ACG 3131 CH 1 Review Questions and Correct Answers
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Course
ACG 3131
Institution
ACG 3131
1. Income Statement 2. Balance Sheet 3. Statement of Cash Flows 4. Statement of Shareholder's Equity Name the (4) financial statements:
Cash basis accounting measurement of cash receipts and cash payments. The difference is the *net operating cash flow.*
Accrual basis accounting measurement of re...
ACG 3131 CH 1 Review Questions and
Correct Answers
1. Income Statement
2. Balance Sheet
3. Statement of Cash Flows
4. Statement of Shareholder's Equity ✅Name the (4) financial statements:
Cash basis accounting ✅measurement of cash receipts and cash payments. The
difference is the *net operating cash flow.*
Accrual basis accounting ✅measurement of revenues and expenses *regardless of
when cash is received or paid.* The difference is *net income* or *net loss.*
Which of the following is *not* an advantage of accrual accounting?
a. Spreads out influence of one-time events that affect multiple reporting periods
b. Highlights cash effects of operations
c. Captures long-run performance
d. Recognizes assets and liabilities associated with receivables and payables ✅b.
Highlights cash effects of operations
A set of both *broad and specific guidelines* that companies should follow when
measuring and reporting the information in their fin. statements and related notes.
✅Generally Accepted Accounting Principles (GAAP)
Created by Congress in response to the stock market crash of 1929 in order to restore
investor confidence. ✅Securities Exchange Commission (SEC)
This act applies to *initial offerings of securities* (stocks and bonds): ✅1933 Securities
Act
This act applies to secondary market transactions; mandates reporting requirements for
companies whose securities are publicly traded: ✅1934 Securities Exchange Act
This board was established in 1973 to set U.S, accounting standards; is supported by
FAF; has 7 full-time workers: ✅Financial Accounting Standards Board (FASB) 1973
This foundation supports the FASB: ✅Financial Accounting Foundation (FAF)
This 1984 task force identifies reporting issues and attempts to resolve them without the
*FASB.* Primarily addresses implementation issues and speeds up standard-setting
process: ✅Emerging Issues Task Force (EITF) 1984
, This board develops accounting standards for governmental units such as states and
cities: ✅Government Accounting Standards Board (GASB)
Accounting standards in the U.S. are currently set by:
a. The FASB
b. The AICPA
c. The EITF
d. The NCAA ✅a. The FASB
Since 1973, has been the primary standard-setting body of the U.S.
The only *source* of nongovernmental U.S. GAAP which:
-Organizes GAAP pronouncements into 90 accounting topics
-Also includes SEC accounting guidance
-Accounting Standards Update (ASU): includes any new standard issued ✅FASB
Accounting Standards Codification (www.fasb.org)
This committee was formed in 1973 to develop global accounting standards; created the
IASB in 2001: ✅International Accounting Standards Committee (IASC) 1973
-This board developed a single set of high-quality, understandable, and enforceable
global accounting standards;
-Issued and endorsed 41 International Accounting Standards (IASs);
-Issued new standard of its own called International Financial Reporting Standards
(IFRSs): ✅International Accounting Standards Board (IASB) 2001
Name the (3) qualitative characteristics of Relevance: ✅1. Predictive Value
2. Confirmatory Value
3. Materiality
This RELEVANCE quality helps a decision maker *predict a company's future cash
flow:* ✅Predictive Value
This RELEVANCE quality helps investors *confirm or change their prior assessment
regarding a company's cash flow generating ability:* ✅Confirmatory Value
If the information has an effect on decision usefulness, it should be included/not
omitted: ✅Materiality
Name the (3) qualitative characteristics of Faithful Representation: ✅1. Completeness
2. Neutrality
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