Chapter 1

Question 1

Four major elements of Financial Accounting

Answer 1

Financial Information/Economic Entities/User Groups/LEPS (Legal, Economic, Political, and Social environment)

Question 2

Four basic financial statements

Answer 2

Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Equity

Question 3

FASB Acronym and what they do

Answer 3

Financial Accounting Standards Board. They issue GAAP

Question 4

Economic Entity

Answer 4

Organization with activities separate from its owners and other companies

Question 5

Equity Investors

Answer 5

Use financial info to determine a company’s ability to generate earnings and cash flow

Question 6

Creditors and Other Debt Investors

Answer 6

Use financial info to determine whether to lend money to a company

Question 7

Competitors

Answer 7

Use financial info to determine their market position and analyze competitor strategies

Question 8

Financial Analysts

Answer 8

Use financial info to provide guidance to others about investment and credit decisions

Question 9

Employees and Labor Unions

Answer 9

Use financial info to assess economic performance and liquidity of employers

Question 10

Suppliers and Customers

Answer 10

Use financial info to determine a company’s financial status, ability to pay, quality of product, and ability to honor warranties

Question 11

External Auditors

Answer 11

Independent of the company. Ensure compliance with GAAP and that financial statements are correct

Question 12

Internal Auditors

Answer 12

Employees of a company that serve an advisory role to management

Question 13

Standard Setters

Answer 13

Develop accounting concepts and rules. Ex: FASB

Question 14

Regulatory Bodies

Answer 14

Protect Investors and oversee accounting standard setting process. Ex: SEC

Question 15

Professional Organizations

Answer 15

Provide support to professional accountants. Ex: AICPA

Question 16

AICPA makes which exam?

Answer 16

CPA Exam

Question 17

What does PCAOB do?

Answer 17

Oversees the External Auditors

Question 18

Reactive Factors

Answer 18

The environment changes so the rules need to change

Question 19

Proactive Factors

Answer 19

The rules change so the environment changes

Question 20

Data Analytics

Answer 20

Process of analyzing large data sets to draw useful conclusions

Question 21

Four reasons why US accountants need to learn International accounting standards

Answer 21

US Companies operate outside the US/Foreign companies operate in the US/SEC permits the use of IFRS for foreign companies on our stock exchange/US Accountants sometimes work outside of the US

Question 22

IFRS

Answer 22

International version of accounting rules

Question 23

IASB

Answer 23

sets global accounting standards

Question 24

SEC made when

Answer 24

1934

Question 25

CAP made when and did what

Answer 25

1939. Released Accounting Research Bulletins to minimize the number of accounting rules

Question 26

APB made when and did what

Answer 26

1959. Gave APB Opinions and Statements to refine the accounting rules

Question 27

FASB made when and does what

Answer 27

1973. Gives Accounting Standards Updates through GAAP. Codifies the accounting rulebook

Question 28

FASB vs GASB

Answer 28

FASB is for public and private companies/GASB is for government companies and non-profits

Question 29

Principles Based Standards

Answer 29

Rely on theories, concepts, and principles of accounting. More judgement based

Question 30

Rules Based Standards

Answer 30

Contain specific prescriptive procedures. More rule based

Question 31

Asset Liability Approach

Answer 31

Movement away from Income Statment towards Balance Sheet. A focus more on assets and liabilities

Question 32

Fair Value Measurements

Answer 32

Movement towards measuring balance sheet items at Fair Value (current value) rather than historical cost (what was originally paid for it)