ACCOUNTING STANDARDS d.

an economy as a whole and to members of

society as consumers, rather than to
21. General-purpose financial statements are the individual enterprises or industries.
product of
a. financial accounting. P
25. The process of identifying, measuring,
b. managerial accounting. analyzing, and communicating financial
c. both financial and managerial accounting. information needed by management to plan,
d. neither financial nor managerial
evaluate, and control an organization’s
accounting.
operations is called
22. Users of financial reports include all of the a. financial accounting.
b. managerial accounting.
following except
c. tax accounting.
a. creditors. d. auditing.
b. government agencies.
c. unions. 26. Whether a business is successful and thrives
d. All of these are users.
is determined by
a. markets.
23. The financial statements most frequently
b. free enterprise.
provided include all of the following except c. competition.
the d. all of these.
a. balance sheet.
b. income statement. 27. An effective capital allocation process
c. statement of cash flows. a. promotes productivity.
d. statement of retained earnings. b. encourages innovation.
c. provides an efficient market for buying
24. The information provided by financial and selling securities.
reporting pertains to d. all of these.
a. individual business enterprises, rather
than to industries or an economy as a 28. Financial statements in the early 2000s
whole or to members of society as provide information related to
consumers. a. non-financial measurements.
b. business industries, rather than to b. forward-looking data.
individual enterprises or an economy as a c. hard assets (inventory and plant assets).
whole or to members of society as d. none of these.
consumers.
c. individual business enterprises, 29. Which of the following statements is not an
industries, and an economy as a whole,
objective of financial reporting?
rather than to members of society as
consumers. a. Provide information that is useful in
investment and credit decisions.
 b. Provide information about enterprise 33. A common set of accounting standards and
resources, claims to those resources, and procedures are called
changes to them. a. financial accounting standards.
c. Provide information on the liquidation b. generally accepted accounting principles.
value of an enterprise. c. objectives of financial reporting.
d. Provide information that is useful in d. statements of financial accounting
assessing cash flow prospects. concepts.

30. Accrual accounting is used because 34. The role of the Securities and Exchange
a. cash flows are considered less important. Commission in the formulation of accounting
b. it provides a better indication of ability principles can be best described as
to generate cash flows than the cash a. consistently primary.
basis. b. consistently secondary.
c. it recognizes revenues when cash is c. sometimes primary and sometimes
received and expenses when cash is paid. secondary.
d. none of the above. d. non-existent.
31. One objective of financial reporting is to 35. The body that has the power to prescribe the
provide accounting practices and standards to be
a. information about the investors in the employed by companies that fall under its
business entity. jurisdiction is the
b. information about the liquidation values
a. FASB.
of the resources held by the enterprise.
b. AICPA.
c. information that is useful in assessing
c. SEC.
cash flow prospects.
d. APB.
d. information that will attract new
investors.
36. Companies that are listed on a stock exchange
32. Accounting principles are "generally are required to submit their financial
statements to the
accepted" only when
a. an authoritative accounting rule-making a. AICPA.
body has established it in an official b. APB
c. FASB.
pro-nouncement.
d. SEC.
b. it has been accepted as appropriate
because of its universal application.
c. both a and b. 37. The Financial Accounting Standards Board
d. neither a nor b. (FASB) was proposed by the
a. American Institute of Certified Public
Accountants.
b. Accounting Principles Board.
 c. Study Group on the Objectives of Financial d. a majority of the members of the FASB are
Statements. CPAs drawn from public practice.
d. Special Study Group on establishment of
Accounting Principles (Wheat Committee). 41. The Financial Accounting Standards Board
employs a "due process" system which
38. The Financial Accounting Standards Board a. is an efficient system for collecting dues
a. has issued a series of pronouncements from members.
entitled Statements on Auditing b. enables interested parties to express
Standards. their views on issues under consideration.
b. was the forerunner of the current c. identifies the accounting issues that are
Accounting Principles Board. the most important.
c. is the arm of the Securities and Exchange d. requires that all accountants must receive
Commission responsible for setting a copy of financial standards.
financial accounting standards.
d. is appointed by the Financial Accounting 42. Which of the following is not a publication
Foundation. of the FASB?
a. Statements of Financial Accounting
39. The Financial Accounting Foundation Concepts
a. oversees the operations of the FASB. b. Accounting Research Bulletins
b. oversees the operations of the AICPA. c. Interpretations
c. provides information to interested d. Technical Bulletins
parties on financial reporting issues.
d. works with the Financial Accounting 43. FASB Technical Bulletins
Standards Advisory Council to provide a. are similar to FASB Interpretations in
informa-tion to interested parties on that they establish enforceable standards
financial reporting issues. under the AICPA's Code of Professional
Ethics.
40. The major distinction between the Financial b. are issued monthly by the FASB to deal
Accounting Standards Board (FASB) and its with current topics.
predecessor, the Accounting Principles Board c. are not expected to have a significant
(APB), is impact on financial reporting in general
a. the FASB issues exposure drafts of and provide guidance when it does not
proposed standards. conflict with any broad fundamental
b. all members of the FASB are fully accounting principle.
remunerated, serve full time, and are d. were recently discontinued by the FASB
independent of any companies or because they dealt with specialized topics
institutions. having little impact on financial
c. all members of the FASB possess extensive reporting in general.
experience in financial reporting.
44. The purpose of the Emerging Issues Task Force
is to
a. develop a conceptual framework as a frame
of reference for the solution of future
problems.
b. lobby the FASB on issues that affect a
particular industry.
c. do research on issues that relate to long-
term accounting problems.
d. issue statements which reflect a consensus
on how to account for new and unusual
financial transactions that need to be
resolved quickly.
45. The Governmental Accounting Standards Board
a. oversees the activities of the SEC.
b. is a private-sector body, which addresses
state and local governmental reporting
issues.
c. is a division of the Securities and
Exchange Commission, which oversees the
corpo-rate accounting in annual reports.
d. was terminated when the Financial
Accounting Standards Board was created.
46. The Governmental Accounting Standards Board's
main purpose is to develop standards for
a. the General Accounting Office.
b. the Federal government.
c. state and local government.
d. the Internal Revenue Service.
47. Which of the following organizations has not
been instrumental in the development of
financial accounting standards in the United
States?
a. AICPA
b. FASB
c. IASB
d. SEC
48. An organization that has not published
accounting standards is the
a. American Institute of Certified Public
Accountants.
b. Securities and Exchange Commission.
c. Financial Accounting Standards Board.
d. All of these have published accounting
standards.
49. The purpose of Statements of Financial
Accounting Concepts is to
a. establish GAAP.
b. modify or extend the existing FASB
Standards Statement.
c. form a conceptual framework for solving
existing and emerging problems.
d. determine the need for FASB involvement in
an emerging issue.
P50.
Members of the Financial Accounting
Standards Board are
a. employed by the American Institute of
Certified Public Accountants (AICPA).
b. part-time employees.
c. required to hold a CPA certificate.
d. independent of any other organization.
P51.
The following published documents are part
of the "due process" system used by the FASB
in the evolution of a typical FASB Statement
of Financial Accounting Standards:
1. Exposure Draft
2. Statement of Financial Accounting
Standards
3. Discussion Memorandum
 The chronological order in which these items b. are influenced by pronouncements of the
are released is as follows: SEC and IRS.
a. 1, 2, 3. c. change over time as the nature of the
b. 1, 3, 2. business environment changes.
c. 2, 3, 1. d. all of these.
d. 3, 1, 2.
55. The most significant current source of
P
52. In the House of GAAP, is the following on the generally accepted accounting principles is
highest level of authoritative status the
(meaning among the most authoritative)? a. AICPA.
b. SEC.
FASB FASB c. APB.
Statement Statement d. FASB.
FASB of Financial of Financial
Technical Accounting FASB Accounting 56. The most authoritative category of generally
Bulletin Standards Interpretation accepted accounting principles includes all
Concepts of the following except
a. Yes Yes Yes Yes a. Accounting Research Bulletins.
b. Yes Yes Yes No b. APB Opinions.
c. No Yes No No c. FASB Standards.
d. No Yes Yes No d. FASB Technical Bulletins.

53. Generally Accepted Accounting Principles
include: 1) FASB Technical Bulletins, 2) APB
Opinions, and 3) Widely-accepted industry
practices. These three items rank from most
authoritative to least authoritative as
follows:
a. 1, 2, 3.
b. 1, 3, 2.
c. 2, 1, 3.
d. 2, 3, 1.
54. Generally accepted accounting principles
a. include detailed practices and procedures
as well as broad guidelines of general
application.
57. Which of the following is not a part of
generally accepted accounting principles?
a. FASB Interpretations
b. CAP Accounting Research Bulletins
c. APB Opinions
d. All of these are part of generally
accepted accounting principles.
58. Which of the following publications does not
qualify as a statement of generally accepted
accounting principles?
a. Statements of financial standards issued
by the FASB
b. Accounting interpretations issued by the
FASB
c. APB Opinions
 d. Accounting research studies issued by the
AICPA

59. Financial accounting standard-setting in the

United States
a. can be described as a social process which
reflects political actions of various
interested user groups as well as a
product of research and logic.
b. is based solely on research and empirical
findings.
c. is a legalistic process based on rules
promulgated by governmental agencies.
d. is democratic in the sense that a majority
of accountants must agree with a standard
before it becomes enforceable.

60. The purpose of the International Accounting

Standards Board is to
a. issue enforceable standards which
regulate the financial accounting and
reporting of multinational corporations.
b. develop a uniform currency in which the
financial transactions of companies
through-out the world would be measured.
c. promote uniform accounting standards
among countries of the world.
d. arbitrate accounting disputes between
auditors and international companies.

Item Ans Ite Ans. Item Ans Item Ans Item Ans Item A Item Ans.

21. a 27. d 33. b 39. a 45. b 51. d 57. d

22. d 28. c 34. c 40. b 46. c 52. d 58. d
23. d 29. c 35. c 41. b 47. c 53. c 59. a
24. a 30. b 36. d 42. b 48. d 54. d 60. c
25. b 31. c 37. d 43. c 49. c 55. d
26. d 32. c 38. d 44. d 50. d 56. d