US Accounting_Chapter 1

What does GAAP stand for?

• Government Accounting and Auditing Procedures

• General Accounting and Auditing Procedures

• Generally Accepted Accounting Principles

• General Auditing and Accounting Practices

What distinguishes managerial accounting from financial accounting?

• Managerial accounting provides information for external users, while financial accounting is for internal decision-making

• Financial accounting provides financial statements for external users, while managerial accounting provides information for internal decision-makers

• There is no difference between managerial and financial accounting

• Financial accounting is for internal users, while managerial accounting provides financial statements for external users

Which of the following has primary responsibility for developing and issuing rules on accounting practice?

• FASB

• IASB

• IRS

• SEC

What does the term "Conservatism Principle" in accounting imply?

• Recording potential losses when they are likely but delaying the recognition of gains until they are certain

• Applying the same accounting methods across all periods

• Recognizing expenses as soon as they are incurred

• Recording all potential gains and losses as soon as they are identified

What is the role of internal controls in accounting?

• To record all business transactions

• To promote efficiency and ensure reliable accounting

• To increase the profitability of a company

• To prepare financial statements

The separate entity concept requires that

• Transactions that involve an exchange of value be kept separate from those that do not

• The personal assets and liabilities of an owner are not shown on the business’s financial statements

• A separate set of books be established for each segment of a business

• Tax records be kept separate from financial reporting records

Which of the following equations represents the fundamental accounting equation?

• Assets = Liabilities + Equity

• Assets = Liabilities + Revenue

• Revenue = Expenses + Equity

• Liabilities = Assets + Equity

Generally accepted accounting principles

• Are accounting rules that are recognized as a general guide for financial reporting

• Are accounting rules formulated by the Internal Revenue Service

• Has eliminated all errors in accounting

• Is sound in theory but rarely used in real life

Which of the following financial statements is the statement at a point in time?

• Cash flow statement

• Statement of retained earnings

• Income Statement

• Balance Sheet

Which principle in accounting requires that financial reports include all information that is materially relevant to the company's financial stability?

• Materiality Principle

• Matching Principle

• Conservatism Principle

• Consistency Principle