Which of the following are true of generally accepted accounting principles (GAAP)

STANDARDS

The FASB makes publicly available the authoritative standards that it has issued, as well as the standards issued by its predecessors (the Accounting Principles Board and the Committee on Accounting Procedure). Also available are nonauthoritative Statements of Financial Accounting Concepts issued by the FASB.

The FASB Accounting Standards CodificationTM is the source of authoritative generally accepted accounting principles (GAAP), other than those issued by the Securities and Exchange Commission, recognized by the FASB to be applied by nongovernmental entities. The Accounting Standards Codification is effective for interim and annual periods ending after September 15, 2009. All previous level (a)-(d) US GAAP standards issued by a standard setter are superseded. Level (a)-(d) US GAAP refers to the previous accounting hierarchy. All other accounting literature not included in the Accounting Standards Codification will be considered nonauthoritative.

FASB Accounting Standards Updates (2009 to present)
As of July 1, 2009, changes to the FASB Accounting Standards Codification™ are communicated through issuance of an Accounting Standards Update (Update). An Update is not authoritative; rather, it is a document that communicates how the Accounting Standards Codification has been amended. It also provides other information to help a user of GAAP understand how and why GAAP is changed and when the changes are effective.

Concepts Statements (1978 to present)
The FASB Concepts Statements are intended to serve the public interest by setting the objectives, qualitative characteristics, and other concepts that guide selection of economic phenomena to be recognized and measured for financial reporting and their display in financial statements or related means of communicating information to those who are interested. Concepts Statements guide the Board in developing sound accounting principles and provide the Board and its constituents with an understanding of the appropriate content and inherent limitations of financial reporting. A Statement of Financial Accounting Concepts does not establish generally accepted accounting standards.

Pre-Codification Standards (2009 and earlier)
The FASB makes available all standards issued by it and its predecessors that were superseded by the FASB Accounting Standards CodificationTM.

• Statements of Financial Accounting Standards 
• FASB Interpretations 
• FASB Staff Positions 
• FASB Technical Bulletins 
• EITF Abstracts 
• Derivatives (Statement 133) Implementation Issues 
• AICPA Copyrighted Standards   

Chapter 1. Smart Book

1 accounting is chiefly concerned with providing information to various Blank 1 of 1 external users. (Enter only one word.)

1. Which of the following are external users of financial information? creditors household investors suppliers government agencies

2. Which organizations provide financial information to external users?

charitable organizations profit-oriented businesses financial intermediaries creditors

1. Which of the following is a financial statement provided to investors?

Statement of investments Statement of shareholders' equity Statement of management discussion Statement of audit report

1. What is the primary function of financial accounting?

Provide financial information for tax purposes. Provide financial information to regulatory agencies. Provide information to internal users of the business. Provide useful information to users external to the business.

1. True or false: The term financial reporting is used to refer to the process of providing financial information to internal users. True Reason: Financial reporting refers to the process of providing financial information to external users.

AS : False

1. Financial accounting is primarily concerned with providing financial information to external users.

True False Reason:  The primary objective of financial accounting is to provide financial information to external users.

1. We can think of the capital markets as a composite of all creditors investors corporations auditors

2. Labor unions and creditors are examples of Blank 1 of 1 external or outside users of financial information. (Enter only one word.)

3. True or false: In the United States, we have a free enterprise economy with the majority of productive resources being government owned.

True ( Reason: The majority of productive resources are privately owned.) False

1. Which of the following are providers of financial information?

Companies households customers investors schools

1. In the United States, corporations acquire capital in which of the following ways?

from the sale of buildings and equipment by providing services to customers from creditors by borrowing from investors in exchange for ownership interest

1. Which are the financial statements most frequently provided to external users? (Select all that apply.) income statement balance sheet statement of shareholders' equity

2. A corporation's shareholders will receive cash from their investment in which of the following ways? A long-term note Periodic dividends Sale of assets

3. true or false: The term financial reporting is used to refer to the process of providing financial information to internal users. True Reason:  Financial reporting refers to the process of providing financial information to external users. False

4. On January 1, 20X1, Jennifer purchases common stock of Gamma Corporation for $100,000. During the year, Gamma Corporation stock pays a dividend of $3,000. At the end of the year, Jennifer sells the Gamma stock for $104,000. What is the return on investment of the Gamma stock? 7% 10% Reason:  The return on investment is calculated as the dividends received plus the appreciation in the value of the stock divided by the initial investment in the stock. ROI is ($3,000 + 4,000)/$100,000 = 7%. 3% Reason:  The return on investment is calculated as the dividends received plus the appreciation in the value of the stock divided by the initial investment in the stock. ROI is ($3,000 + 4,000)/$100,000 = 7%. 4% Reason:  The return on investment is calculated as the dividends received plus the appreciation in the value of the stock divided by the initial investment in the stock. ROI is ($3,000 + 4,000)/$100,000 = 7%.

Correct Answer

1. True or false: The uncertainty of the return on an investment is also referred to as risk. True False

2. The majority of productive resources are privately owned in a Blank 1 of 1  free enterprise economy. (Enter one word per blank)

3. In the United States, corporations acquire capital in which of the following ways? from investors in exchange for ownership interest by providing services to customers from the sale of buildings and equipment from creditors by borrowing

4. A company generates profits when it provides goods and services and

losses exceed gains. revenues are greater than expenses. investing activities are greater than financing activities. assets exceed liabilities.

1. Investors and Creditors are willing to provide capital to a corporation only if they expect to receive more cash in return at some time in the future.

2. The process of providing information to external users is referred to as financial , reporting , or accounting

3. The objectives of financial accounting include (Select all that apply.) provide information used to evaluate future cash flows. regulate businesses in the United States. provide information to investors and creditors. regulate businesses globally. provide managers with internal information for decisions.

4. The uncertainty regarding an investment is also referred to as risk

5. The accrual accounting model is best able to achieve the goal of predicting future cash flows

6. An investment that has higher risk also has greater cash flows. a lower return on investment. lower income for the period. more uncertainty of returns.

7. Net operating cash flow is found in which accounting model? Accrual basis Cash basis

8. The difference between revenue and expenses when revenue is greater is called net income

9. Which accounting model best meets the primary goal of users of financial reporting? Cash basis Net basis Cost basis Accrual basis

10. Which of the following instances indicate net operating cash flow may not be a good predictor of long-run cash-generating ability? (Select all that apply.)

A company pays a service technician the day work is performed A customer pays for services provided in a prior period A company pays cash to purchase a 2 year insurance policy

1. True or false: Resource inflows and outflows may not correspond to cash inflows and outflows. True False

2. The accrual accounting model's measure of resources provided by business operations is called revenue

3. What financial reporting model is used by most profit-oriented businesses and not-for-profit entities? cash basis accounting cost accounting accrual accounting tax accounting

4. Claire's revenues are greater than her expenses. Claire has net Blank 1 of 1 income for the period

5. The abbreviation GAAP stands for generally Blank 1 of 1 accepted accounting principles.

51. Question Mode

Matching Question

Match the financial reporting law with its requirements. Drag and drop application. 1933 Securities Act Sets forth accounting and disclosure requirements for initial public offerings of securities. 1934 Securities and Exchange Act Mandates reporting requirements for companies whose stock is publicly traded.

1. Accrual income attempts to measure the resource inflows and outflows generated by the company's Blank 1 of 1 operations during the reporting period.

2. If the SEC does not agree with a standard issued by the private sector, it can create another accounting standard setting body. issue a new FASB statement. remove FASB board members from their position. force a change in the standard.

3. True or false: Cash basis accounting is the required accounting method for most profit-oriented companies. True False

4. Which accounting standard setting body replaced the Accounting Principles Board in 1973? Securities and Exchange Commission American Institute of Certified Public Accountants Public Company Accounting Oversight Board Financial Accounting Standards Board

5. Generally accepted accounting principles are abbreviated as GAAP

6. The first private accounting standard setting body in the United States was the Financial Accounting Standards Board. Committee on Accounting Procedure. Accounting Principles Board. Securities and Exchange Commission.

7. The 1933 and 1934 Acts were designed to restore investor Blank 1 of 1  confidence, faith, belief, or trust in the stock market.

Issue new accounting pronouncements. Integrate international standards with U. accounting standards.

1. The Emerging Issues Task Force (EITF) was formed to address long-term accounting problems and set standards. identify potential problem areas and provide a timely response to issues. prepare exposure drafts for Statements of Financial Accounting Standards.

2. The citation used to reference generally accepted accounting principles is ACSS. GAAP. FASB ASC. FAS.

3. Which of the following provides an underlying structure for the development of accounting standards? The Conceptual Framework EITF Issue Consensuses Statements of Financial Accounting Standards FASB Staff Positions

4. The first private accounting standard setting body in the United States was the Securities and Exchange Commission. Accounting Principles Board. Committee on Accounting Procedure. Financial Accounting Standards Board.

5. The acronym GASB refers to the Government Accounting and State Bylaws. Government Accounting Standards Board. Generally Accepted Standards Board. General Accounting Standards Bylaws.

6. The FASB Accounting Standards codification organizes all relevant accounting pronouncements in a searchable, online database

7. The acronym for the Accounting Standards Codification is ASC

8. The organization that develops global accounting standards is the International Accountants Society Bylaws.

International Accountants Standards and Bylaws. International Accounting Standards Board.

1. The organization that is responsible for the standard setting process for states and cities in the United States is the Generally Accepted Standards and Bylaws. Government Authority for Standards and Bylaws. Governmental Accounting Standards Board. General Accounting State Board.

2. The IASB's main objective is to develop a single set of global accounting standards that are high-quality, understandable, and enforceable.

3. As of July 1, 2009, the single source of nongovernmental U. GAAP is found in the AICPA professional standards. FASB statements. SEC literature. Accounting Standards Codification.

4. The IASB is dedicated to developing a set of high-quality, understandable, and enforceable global, international, universal, or world accounting standards.

5. The International Accounting Standards Committee (IASC) reorganized in 2001 to create a new standard-setting body called the International Accounting Standards Board (IASB). The IASB issues global accounting standards called Global Financial Reporting Standards International Financial Reporting Standards European Accounting Standards International Accounting Standards

6. The Financial Accounting Foundation provides oversight, appoints members, and raises funds to support the: EITF FASB SEC IASB

Emerging Issues Task Force matches Choice, Group dealing with emerging issues - U. GAAP Group dealing with emerging issues - U. GAAP IASB matches Choice, Standard-setting board - IFRS Standard-setting board - IFRS

1. The International Accounting Standards Committee issued International Accounting Standards (IAS), whereas the International Accounting Standards Board currently issues Globally Accepted Accounting Principles. International Financial Reporting Standards. International Accounting and Auditing Standards. General Guidelines for Global Reporting.

2. Which of the following represent(s) an important objective of the IASB? To lower the cost of capital on global markets To control the global standard setting process To develop high quality global standards

3. Differences in implementation and enforcement of IFRS across countries can impact comparability or uniformity of financial statements.

4. What was the purpose of the FASB Accounting Standards Codification project? Reorganize all relevant accounting pronouncements in U. GAAP. Issue new accounting pronouncements. Integrate international standards with U. accounting standards.

5. Which of the following would be a likely advantage of a single set of accounting standards? Enhanced export and import opportunities Less volatile exchange rates Easier access to capital

6. Which of the following are common arguments against the creation of a single set of global accounting standards? (Select all that apply.) Accounting under IFRS will appear more uniform than it actually is Global standards will lead to more complex accounting standards Maintaining competition between accounting standard-setting bodies improves quality Implementation and enforcement of IFRS varies among nations

7. In 2007, the SEC eliminated the requirement of foreign companies issuing stock in the United States to include a reconciliation of IFRS to U. GAAP in their financial statements. True False

8. The International Accounting Standards Committee provides oversight, appoints members, and raises funds to support the: EITF FASB SEC IASB

9. In which of the following areas did the FASB and IASB already develop converged accounting standards? (Select all that apply.) Earnings-per-share Share-based compensation Lease accounting Financial instruments Non-monetary exchanges

10. Recent events suggest that full convergence ________ be achieved in the foreseeable future. will will not

11. Before issuing an Accounting Standards Update, the FASB undertakes a series of information-gathering steps including deliberations open hearings company visits written comments

12. In 2007, the SEC eliminated the requirement for foreign or international companies that issue stock in the United States to include in their financial statements a reconciliation of IFRS to U. GAAP.

13. The FASB's standard setting process begins when the board adds a project to its technical agenda. Identify the final step in this process. The board deliberates at one or more public meetings. The board issues an Exposure Draft or Discussion Paper. The staff analyzes comment letters. The Board issues an Accounting Standards Update.

14. The purpose of the Private Company Council (PCC) is to advise the ________ about its current projects that affect private companies. FASB PCAOB IASB SEC

15. The most recent issue in implementing the fair value accounting standard is the FASB's reluctance to issue an accounting pronouncement. the attempts by Congress to prohibit historical cost accounting. pressure to reduce the extent to which fair value changes are reported in net income. the government's responsibility to measure fair value of assets.

16. It is the responsibility of management or managers to apply Generally Accepted Accounting Principles in preparation of the company's financial statements

17. Economic consequences for EU member nations are an important consideration in the adoption of International Financial Reporting Standards. True False

18. The Private Company Council (PCC) determines whether changes to existing GAAP are necessary to meet the needs of users of public company financial statements users of private company financial statements users of non-profit company financial statements

19. Auditors examine financial statements to express a professional, independent opinion on the financial statements.

20. What classification would the following auditor opinion receive?: "In our opinion, the consolidated financial statements listed in the accompanying index present fairly... in conformity with U. GAAP. an adverse opinion a qualified opinion a clean opinion a disclaimer opinion

21. What is the testing requirement for a licensed certified public accountant? Uniform CMA Examination Uniform CFA Examination

Uniform CPA Examination

1. Who has the responsibility to appropriately apply GAAP when preparing financial statements? Auditors The SEC Management The FASB

2. Where does political pressure come from in International standard setting? (Select all that apply.) The European Union (EU) Politicians from countries utilizing IFRS The United States The International Accounting Standards Board

3. What is the purpose of the audit report? To add credibility to the financial statements. To provide investment advice. To report taxable income to the IRS.

4. The involvement of accounting professionals and management in accounting scandals resulted in Congress passing the Sarbanes-Oxley Act. What is the purpose of the Sarbanes-Oxley Act? (Select all that apply.) Regulate auditors. Prevent conflicts of interests. Issue capital requirements for companies. Provide penalties for violators. Require CEO accountability.

5. A(n) unqualified, clean, or unmodified opinion signals that a company's financial statements do not contain material departures from US GAAP.

6. What are the requirements of most states to become a licensed certified public accountant? experience income testing education background check

7. Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles? CPA firms who audit the company

8. Proponents of objectives-based standards assert that less professional judgment will be needed in the preparation and audit of the financial statements professional judgment minimizes sidestepping of rules financial statements will become more transparent

9. What requirements for corporate accountability are included in the Sarbanes-Oxley Act? Corporate executives must personally certify the financial statements. Corporate executives may be criminally liable for fraudulent financial statements. Corporate management must select the auditor. Corporate management must hire the same audit and consulting firm.

10. The Sarbanes-Oxley Act requires auditors to retain work papers for ______ years. 10 3 5 7

11. A code or moral system that provides criteria for evaluating right or wrong is referred to as ethics

12. Criticisms of the objectives-oriented approach for accounting standards are (Select all that apply.) professional judgment may result in different treatments of similar transactions. a lack of disclosure notes explaining accounting policies. the rules can be easily applied uniformly. an absence of rules may lead to intentional misuse of a standard.

13. Under the Sarbanes-Oxley Act, who is responsible for the selection of a corporation's auditor? The American Institute of Certified Public Accountants. The Securities and Exchange Commission. The audit committee of the Board of Directors. Corporate management.

14. Which of the following fields are considered a profession that has its own code of professional ethics? (Select all that apply.) marketing management

law accounting medicine

1. A code or moral system that provides criteria for evaluating right and wrong is referred to as standards. ethics. a dilemma system. a values model.

2. The organization responsible for the code of ethics for accountants working in government and industry is the Public Accounting Standards Oversight Board Accounting Principles Board American Institute of Certified Public Accountants Institute of Management Accountants Securities and Exchange Commission

3. Which approach to standard setting emphasizes the use of professional judgment when choosing how to account for a transaction? Objectives-oriented Rules-oriented Transaction-oriented

4. What is the distinguishing feature of a profession? It is regulated by the SEC. Its members accept responsibility for the interests of those it serves. It requires a federal permit to practice. It requires liability insurance to cover responsibilities.

5. 1. Determine the facts of the situation

6. Identify the ethical issue and stakeholders.

7. Identify the values related to the situation.

8. Specify the alternative course of action.

9. Evaluate the courses of action in terms of their consistency.

10. The organization responsible for the Code of Professional Conduct for accountants providing auditing services to their own organizations is the Institute of Internal Auditors Public Accounting Standards Oversight Board Accounting Principles Board Institute of Management Accountants

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