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.
F 17. 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.
P
b 27. 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.
,1-2 Test Bank for Intermediate Accounting, Thirteenth Edition
c 35. Objectives of financial reporting.
MULTIPLE CHOICE—Conceptual (cont.)
Answer No. Description
b 36. Accrual accounting.
P
c 37. 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. Organizations responsible 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.
b 64. Pronouncement issued by the APB.
c 65. Standard setting organizations.
d 66. Identification of standard setting organizations.
c 67. Statements of financial accounting concepts.
P
d 68. FASB members.
P
d 69. 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. Code for 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.
, Financial Accounting and Accounting Standards 1-3
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 organizations.
E1-88 FASB.
E1-89 Evolution of a statement of financial accounting standards.
CHAPTER LEARNING OBJECTIVES
1. Identify the major financial statements and other means of financial reporting.
2. Explain how accounting assists in the efficient use of scarce resources.
3. Describe some of the challenges facing accounting.
4. Identify the objectives of financial reporting.
5. Explain the need for accounting standards.
6. Identify the major policy-setting bodies and their role in the standard-setting process.
7. Explain the meaning of generally accepted accounting principles (GAAP) and the role of the
codification for GAAP.
8. Describe the impact of user groups on the rule-making process.
9. Understand issues related to ethics and financial accounting.
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.
F 17. 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.
P
b 27. 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.
,1-2 Test Bank for Intermediate Accounting, Thirteenth Edition
c 35. Objectives of financial reporting.
MULTIPLE CHOICE—Conceptual (cont.)
Answer No. Description
b 36. Accrual accounting.
P
c 37. 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. Organizations responsible 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.
b 64. Pronouncement issued by the APB.
c 65. Standard setting organizations.
d 66. Identification of standard setting organizations.
c 67. Statements of financial accounting concepts.
P
d 68. FASB members.
P
d 69. 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. Code for 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.
, Financial Accounting and Accounting Standards 1-3
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 organizations.
E1-88 FASB.
E1-89 Evolution of a statement of financial accounting standards.
CHAPTER LEARNING OBJECTIVES
1. Identify the major financial statements and other means of financial reporting.
2. Explain how accounting assists in the efficient use of scarce resources.
3. Describe some of the challenges facing accounting.
4. Identify the objectives of financial reporting.
5. Explain the need for accounting standards.
6. Identify the major policy-setting bodies and their role in the standard-setting process.
7. Explain the meaning of generally accepted accounting principles (GAAP) and the role of the
codification for GAAP.
8. Describe the impact of user groups on the rule-making process.
9. Understand issues related to ethics and financial accounting.
