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INTERMEDIATE ACCOUNTING CHAPTER 1-EXAM QUESTIONS AND ANSWERS
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INTERMEDIATE ACCOUNTING CHAPTER 1-EXAM QUESTIONS AND ANSWERS
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INTERMEDIATE ACCOUNTINGCHAPTER 1-EXAM QUESTIONS AND
ANSWERS
The balance sheet, the income statement, the statement of cash flows, and the
statement of owners' or stockholders' equity. - Answer-What are the four main financial
statements?
Accounting provides relevant, reliable, and timely information to managers, investors,
and creditors to allow resource allocation to the most efficient enterprises. Accounting
also provides measurements of efficiency and financial soundness. - Answer-How does
accounting assist in the efficient use of scarce resources?
Financial, managerial, tax, audit, accounting information systems. - Answer-What are
the main areas of accounting?
Investors and Creditors. - Answer-Who are the primary users of financial statements?
Financial accounting is the process that prepares a firm's financial reports for use by
both internal and external parties and managerial accounting is the process of
identifying, measuring, analyzing, and communicating financial info needed by
management. - Answer-What is the difference between financial accounting and
managerial accounting?
Stockholder's/Investors and creditors. Others include government agencies, employees,
consumers, financial intermediaries, suppliers, labor unions, and auditors. - Answer-
Who are the external user groups that use financial accounting statements?
Financial statements, annual reports, prospectuses, reports filed with the SEC and other
government agencies, news releases and management forecasts, and social or
environmental impact statements. - Answer-What is included in financial reporting?
Entity Perspective - Answer-Using this perspective, companies are viewed as separate
and distinct from their owners.
Decision-Usefulness - Answer-Investors are interested in assessing the company's (1)
ability to generate net cast inflows and (2) management's ability to protect and enhance
the capital providers' investments.
(1) To minimize bias, ambiguity, inexactness, and misinterpretation, and (2) to have
comparability. - Answer-Why are accounting standards necessary?
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