Questions and Answers of Accounting

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What do we mean when we say that accounting is a means rather than an end?

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Accounting is sometimes described as the language of business. What is meant by this description?

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What kinds of organizations, in addition to businesses, use accounting information?

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What is the primary distinction between financial accounting and managerial accounting?

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Describe the relatioliship among the accounting process, accounting information, decision makers, and economic activities.

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What are some examples of nonfinancial information that is often used by management in performing its duties?

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What is an accounting system and what is the primary objective of such t system?

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What do we mean when we say that an accounting system needs to be “cost-effective”?

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What are the- three basic functions of every accounting -system?

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Who designs and installs accounting systems?

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Generally describe and give several examples of external users of accounting information?

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What are the two primary -external groups to which financial accounting information is directed?

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What do we mean when we say that investors and creditors are interested in a company’s “cash flow prospects”?

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When you invest your savings in a company, what is the difference between the return on your investment and the return of your investment?

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Going from general to specific, what are the three primary objectives of financial accounting information?

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What are time three primary financial statements with which we communicate financial accounting- information?

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Do the terms financial reporting and financial statements mean the same thing? Explain

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Is externally reported financial information always precise and accurate?

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What do we mean when we say that financial accounting information is “general-purpose?

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How does management’s explanation enhance the usefulness of financial accounting information?

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What are several examples of internal, management-prepared information that ordinarily would not be communicated externally?

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What are some examples of internal users of accounting information?

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What is meant by a database warehousing approach for the creation of useful accounting information for internal management?

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What are the three primary ways enterprises use their management accounting information?

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Why does management accounting information need to be timely?

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Is management accounting information primarily historical or future oriented? How does that compare with financial accounting information?

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How does accounting information assist management in measuring efficiency and effectiveness?

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How is management accounting information a means to an end?

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Why is- it important for accounting information to have the quality of integrity?

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What is meant by generally accepted accounting principles, and how do these principles add to the integrity of financial accounting information?

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What is an internal control structure, and how does it add to the integrity of accounting information?

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What is an audit, and how does it add to the integrity of accounting information?

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Differentiate broadly between financial accounting and managerial accounting.

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Differentiate between “financial statements” and “financial reporting.”

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How does accounting help the capital allocation process?

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What are some of the major challenges facing the accounting profession?

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What are the major objectives of financial reporting?

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Of what value is a common set of standards in financial accounting and reporting?

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What is the likely limitation of “general-purpose financial statements”?

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In what way is the Securities and Exchange Commission concerned about and supportive of accounting principles and standards?

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What was the Committee on Accounting Procedure, and what were its accomplishments and failings?

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For what purposes did the AICPA in 1959 create the Accounting Principles Board?

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Distinguish among Accounting Research Bulletins, Opinions of the Accounting Principles Board, and Statements of the Financial Accounting Standards

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If you had to explain or define “generally accepted accounting principles or standards,” what essential characteristics would you include in your

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In what ways was it felt that the statements issued by the Financial Accounting Standards Board would carry greater weight than the opinions issued

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How are FASB discussion memoranda and FASB exposure drafts related to FASB “statements”?

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Distinguish between FASB “statements of financial accounting standards” and FASB “statements of financial accounting concepts.”

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What is Rule 203 of the Code of Professional Conduct?

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Rank from the most authoritative to the least authoritative, the following three items: FASB Technical Bulletins, AICPA Practice Bulletins, and FASB

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The chairman of the FASB at one time noted that “the flow of standards can only be slowed if (1) producers focus less on quarterly earnings per

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What is the purpose of FASB Staff Positions?

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Explain the role of the Emerging Issues Task Force in establishing generally accepted accounting principles.

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What is the purpose of the Governmental Accounting Standards Board?

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What are some possible reasons why another organization, such as the Governmental Accounting Standards Board, should not issue financial reporting

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What are the sources of pressure that change and influence the development of accounting principles and standards?

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Some individuals have indicated that the FASB must be cognizant of the economic consequences of its pronouncements. What is meant by “economic

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If you were given complete authority in the matter, how would you propose that accounting principles or standards should be developed and enforced?

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One writer recently noted that 99.4 percent of all companies prepare statements that are in accordance with GAAP. Why then is there such concern

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What is the “expectations gap”? What is the profession doing to try to close this gap?

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The Sarbanes-Oxley Act was enacted to combat fraud and curb poor reporting practices. What are some key provisions of this legislation?

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A number of foreign countries have reporting standards that differ from those in the United States. What are some of the main reasons why reporting

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How are financial accountants challenged in their work to make ethical decisions? Is technical mastery of GAAP not sufficient to the practice of

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Financial Accounting) Omar Morena has recently completed his first year of studying accounting. His instructor for next semester has indicated that

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(Objectives of Financial Reporting) Karen Sepan, a recent graduate of the local state university, is presently employed by a large manufacturing

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(Accounting Numbers and the Environment) Hardly a day goes by without an article appearing on the crises affecting many of our financial institutions

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(Need for GAAP) Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating

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(AICPA’s Role in Rule-Making) One of the major groups involved in the standard-setting process is the American Institute of Certified Public

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(FASB Role in Rule-Making) A press release announcing the appointment of the trustees of the new Financial Accounting Foundation stated that the

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(Politicization of GAAP) Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles

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(Models for Setting GAAP) Presented below are three models for setting GAAP.1. The purely political approach, where national legislative action

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(GAAP Terminology) Wayne Rogers, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the

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(Accounting Organizations and Documents Issued) Presented below are a number of accounting organizations and types of documents they have issued.

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(Accounting Pronouncements) Standard-setting bodies have issued a number of authoritative pronouncements. A list is provided on the left, below, with

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(Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early

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(Securities and Exchange Commission) The U.S. Securities and Exchange Commission (SEC) was created in 1934 and consists of five commissioners and a

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(Financial Reporting Pressures) Presented below is abbreviated testimony from Troy Normand in the WorldCom case. He was a manager in the corporate

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(Rule-Making Process) In 1973, the responsibility for developing and issuing rules on accounting practices was given to the Financial Accounting

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(GAAP and Economic Consequences) The following letter was sent to the SEC and the FASB by leaders of the business community.Dear Sirs:The FASB has

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Beverly Crusher, a new staff accountant, is confused because of the complexities involving accounting standard-setting. Specifically, she is confused

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The following comments were made at an Annual Conference of the Financial Executives Institute (FEI). There is an irreversible movement towards the

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As a newly enrolled accounting major, you are anxious to better understand accounting institutions and sources of accounting literature. As a first

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What is a conceptual framework? Why is a conceptual framework necessary in financial accounting?

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What are the primary objectives of financial reporting as indicated in Statement of Financial Accounting Concepts No. 1?

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What is meant by the term “qualitative characteristics of accounting information”?

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Briefly describe the two primary qualities of useful accounting information.

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According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on the needs of the users of

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What is the distinction between comparability and consistency?

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Why is it necessary to develop a definitional framework for the basic elements of accounting?

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Expenses, losses, and distributions to owners are all decreases in net assets. What are the distinctions among them?

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Revenues, gains, and investments by owners are all increases in net assets. What are the distinctions among them?

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What are the four basic assumptions that underlie the financial accounting structure?

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The life of a business is divided into specific time periods, usually a year, to measure results of operations for each such time period and to

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What is the basic accounting problem created by the monetary unit assumption when there is significant inflation? What appears to be the FASB

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The chairman of the board of directors of the company for which you are chief accountant has told you that he has little use for accounting figures

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When revenue is generally recognized? Why has that date been chosen as the point at which to recognize the revenue resulting from the entire

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Magnus Eatery operates a catering service specializing in business luncheons for large corporations. Magnus requires customers to place their orders

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What is the difference between realized and realizable? Give an example of where the concept of realizable is used to recognize revenue.

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What is the justification for the following deviations from recognizing revenue at the time of sale?(a) Installment sales method of recognizing

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Jane Hull Company paid $135,000 for a machine in 2005. The Accumulated Depreciation account has a balance of $46,500 at the present time. The company

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Three expense recognition methods (associating cause and effect, systematic and rational allocation, and immediate recognition) were discussed in the

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