Chapter Questions
Accounting has been defined as a service activity. Who is served by accounting and how do they benefit?
How does the fact that there are limited resources in the world relate to accounting information?
Accounting is sometimes characterized as dealing only with the past. Give examples of how accounting information can be of value in deating with the future.
Distinguish between management accounting and financial accounting.
What five items make up the general-purpose financial statements?
Contrast the roles of an accountant and an auditor.
Why are independent audits necessary?
What conditions led to the establishment of accounting standard-setting bodies in the United States?
Describe the structure of the FASB. Where does the FASB get its operating funds?
What are the differences in purpose and scope of the FASB Accounting Standards Codification and the FASB Statements of Financial Accounting Concepts?
What characteristics of the standard-setting process are designed to increase the acceptability of standards established by the FASB?
(a) What role does the EITF play in establishing accounting standards? (b) Why can it meet this role more efficiently than the FASB?
How does the SEC influence the setting of accounting standards?
What is the AICPA? The AAA?
Explain the relationship between financial accounting rules and tax accounting rules.
Why is standard setting such a difficult and complex task?
What constitutes authoritative GAAP in the United States?
Why are differing national accounting standards converging to a common global standard?
What is the IASB? What is the SEC position regarding IASB standards?
List and explain the main reasons why a conceptual framework of accounting is important.
Identify the major objectives of financial reporting as specified by the FASB.
One objective of financial reporting is understandability. Understandable to whom?
Why is it so difficult to measure the cost effectiveness of accounting information?
Distinguish between the qualities of relevance and reliability.
Does reliability imply absolute accuracy? Explain.
Define comparability.
Of what value is consistency in financial reporting?
What is the current numerical materiality standard in accounting?
What is conservatism in accounting? What is an example of conservatism in accounting practice?
Identify the criteria that an item must meet to qualify for recognition.
Identify and describe five different measurement attributes.
Briefly describe the five traditional assumptions that influence the conceptual framework.
What is the most common career path for a college graduate who starts out in public accounting?
What user careers require a knowledge of intermediate accounting issues?