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INTERMEDIATE ACCOUNTING I - EXAM #1 QUESTIONS WITH COMPLETE SOLUTIONS
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INTERMEDIATE ACCOUNTING I - EXAM #1 QUESTIONS WITH COMPLETE SOLUTIONS
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INTERMEDIATE ACCOUNTING I - EXAM#1 QUESTIONS WITH COMPLETE
SOLUTIONS
Internal Users - Answer-make decisions directly affecting the internal operations of the
enterprise
Ex. Management, Employees
External Users - Answer-are outside the company
Ex. Investors, Creditors, Government Agencies (SEC, IRS), Suppliers, Customers
Management Accounting - Answer-intended for internal users. Company specifies what
accounting information is needed and how is to be reported
Financial Accounting - Answer-intended primarily for external users. Generally accepted
accounting principles (GAAP) specify information needed and how it is to be reported
Securities and Exchange Commission (SEC) - Answer-has the legal authority to
establish accounting standards for firms with publicly traded stock and occasionally
does. However, usually relies on private-sector organizations (e.g., FASB) to set
accounting standards in the U.S.
FASB (Financial Accounting Standards Board) - Answer-currently recognized as the
private-sector body responsible for setting U.S. accounting standards.
Generally Accepted Accounting Principles (GAAP) - Answer-accounting standards
recognized by the accounting profession as required in the preparation of financial
statements for external users
Emerging Issues Task Force (EITF) - Answer-if reaches a consensus, defines the
generally accepted accounting treatment on an emerging accounting issue until the
FASB considers the issue.
Balance Sheet - Answer-A financial statement that reports the assets and claims to
those assets at a specific point in time.
Income Statement - Answer-A financial statement that reports a company's revenues
and expenses and resulting net income or net loss for a specific period of time.
Statement of Cash Flows - Answer-Financial statement that reports cash receipts and
disbursements related to a firm's three major activities: operations, investments, and
financing.
, Notes to the financial statements - Answer-Notes clarify information presented in the
financial statements and provide additional detail.
Auditor's Opinion - Answer-An expression about whether financial statements conform
with generally accepted accounting principles.
Economic Entity Assumption - Answer-An assumption that every economic entity can
be separately identified and accounted for.
Going Concern Assumption - Answer-The assumption that the company will continue in
operation for the foreseeable future.
Monetary Unit Assumption - Answer-An assumption that requires that only those things
that can be expressed in money are included in the accounting records.
Periodicity - Answer-the repeating pattern of chemical and physical properties of the
elements
Measurement Principle - Answer-Principle that prescribes financial statement
information, and its underlying transactions and events, be based on relevant measures
of valuation; also called the cost principle.
Revenue Recognition Principle - Answer-The principle that companies recognize
revenue in the accounting period in which the performance obligation is satisfied.
Expense Recognition Principle - Answer-The principle that matches expenses with
revenues in the period when the company makes efforts to generate those revenues.
Full Disclosure Principle - Answer-Accounting principle that dictates that companies
disclose circumstances and events that make a difference to financial statement users.
Debits - Answer-increase assets and decrease liabilities and stockholders equity.
credits - Answer-Decrease assets; increase liabilities and stockholders' equity
double-entry accounting system - Answer-A system of accounting for recording
transactions, based on recording increases and decreases in accounts so that debits
equal credits.
accouting equation - Answer-Assets = Liabilities + Owner's Equity
General Ledger - Answer-A ledger that contains all accounts needed to prepare
financial statements
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