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ACCT 3001 test 1 test bank.[ FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS]
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ACCT 3001 test 1 test bank.[FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS].
CHAPTER 1
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS
MULTIPLE CHOICE—Conceptual.
21. General-purpose financial statements are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.
22. Which of the following is not a user of financial reports?
a. Creditors.
b. Government agencies.
c. Unions.
d. All of these are users.
23. The financial statements most frequently provided include all of the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
24. The information provided by financial reporting pertains to
a. individual business enterprises, rather than to industries or an economy as a whole or
to members of society as consumers.
b. business industries, rather than to individual enterprises or an economy as a whole or
to members of society as consumers.
c. individual business enterprises, industries, and an economy as a whole, rather than to
members of society as consumers.
d. an economy as a whole and to members of society as consumers, rather than to
individual enterprises or industries.
25. All the following are differences between financial and managerial accounting in how
accounting information is used except to
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
d. All the answer choices are correct.
26. Which of the following represents a form of communication through financial reporting but
not through financial statements?
a. Balance sheet.
b. President's letter.
c. Income statement.
d. Notes to financial statements.
, ACCT 3001 test 1 test bank.[
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS].
P
27. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is
called
a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.
28. How does accounting help the capital allocation process attract investment capital?
a. By providing timely, relevant information.
b. By encouraging innovation.
c. By promoting productivity.
d. By providing timely, relevant information and by encouraging innovation.
29. Which of the following helps in determining whether a business thrives?
a. Markets.
b. Free enterprise.
c. Competition.
d. All of these answer choices are correct.
30. Which of the following is related to an effective capital allocation?
a. Promoting productivity.
b. Encouraging innovation.
c. Providing an efficient market for buying and selling securities.
d. All of these answer choices are correct.
31. Financial statements in the early 2000s provide information related to
a. nonfinancial measurements.
b. forward-looking data.
c. hard assets (inventory and plant assets).
d. None of these answer choices are correct.
32. Which of the following is not a major challenge facing the accounting profession?
a. Nonfinancial measurements.
b. Timeliness.
c. Accounting for hard assets.
d. Forward-looking information.
33. What is the objective of financial reporting?
a. Provide information that is useful to management in making decisions.
b. Provide information that clearly portrays nonfinancial transactions.
c. Provide information about the reporting entity that is useful to present and potential
equity investors, lenders, and other creditors.
d. Provide information that excludes claims to the resources.
34. Primary users for general-purpose financial statements include
a. creditors.
b. employees.
c. investors.
d. both creditors and investors.
, ACCT 3001 test 1 test bank.[
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS].
35. Which of the following will be of interest to investors in decision-making?
a. Assessing the company’s ability to generate net cash inflows.
b. Assessing management’s ability to protect and enhance the capital providers’
investments.
c. Both assessing the company’s ability to generate net cash inflows and assessing
management’s ability to protect and enhance the capital provider’s investments.
d. Assessing the company’s ability to collect debts.
36. Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of a company’s ability to generate cash flows than the
cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. None of the answer choices are correct.
37. Which perspective is adopted as a part of the objective of general-purpose financial
reporting?
a. A decision-usefulness perspective.
b. A proprietary perspective.
c. An entity perspective.
d. A financial reporting perspective.
38. Which of the following is a requirement for an accounting principle to be called "generally
accepted"?
a. An authoritative accounting rule-making body has established it in an official
pronouncement.
b. The principle has been accepted as appropriate because of its universal application.
c. An authoritative accounting rule-making body has established it and it has been
accepted because of its universal application.
d. None of the answer choices are correct.
39. A common set of accounting standards and procedures are called
a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
, ACCT 3001 test 1 test bank.[
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS].
40. Which of the following is a general limitation of "general purpose financial statements"?
a. General purpose financial statements may not be the most informative for a specific
enterprise.
b. General purpose financial statements are not comparable.
c. General purpose financial statements do not fairly present a company's financial
operations.
d. None of the answer choices are correct.
41. What is the relationship between the Securities and Exchange Commission and
accounting standard setting in the United States?
a. The SEC requires all companies listed on an exchange to submit their financial
statements to the SEC.
b. The SEC coordinates with the AICPA in establishing accounting standards.
c. The SEC has a mandate to establish accounting standards for enterprises under its
jurisdiction.
d. The SEC reviews financial statements for compliance.
42. What is due process in the context of standard setting at the FASB?
a. The FASB operates in full view of the public.
b. Public hearings are held on proposed accounting standards.
c. Interested parties can make their views known.
d. All of the answer choices are correct.
43. Which of the following organizations has been responsible for setting U.S. accounting
standards?
a. The Accounting Principles Board.
b. The Committee on Accounting Procedure.
c. The Financial Accounting Standards Board.
d. All of the answer choices are correct.
44. Why did the AICPA create the Accounting Principles Board?
a. The SEC disbanded the previous standard setting organization.
b. The previous standard setting organization did not provide a structured set of
accounting principles.
c. No such organization existed in the past.
d. None of the answer choices are correct.
45. Which organization was responsible for issuing Accounting Research Bulletins?
a. The Accounting Principles Board.
b. The Committee on Accounting Procedure.
c. The SEC.
d. The FASB.
46. A characteristic of generally accepted accounting principles include:
a. a common set of standards and principles.
b. standards and principles are based a federal statutes.
c. acceptance requires an affirmative vote of Certified Public Accountants.
d. practices that become accepted for at least a year by all industry members.
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