The following questions dealing with the environment and theoretical structure of financial accounting are adapted from questions that previously appeared on Certified Management Accountant (CMA) examinations. The CMA designation sponsored by the Institute of Management Accountants (www.imanet.org) provides members with an objective measure of knowledge and competence in the field of management accounting.
Determine the response that best completes the statements or questions.
1. Accounting standard setting in the United States is
a. Done primarily by the Securities and Exchange Commission.
b. Done primarily by the private sector.
c. The responsibility of the public sector.
d. Done primarily by the International Accounting Standards Committee.
2. Verifiability as used in accounting includes
a. Determining the revenue first, then determining the costs incurred in earning that revenue.
b. The entity’s giving the same treatment to comparable transactions from period to period.
c. Similar results being obtained by both the accountant and an independent party using the same measurement methods.
d. The disclosure of all facts that may influence the judgment of an informed reader.
3. Recognition is the process of formally recording and reporting an item in the financial statements. In order for a revenue item to be recognized, it must be all of the following except
a. Measurable.
b. Relevant.
c. Material.
d. Realized or realizable.