ACC 6501 Exam 1 Review Questions and Answers Latest 2025-2026
What does it mean to state that the accounting process should support decisions and informed
judgments? - Answers It means that accounting is a service activity that helps many different
users of accounting information who use the information in many ways
What does it mean to work in public accounting? - Answers It means to perform professional
services for clients principally in the areas of auditing, income tases, management consulting,
and/or accounting systems evaluation and development.
What does it mean to be a CPA? - Answers It means that the individual has met the educational
requirements and has passed the uniform examination. Subsequently, the individual has met
the experience requirements and has applied for and been issued a license by the state board of
accountancy granting the individual the right to practice as a Certified Public Accounting.
What does it mean to state that generally accepted accounting principles are not a set of rules
to be blindly followed? - Answers It means that generally accepted accounting principles
sometimes permit alternative ways of accounting for identical transactions, thus requiring
professional judgment, and that these principles are still evolving
What does it mean when the FASB issues a new Accounting Standards Update? - Answers It
means that the FASB has completed an extensive process of research and development,
including receiving input from interested individuals and organizations, and has made an
authoritative pronouncement (i.e., an Update to the FASB codification) that defines accounting
and reporting for a specific activity or transaction and becomes a generally accepted
accounting principle.
What does it mean that the FASB and IASB have been working together to achieve convergence?
- Answers It means that the FASB is committed to working with the IASB to ensure that a
solution can be reached whereby US accounting standards will eventually be merged with
international accounting standards to the greatest extent possible.
What does it mean to state that ethical behavior includes being objective and independent? -
Answers It means that the individual is impartial, free from conflict of interest, and will not
receive a personal gain rom the activity in which she or he is involved.
What does it mean to state that the objectives of financial reporting given in Statements of
Financial Accounting Concepts No. 8 provide a framework for this text? - Answers It means that
the accounting and financial reporting topics explained in the financial accounting part of the
text should:
- related to external financial reporting
, - support business and economic decisions
- provide information about cash flows
- focus on earnings based on accrual accounting
- not seek to directly measure the value of a business enterprise
- report information that is subject to evaluation by individual financial statement users
What does it mean to say that there has been an accounting transaction between you and your
school? Give an example of such a transaction. - Answers It means that there has been some
sort of economic interchange; for example, you have agreed to pay tuition in exchange for
classes.
What does it mean to refer to a balance sheet for the year ended August 31, 2020? - Answers It
means the persons doing this is really mixed up because the balance sheet presents data as a
point in time. It's a balance sheet as of August 31, 2020 and shows balances as that specific
point in time rather than for a period of time.
What does it mean when a balance sheet has been prepared for an organization? - Answers It
means that the organization's financial position at a point in time has been determined and
summarized.
What does it mean when a stockholder says that she needs to look at her firm's set of four
financial statements to fully understand its financial position and results of operations? -
Answers It means that each financial statement provides unique information but focuses on
only a part of the big picture, so all four statements need to be reviewed to achieve a full
understanding of the firm's financial position and results of operation.
What does it mean when a company that has a high net income doesn't have enough cash to
pay its bills? - Answers It means that revenues have been earned from selling products or
providing services but that the accounts receivable from those revenues have not yet been
collected - or if the receivables have been collected, the cash has been used for some purpose
other than paying bills.
What does it mean to say that the balance sheet must be in balance after every transaction even
though a lot of transactions affect the income statement? - Answers It means that transactions
affecting the income statement also affect the stockholders' equity section of the balance sheet
as well as the asset and/or liability sections of the balance sheet.
What does matching of revenue and expense in the income statement mean? - Answers It
means that all expenses incurred in generating revenue for the period are subtracted from those
revenues to determine net income for that period. Matching does not mean that revenues equal
expenses.
What does it mean to state that the accounting process should support decisions and informed
judgments? - Answers It means that accounting is a service activity that helps many different
users of accounting information who use the information in many ways
What does it mean to work in public accounting? - Answers It means to perform professional
services for clients principally in the areas of auditing, income tases, management consulting,
and/or accounting systems evaluation and development.
What does it mean to be a CPA? - Answers It means that the individual has met the educational
requirements and has passed the uniform examination. Subsequently, the individual has met
the experience requirements and has applied for and been issued a license by the state board of
accountancy granting the individual the right to practice as a Certified Public Accounting.
What does it mean to state that generally accepted accounting principles are not a set of rules
to be blindly followed? - Answers It means that generally accepted accounting principles
sometimes permit alternative ways of accounting for identical transactions, thus requiring
professional judgment, and that these principles are still evolving
What does it mean when the FASB issues a new Accounting Standards Update? - Answers It
means that the FASB has completed an extensive process of research and development,
including receiving input from interested individuals and organizations, and has made an
authoritative pronouncement (i.e., an Update to the FASB codification) that defines accounting
and reporting for a specific activity or transaction and becomes a generally accepted
accounting principle.
What does it mean that the FASB and IASB have been working together to achieve convergence?
- Answers It means that the FASB is committed to working with the IASB to ensure that a
solution can be reached whereby US accounting standards will eventually be merged with
international accounting standards to the greatest extent possible.
What does it mean to state that ethical behavior includes being objective and independent? -
Answers It means that the individual is impartial, free from conflict of interest, and will not
receive a personal gain rom the activity in which she or he is involved.
What does it mean to state that the objectives of financial reporting given in Statements of
Financial Accounting Concepts No. 8 provide a framework for this text? - Answers It means that
the accounting and financial reporting topics explained in the financial accounting part of the
text should:
- related to external financial reporting
, - support business and economic decisions
- provide information about cash flows
- focus on earnings based on accrual accounting
- not seek to directly measure the value of a business enterprise
- report information that is subject to evaluation by individual financial statement users
What does it mean to say that there has been an accounting transaction between you and your
school? Give an example of such a transaction. - Answers It means that there has been some
sort of economic interchange; for example, you have agreed to pay tuition in exchange for
classes.
What does it mean to refer to a balance sheet for the year ended August 31, 2020? - Answers It
means the persons doing this is really mixed up because the balance sheet presents data as a
point in time. It's a balance sheet as of August 31, 2020 and shows balances as that specific
point in time rather than for a period of time.
What does it mean when a balance sheet has been prepared for an organization? - Answers It
means that the organization's financial position at a point in time has been determined and
summarized.
What does it mean when a stockholder says that she needs to look at her firm's set of four
financial statements to fully understand its financial position and results of operations? -
Answers It means that each financial statement provides unique information but focuses on
only a part of the big picture, so all four statements need to be reviewed to achieve a full
understanding of the firm's financial position and results of operation.
What does it mean when a company that has a high net income doesn't have enough cash to
pay its bills? - Answers It means that revenues have been earned from selling products or
providing services but that the accounts receivable from those revenues have not yet been
collected - or if the receivables have been collected, the cash has been used for some purpose
other than paying bills.
What does it mean to say that the balance sheet must be in balance after every transaction even
though a lot of transactions affect the income statement? - Answers It means that transactions
affecting the income statement also affect the stockholders' equity section of the balance sheet
as well as the asset and/or liability sections of the balance sheet.
What does matching of revenue and expense in the income statement mean? - Answers It
means that all expenses incurred in generating revenue for the period are subtracted from those
revenues to determine net income for that period. Matching does not mean that revenues equal
expenses.
