Accounting, Financial Accounting Exam 1(version 1-10) over 750 questions with correct answers
Accounting, Financial Accounting Exam 1(version 1-
10) over 750 questions with correct answers
Financial Accounting Exam 1-version 1
What is the objective of financial reporting - correct answer Helps investors make
better investment decisions by lowering the cost of being informed
What are the two fundamental qualitative characteristics of decision usefulness financial
information? - correct answer Relevence and Faithfulness
What are the characteristics that suggest the information exhibits faithful representation? -
correct answer Free from error, completeness and neutrality
Predictive Value - correct answer Information is useful in predicting the future
Relevance - correct answer Pertinent to the decision at hand
Timeliness - correct answer Information is available prior to the decision
Distribution to Owners - correct answer Decreases in equity resulting from transfers
to owners
Confirmatory Value - correct answer Information confirms expectations.
Materiality - correct answer Concerns the relative size of an item and its effecton
decisions.
Comparability - correct answer Important for making interfirm comparisons.
Neutrality - correct answer The absence of bias.
Recognition - correct answer The process of admitting information into financial
statements
Gains - correct answer Increases in equity from peripheral or incidental transactions
of an entity.
Cost Effectiveness - correct answer Requires consideration of the costs and value of
information
Verifiability - correct answer Implies consensus among different measurers.
Expense recognition - correct answer Record expenses in the period the related
revenue is recognized
,Accounting, Financial Accounting Exam 1(version 1-10) over 750 questions with correct answers
Periodicity assumption - correct answer The life of an enterprise can be divided into
artificial time periods
Historical cost principle - correct answer The original transaction value upon
acquisition.
Revenue recognition - correct answer Criteria usually satisfied for products at point
of sale
Going concern assumption - correct answer The entity will continue indefinitely.
Monetary unit assumption - correct answer A common denominator is the dollar.
Economic entity asssuption - correct answer The enterprise is separate from its
owners andother entities
Full-disclosure principle - correct answer All information that could affect decisions
shouldbe reported
Conceptual Framework - correct answer Allows for practical problems to be solved
more quickly by referencing it
Objective of general purpose financial reporting is to provide financial information to -
correct answer Investors and Creditors
Residual interest in the assets of a company that remains after deducting its liabilities is called -
correct answer Equity
What are the costs of providing financial information - correct answer Auditing,
potential litigation, disclousure to competitors
True or false: Its the responsibility of the auditor to apply GAAP principles to the financial
statements - correct answer False
GAAP stands for - correct answer Generally Accepted Accounting Principles
Objective of financial reporting - correct answer Reporting to capital providers
Companies listed on a major US stock exchange are required to submit financial statements to
the - correct answer SEC
How often are US public companies required to file their financial statements with the SEC -
correct answer 4 times a year
Which types of companies are required to file their financial statements with the SEC -
correct answer All companies accessing US public markets for capital
,Accounting, Financial Accounting Exam 1(version 1-10) over 750 questions with correct answers
Why were the Securities Act of 1933 and the Securities Exchange Act passed? - correct
answer To restore investor confidence in the capital market by providing more reliable
information and rules for honest dealing
When was the SEC established - correct answer 1934
The FASB was established in - correct answer 1973
Who sets the US GAAP? - correct answer The SEC has the ultimate authority but the
FASB sets the principles
Which type of companies are required to provide financial statements in accordance with GAAP
- correct answer Public companies
Who is responsible for establishing and maintaining adequate internal controls over a
company's financial reporting? - correct answer Management of the company
Asset turnover ratio - correct answer Net Sales/Average total assets
Receivables turnover ratio - correct answer Net Sales / Average Accounts
Receivable
Average Collection Period - correct answer 365/Accounts Receivables Turnover
Inventory turnover ratio - correct answer COGS/Average Inventory
Average Days in Inventory - correct answer 365/Inventory turnover ratio
Return on Sales - correct answer NI/Net sales
Return on assets - correct answer NI/Average total assets
Return on Equity - correct answer NI/ Average Equity
Current Ratio - correct answer Current Assets/Current Liabilities
Net working capital - correct answer Current assets - Current liabilities
Acid-test (quick) ratio - correct answer Quick assets/Current liabilities
Quick assets - correct answer includes only cash, current investments, and accounts
receivable
Which ratio is used to evaluate the solvency of a company - correct answer Return
on Equity
Which ratio is most useful for assessing the liquidity of a company - correct answer
Current ratio
, Accounting, Financial Accounting Exam 1(version 1-10) over 750 questions with correct answers
MD&A - correct answer Management's views on its results of operations, liquidity,
capital resources, off-balance sheet arrangements, and critical accounting estimates.
Proxy Statement - correct answer Includes disclosures of executive compensation
among other things.
Auditors report - correct answer Independent and professional opinion about the
fairness of the financial statements.
Subsequent events report - correct answer Occurs after the fiscal year-end, but
before the statements are issued.
Summary of significant accounting policies - correct answer Information about the
company's choices from among various alternative accounting methods.
Eps disclosures are required for - correct answer Continuing operations
Discontinued operations
Total net income
What do the four numbers in a codification reference represent? - correct answer
Topic, Subtopic, Section, Paragraph
The two criteria of a discontinued operation - correct answer Clearly distinguished
cash flow, strategic shift
Common OCI items - correct answer 1. Unrealized gains for AFS-debt securities
2. Foreign Currency translation adjustment
3. Pension plan gains/losses/service costs
4. G/L on derivative financial instruments
Interest paid or received are in what section of the statement of cash flows? - correct
answer Operating
Dividends received are part of which section on the statement of cash flows? - correct
answer Operating
Dividends paid are part of which section on the statement of cash flows? - correct answer
Financing
Disclosures on the Statement of Cash Flows - correct answer - Noncash investing
and financing activities
- Cash paid for interest and income taxes (if indirect method was used)
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