - Answers - Created by Congress in response to the stock
market crash of 1929
- Goal: To restore investor confidence
1933 Securities Act - Answers Applies to initial offerings of securities (stocks and bonds)
1934 Securities Exchange Act - Answers -Applies to secondary market transactions
-Mandates reporting requirements for companies whose securities are publicly traded
Committee on Accounting Procedure (CAP) (1938 to 1959) - Answers -First private sector standard-
setting body
-Committee of the American Institute of Accountants (AIA)
-AIA: National professional organization for certified professional public accountants
-AIA: Renamed as American Institute of Certified Public Accountants (AICPA)
-Issued 51 Accounting Research Bulletins (ARBs)
Accounting Principles Board (APB) (1959- 1973) - Answers -Issued 31 Accounting Principles Board
Opinions (APBOs), various Interpretations, and four Statements
-Replaced by Financial Accounting Standards Board (FASB)
FASB created in 1973 - Answers -Established to set U.S. accounting standards
-Supported by Financial Accounting Foundation (FAF)
