Accounting graded A+ and with verified solutions

What is meant by the phrase efficient allocation of resources? What mechanism fosters the efficient allocation of resources in the United States? - ANSResources are efficiently allocated if they are given to enterprises that will use them to provide goods and services desired by society and not to enterprises that will waste them. The capital markets are the mechanism that fosters this efficient allocation of resources. What is the primary objective of financial accounting? - ANSThe primary objective of financial accounting is to provide investors and creditors with information that will help them make investment and credit decisions. What is meant by GAAP? Why should all companies follow GAAP in reporting to external users? - ANSGAAP (generally accepted accounting principles) are a dynamic set of both broad and specific guidelines that a company should follow in measuring and reporting the information in their financial statements and related notes. It is important that all companies follow GAAP so that investors can compare financial information across companies to make their resource allocation decisions. Explain the roles of the SEC and the FASB in the setting of accounting standards. - ANSIn 1934, Congress created the SEC and gave it the job of setting accounting and reporting standards for companies whose securities are publicly traded. The SEC has retained the power, but has delegated the task to private sector bodies. The current private sector body responsible for setting accounting standards is the FASB. List three key provisions of the Sarbanes-Oxley Act of 2002. Order your list from most important to least important in terms of the likely long-term impact on the accounting profession and financial reporting. - ANS-Creation of an Oversight Board -Corporate executive accountability -Nonaudit services What is the purpose of the FASB's conceptual framework? - ANSThe purpose of the conceptual framework is to guide the Board in developing accounting standards by providing an underlying foundation and basic reasoning on which to consider merits of alternatives. The framework does not prescribe GAAP. Discuss the terms relevance and faithful representation as they relate to financial accounting information. - ANSRelevance and faithful representation are the primary qualitative characteristics that make information decision-useful. Relevant information will possess predictive and/or confirmatory value. Faithful representation is the extent to which there is agreement between a measure or description and the phenomenon it purports to represent.