AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may approach assessment and its documentation differently, one approach is to provide specific questions on exams that become the basis...
Chapter 1 Environment and Theoretical Structure of
Financial Accounting
AACSB assurance of learning standards in accounting and business education require
documentation of outcomes assessment. Although schools, departments, and faculty may approach
assessment and its documentation differently, one approach is to provide specific questions on
exams that become the basis for assessment. To aid faculty in this endeavor, we have labeled each
question, exercise and problem in Intermediate Accounting, 7e with the following AACSB learning
skills:
, QUESTIONS FOR REVIEW OF KEY TOPICS
Question 1–1
Financial accounting is concerned with providing relevant financial information about various
kinds of organizations to different types of external users. The primary focus of financial
accounting is on the financial information provided by profit-oriented companies to their present and
potential investors and creditors.
Question 1–2
Resources 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.
Question 1–3
Two extremely important variables that must be considered in any investment decision are the
expected rate of return and the uncertainty or risk of that expected return.
Question 1–4
In the long run, a company will be able to provide investors and creditors with a rate of return
only if it can generate a profit. That is, it must be able to use the resources provided to it to generate
cash receipts from selling a product or service that exceed the cash disbursements necessary to
provide that product or service.
Question 1–5
The primary objective of financial accounting is to provide investors and creditors with
information that will help them make investment and credit decisions.
Question 1–6
Net operating cash flows are the difference between cash receipts and cash disbursements
during a period of time from transactions related to providing goods and services to customers. Net
operating cash flows may not be a good indicator of future cash flows because, by ignoring
uncompleted transactions, they may not match the accomplishments and sacrifices of the period.
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