ACC 310 Chapter 1

LO 1.1 Financial accounting information is used by various stakeholders of a company, which include

• 1. investors

• 1. creditors

• 1. suppliers

• government regulators

• 1. all of the above

LO 1.1 Which business activities involve raising the capital a company needs?

• 1. Operating activities

• 1. Investing activities

• 1. Financing activities

• 1. Consulting activities

LO 1.1 Which business activities involve purchasing and selling productive resources that a company needs to operate the business?

• 1. Operating activities

• 1. Investing activities

• 1. Financing activities

• 1. Consulting activities

LO 1.1 Which business activities involve day-to-day transactions to make and sell goods and services to customers and to pay employees and suppliers?

• 1. Operating activities

• 1. Investing activities

• 1. Financing activities

• 1. Consulting activities

LO 1.1 The demand for financial reporting accounting information is driven by

• 1. the needs of managers to make internal resource allocation decisions.

• 1. the need to avoid potential problems that can arise when the ownership of a company’s resources are separate from the control of those resources.

• 1. the need of governmental agency to raise funds by taxing company profits.

• 1. all of the above.

LO 1.2 Which two of the following four statements determine the supply of financial accounting information that companies report?

A. Authoritative professional accounting standards (e.g., U.S. GAAP)

1. B. The need for independent experts to verify whether a company has applied accounting standards fairly and consistently

3. C. The choices, methods, estimates, and judgments that companies make in producing financial statements

5. D. Information asymmetry caused by the separation of ownership and control

• 1. A and B

• 1. A and C

• 1. B and C

• 1. C and D

LO 1.3 Which of the following statements is true regarding the structure of the FASB?

• 1. The FASB is supported by a part-time professional and technical research staff that conducts research, communicates with constituents, and drafts preliminary findings.

• 1. The FASB is the parent organization of the Financial Accounting Foundation (FAF).

• 1. The FAF has the primary responsibilities to oversee the effectiveness and efficiency of the standard-setting process and appoint the members of the FASB.

• 1. The Financial Accounting Advisory Council is responsible for identifying and researching financial accounting issues.

LO 1.4 Which of the following statements regarding the FASB Codification is true?

• 1. All authoritative U.S. GAAP is contained in the Codification.

• 1. The accounting guidance contained with the Codification has differing levels of authority.

• 1. The Codification has increased the amount of time and effort needed to solve an accounting research issue.

• 1. The Codification is a hierarchical database, and the topic level contains the most specific guidance that constitutes U.S. GAAP.

LO 1.5 Which of the following statements is false regarding the IASB and IFRS?

• 1. The IASB in an international accounting standard-setting body that establishes International Financial Reporting Standards that are used in many countries around the world.

• 1. The United States still follows accounting standards established by the FASB due to the FASB’s resistance to international convergence of accounting standards.

• 1. For companies that list their securities on U.S. capital markets, the SEC mandates that U.S. companies follow accounting standards established by the FASB, while non-U.S. companies may use accounting standards established by the IASB.

• 1. It is important that accountants be fluent in U.S. GAAP and IFRS.

LO 1.6 Which financial statement measures and reports a company’s financial position at a point in time?

• 1. Balance sheet

• 1. Income statement

• 1. Statement of cash flows

• 1. Statement of shareholders’ equity