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Chapter 4

1) Financial accounting is concerned with general purpose reports on financial position and financial performance that are used by parties both internal and external to the entity. 2) Financial accounting can be broadly defined as the area of accounting that prepares general purpose financial statements to be used by parties internal to the entity as well as creditors and investors external to the entity. 3) Generally accepted accounting principles derive their credibility and authority from general recognition and acceptance by the accountancy profession rather than from legal rulings or a government regulatory authority.

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61 views2 pages

Chapter 4

1) Financial accounting is concerned with general purpose reports on financial position and financial performance that are used by parties both internal and external to the entity. 2) Financial accounting can be broadly defined as the area of accounting that prepares general purpose financial statements to be used by parties internal to the entity as well as creditors and investors external to the entity. 3) Generally accepted accounting principles derive their credibility and authority from general recognition and acceptance by the accountancy profession rather than from legal rulings or a government regulatory authority.

Uploaded by

Jao Flores
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Problem 1 – 5:

1) Financial accounting is concerned with


a) General purpose reports on financial position and financial performance
b) Specialized reports for inventory management and control
c) Specialized reports for income tax computation and recognition
d) General purpose reports on changes in share prices and future estimate of market
position.

2) Financial accounting can be broadly defined as the area of accounting that prepares
a) General purpose financial statements to be used by parties internal to the entity.
b) Financial statements to be used by investors
c) General purpose financial statements to be used by parties both internal and external to
the entity
d) Financial statements to be used primarily by management.

3) Financial accounting is the area of accounting that emphasizes reporting to


a) Management
b) Regulatory bodies
c) Internal auditors
d) Creditors and investors

4) Managerial accounting is the area of accounting that emphasizes


a) Reporting financial information to external users
b) Reporting to the SEC
c) Combining accounting knowledge with an expertise in data processing
d) Developing accounting information for use within an entity
Problem 1 – 6

1) Generally accepted accounting principles


a) Are accounting adaptations based on law
b) Derive their credibility and authority from legal rulings and court precedents
c) Derive their credibility and authority from a government regulatory authority
d) Derive their credibility and authority from general recognition and acceptance by the
accountancy profession

2) Which of the following statements best describes generally accepted accounting principles?
a) The accounting principles have been formulated in the public sector
b) The accounting principles have been developed on the basis of such factors as usage
and practical necessity.
c) The accounting principles are the same as laws within our legal system
d) The accounting principles do not apply to small and medium – sized entities.

3) Once an accounting standard has been established


a) The standard is continually reviewed to see if modification is necessary
b) The standard is not reviewed unless a regulatory authority makes a complaint
c) The task of reviewing the standard to see if modification is necessary is given to the
national accounting organization.
d) The principle of consistency requires that no revisions ever be made to the standard.

4) Financial accounting standard – setting


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 government agencies
d) Is democratic in the sense that a majority of accountants must agree with a standard
before it becomes enforceable

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