WALL STREET PREP EXAM (ACCOUNTING CRASH COURSE) QUESTIONS AND CORRECT ANSWERS 2024/2025. 2 / 30 m the federal ations ompanies he securities EC Financial 1. What is Accounting?: Accounting is the language of business; it is a standard set of rules for measuring a company's financial performance. Ass...
WALL STREET PREP EXAM (ACCOUNTING CRASH
COURSE) QUESTIONS AND CORRECT ANSWERS
2024/2025
,WALL STREET PREP EXAM (ACCOUNTING CRASH COURSE)
QUESTIONS AND CORRECT ANSWERS 2024/2025
1. What is Accounting?: Accounting is the language of business; it is a standard
set of rules for measuring a company's financial performance.
Assessing a company's financial performance is important for:
The firm's officers (managers and employees)
Investors
Lenders
General public
Standard financial statements serve as a "yardstick" of communicating financial
performance to the general public.
2. Why is Accounting Important?: Enables managers to make corporate deci-
sions
Enables the general public to make investment decisions
3. Who Uses Accounting?: Used by a variety of organizations - from the federal
government to non-profit organizations to small businesses to corporations
We will discuss accounting rules as they pertain to publicly-traded companies
4. Accounting Regulations: Accounting attempts to standardize financial infor-
mation and follows rules and regulations
These rules are called Generally Accepted Accounting Principles (GAAP)
,WALL STREET PREP EXAM (ACCOUNTING CRASH COURSE)
QUESTIONS AND CORRECT ANSWERS 2024/2025
In the US, the Securities and Exchange Commision (SEC) authorizes the Financial
Accounting Standards Board (FASB) to determine accounting rules
GAAP comes from the Statements of Financial Accounting Standards (SFAS)
issued by the FASB
5. An Overview of the SEC: A US federal agency established by the US Congress
in 1934
Primary mission is "to protect investors and maintain the integrity of the securities
markets"
Division of Corporate Finance oversees FASB
6. An Overview of FASB: Established in 1973 as an independent body to carry
out the function of codifying accounting standards on the behalf of the SEC
Composed of seven full-time members appointed for five years by the Financial
Account Foundation (FAF)
Decisions are influenced by:
7. International Financial Reporting Standards (IFRS): Over 100 countries,
including the EU, UK, Canada, Australia, and Russia, have adopted a unified set
of international accounting standards (IFRS)
Although we have seen unprecedented convergence over the last few years
between US GAAP and IFRS, some differences remain
, WALL STREET PREP EXAM (ACCOUNTING CRASH COURSE)
QUESTIONS AND CORRECT ANSWERS 2024/2025
8. Assumption 1: Accounting Entity: A company is considered a separate "liv-
ing" enterprise, apart from its owners
In other words, a corporation is a "fictional" being
9. Assumption 2: Going Concern: A company is considered a "going concern"
for the foreseeable future; it is assumed to remain in existence indefinitely
10. Assumption 3: Measurement: Financial statements can only show measur-
able activities of a corporation such as its quantifiable resources, its liability, amount
of taxes it is facing, etc.
11. Assumption 4: Periodicity: Companies are required to file annual and interim
reports
In the US, quarterly and annual financial reports are required
An accounting year (fiscal year) is frequently aligned with the calendar year
12. Four Underlying Assumptions of Accounting: (1) Accounting Entity
(2) Going Concern
(3) Measurement
(4) Periodicity
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