Chapter 1 Financial Accounting Answers

In: Business and Management

Submitted By piggie3
Words 5033
Pages 21


IFRS questions are available at the end of this chapter.


Answer No. Description

F 1. Definition of financial accounting. T 2. Purpose of financial statements. T 3. Definition of financial accounting. T 4. Capital allocation process. F 5. Objective of financial reporting. T 6. Decision-Usefulness approach. T 7. Users of financial statements. F 8. Committee on Accounting Procedure. F 9. Passage of FASB standards. T 10. Financial Accounting Concepts. T 11. Creation of Accounting Principles Board. F 12. FASB Codification. T 13. Code of Professional Conduct. F 14. GAAP and political action. T 15. Public Company Accounting Oversight Board. T 16. Expectations gap. F 17. Financial reports. F 18. Fair value information. F 19. International Financial Reporting Standards. F 20. Ethical issues.

Multiple Choice—Conceptual

Answer No. Description

a 21. Financial accounting. d 22. Users of financial reports. d 23. Identify the major financial statements. a 24. Financial reporting entity. d 25. Differences between financial and managerial accounting. b 26. Financial reporting communication. b 27. Managerial accounting. a 28. Capital allocation process. d 29. Efficient use of resources. d 30. Capital allocation process. c 31. Financial statement information. c 32. Accounting profession challenge. c 33. Financial reporting objective. d 34. Financial statements primary users. c 35. Investor’s decision making.
Multiple Choice—Conceptual (cont.)

Answer No. Description

b 36. Accrual accounting. c 37. Objective of financial reporting perspective. c 38. Meaning of “generally accepted.” b 39. Common set of standards and procedures. a 40. Limitation of general purpose financial statements. c 41. Securities…...

Similar Documents

Financial Manegement: Answers to End-of-Chapter Questions: Chapter 1 an Overview of Corporate Finance and the Financial Environment

...Chapter 1 An Overview of Financial Management ANSWERS TO END-OF-CHAPTER QUESTIONS 1-1 a. A proprietorship, or sole proprietorship, is a business owned by one individual. A partnership exists when two or more persons associate to conduct a business. I contrast, a corporation is a legal entity n created by a state. The corporation is separate and distinct from its owners and managers. b. In a limited partnership, limited partners’ liabilities, investment returns and control are limited, while general partners have unlimited liability and control. A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines the limited liability advantage of a corporation with the tax advantages of a partnership. A professional corporation (PC), known in some states as a professional association (PA), has most of the benefits of incorporation but the participants are not relieved of professional (malpractice) liability. c. Stockholder wealth maximization is the appropriate goal for management decisions. The risk and timing associated with expected earnings per share and cash flows are considered in order to maximize the price of the firm’s common stock. d. Social responsibility is the concept that businesses should be partly responsible for, and thus bear the costs of, the welfare of society at large. Business ethics can be thought of as a company’s attitude and conduct toward its employees, customers, community, and stockholders. A firm’s commitment...

Words: 2050 - Pages: 9

Accounting Atrill Chapter 1 Answers

...Solutions Manual to accompany ACCOUNTING: an introduction Compiled by D. Harvey and M. Jenner Chapter 1 - Introduction to Accounting and Finance Suggested Solutions Discussion Questions 1.1 The AASB Framework suggests the report users need to be both competent and diligent. Therefore, it is not assumed that financial reports will be readily read and understood by the lay readers, but rather that the readers will be proficient in accounting and finance (aptitude and application). 1.2 Basically comprised of: a) Transactions – buy; sell; borrow; lend b) Transformations – convert raw materials via labour and overhead to finished goods c) Other economic events – natural disasters (flood; fire); economic events (recession; inflation); regulation (exchange rate restrictions; import restrictions; banned substances). This relates to usefully repacking the financial data: a) Classify b) Summarise c) Record Financial reports a) Statement of Comprehensive Income (Financial Performance) b) Statement of Cash Flows c) Statement of Financial Position 1.3 Planning is concerned with providing direction for future activity. Control can be defined as compelling events to conform to the plan. 1.4 The organisations’ mission represents......

Words: 5523 - Pages: 23

Chapter 2 Answers to Questions - Financial Accounting

...* Chapter 2 ANSWERS TO QUESTIONS 1. A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements. A conceptual framework is necessary in financial accounting for the following reasons: (1) It will enable the FASB to issue more useful and consistent standards in the future. (2) New issues will be more quickly solvable by reference to an existing framework of basic theory. (3) It will increase financial statement users’ understanding of and confidence in financial reporting. (4) It will enhance comparability among companies’ financial statements. 2. The primary objectives of financial reporting are as follows: (1) Provide information useful in investment and credit decisions for individuals who have a reasonable understanding of business. (2) Provide information useful in assessing future cash flows. (3) Provide information about enterprise resources, claims to these resources, and changes in them. 3. “Qualitative characteristics of accounting information” are those characteristics which contribute to the quality or value of the information. The overriding qualitative characteristic of accounting information is usefulness for decision making. 4. Relevance and reliability are the two primary qualities of useful accounting information. For informa-tion to be relevant, it should......

Words: 5662 - Pages: 23

International Accounting Chapter 1

...Chapter 1 Introduction Discussion Questions 1. In the domestic case, accounting is an information service that provides financial information about a domestic entity to domestic users of that information. International accounting is distinctive in that the entity being reported on is either a multinational company with operations and transactions that transcend national boundaries or involves an entity with reporting obligations to readers who are located outside the reporting entity’s country of domicile. 2. Advantage: Some might argue that measurement, disclosure, and external auditing are three distinct (although related) processes, involving different members of the company. For example, corporate attorneys often are involved in disclosure issues, but seldom intervene in measurement issues. The Board of Directors works with the external auditors but not necessarily with the comptroller s office. Thus, discussion of accounting requirements and voluntary accounting choices in different jurisdictions is simplified by focusing on the three components of accounting. Disadvantage: measurement, disclosure and auditing are interdependent, and should not be viewed in isolation of one another. A company choosing to disclose as little as possible, for example, may use accounting measurement approaches that reduce the information content of financial statements, and select an external auditor who will be relatively lenient in enforcing accounting requirements. One......

Words: 3929 - Pages: 16

Ais Answer Chapter 1

...chapter 1 accounting information systems: An overview Suggested Answers to Discussion Questions 1.1 The value of information is the difference between the benefits realized from using that information and the costs of producing it. Would you, or any organization, ever produce information if its expected costs exceeded its benefits? If so, provide some examples. If not, why not? Most organizations produce information only if its value exceeds its cost. However, there are two situations where information may be produced even if its cost exceeds its value. a. It is often difficult to estimate accurately the value of information and the cost of producing it. Therefore, organizations may produce information that they expect will produce benefits in excess of its costs, only to be disappointed after the fact. b. Production of the information may be mandated by either a government agency or a private organization. Examples include the tax reports required by the IRS and disclosure requirements for financial reporting. 1.2 Can the characteristics of useful information listed in Table 1-1 be met simultaneously? Or does achieving one mean sacrificing another? Several of the criteria in Table 1.1 can be met simultaneously. For example, more timely information is also likely to be more relevant. Verifiable information is likely to be more reliable. However, achieving one objective may require sacrificing another. For example,......

Words: 6172 - Pages: 25

Management Accounting Chapter 1

...CHAPTER 1 FUNDAMENTAL CONCEPTS Questions, Exercises, Problems, and Cases: Answers and Solutions 1.1 The first question at the end of each chapter requires the student to review the important concepts or terms discussed in the chapter. In addition to the definitions or descriptions in the chapter, the end of the book has a glossary. 1.2 Titles could be Controller, Vice-President of Finance, or Chief Financial Officer. 1.3 The two major uses of managerial accounting information are (1) information for managerial decision making (for example, make-or-buy decisions, store closure decisions, capital investment decisions), and (2) information for managerial control and performance evaluation (for example, budgeting, comparing actual performance with norms or standards). The first use, which is the focus of Part II of this book, usually requires special purpose reports that estimate how revenues, costs, and investments will differ among the alternatives being considered. The second use, which is the focus of Part III of this book, usually involves routine monthly, quarterly, and annual performance reports. Information for planning requires estimates of future costs, revenues, and other data, while information for performance evaluation is generally based on data about the past. 1.4 Total Quality Management (TQM) means the organization is managed to excel on all dimensions and quality is ultimately defined by the customer. Under total quality management,......

Words: 3147 - Pages: 13

Solutions to Chapter 1 - Financial Accounting

... CHAPTER 1 THE NATURE AND PURPOSE OF ACCOUNTING Problems Problem 1-1 |CHARLES COMPANY | |BALANCE SHEET AS OF DECEMBER 31, ----. | |Assets | |Liabilities and Owners’ Equity | |Cash |$ 12,000 | |Bank loan |$ 40,000 | |Inventory |95,000 | |Owners’ Equity | | |Other assets |13,000 | |Owners’ equity |80,000 | | | | |Total liabilities and owners’ equity | | |Total assets |$120,000 | | |$120,000 | This problem can be used to explain certain accounting presentation conventions. For example, the use of double lines to underscore a total, the position of the dollar sign at the top of a column of numbers, and the dating of the balance sheet. The purpose of this problem is to illustrate the equality of the basic accounting equation: assets equal liabilities plus owners’ equity. Problem 1-2 The missing numbers are: Year 1 |Noncurrent assets ...

Words: 1188 - Pages: 5

Government Accounting Chapter 1

...Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman) Chapter 1 Governmental and Nonprofit Accounting—Environment and Characteristics 1. Which of the following would not be considered a government or nonprofit organization? A. A software company that sells software exclusively to state and local governments. B. A public elementary school. C. A church. D. A private trust organized for charitable purposes. (Answer: A; Easy; LO1) 2. Which of the following activities would most likely be accounted for as a business-type activity? A. Fire protection. B. Recreation. C. Water operations. D. Street maintenance. (Answer: C; Moderate; LO1) 3. Prior to the creation of the Governmental Accounting Standards Board in 1984, which of the following organizations had the greatest influence over accounting concepts, principles, and standards for the state and local governments? A. The National Council on Governmental Accounting (NCGA) B. The National Association of College and University Business Officers (NACUBO). C. The American Institute of Certified Public Accountants (AICPA). D. The Comptroller General of the United States. (Answer: A; Moderate; LO1) 4. Which of the following is considered a health and welfare organization? A. Secondary schools. B. Young Men’s Christian Association (YMCA). C. Child protection agencies. D. United Way. (Answer: C; Easy; LO2) 5. Which of......

Words: 1569 - Pages: 7

Financial Accounting Chapter 1 Solution

...CHAPTER 1 Accounting in Action ASSIGNMENT CLASSIFICATION TABLE Brief Exercises A Problems B Problems Study Objectives 1. Explain what accounting is. Identify the users and uses of accounting. Understand why ethics is a fundamental business concept. Explain accounting standards and the measurement principles. Explain the monetary unit assumption and the economic entity assumption. State the accounting equation, and define its components. Analyze the effects of business transactions on the accounting equation. Understand the four financial statements and how they are prepared. Questions 1, 2, 5 Do It! 1, 2, 4 Exercises 1 2. 3, 4 1 2 3. 3 4. 6, 7 1 4 5. 8, 9, 10, 11 4 6. 12, 13, 14 1, 2, 3, 4, 5 2 5, 6, 7, 11 1A, 2A, 4A 1B, 2B, 4B 7. 15, 16, 17, 19 6, 7, 8, 9 3 6, 7, 8, 11 1A, 2A, 4A, 5A 1B, 2B, 4B, 5B 8. 18, 20, 21 22, 23 10, 11 4 9, 10, 12, 13, 14, 15, 16, 17 2A, 3A, 4A, 5A 2B, 3B, 4B, 5B Copyright © 2011 John Wiley & Sons, Inc. Weygandt, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 1-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number 1A 2A Difficulty Level Moderate Moderate Time Allotted (min.) 40–50 50–60 Description Analyze transactions and compute net income. Analyze transactions and prepare income statement, retained earnings statement, and statement of financial position. Prepare income statement, retained earnings statement,......

Words: 9549 - Pages: 39

Intermediate Financial Accounting Chapter 1 Solution

...Chapter 1 Environment and Theoretical Structure of Financial Accounting AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may approach assessment and its documentation differently, one approach is to provide specific questions on exams that become the basis for assessment. To aid faculty in this endeavor, we have labeled each question, exercise and problem in Intermediate Accounting, 7e with the following AACSB learning skills: Questions 1–1 1–2 1–3 1–4 1–5 1–6 1–7 1–8 1–9 1–10 1–11 1–12 1–13 1–14 1–15 1–16 1–17 1–18 1–19 1–20 1–21 1–22 1–23 1–24 1–25 1–26 1–27 1–28 1–29 AACSB Tags Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking 1–30 1–31 1–32 Reflective thinking Reflective thinking Reflective thinking Brief Exercises 1–1 1–2 1–3 1–4 1–5 1–6 AACSB Tags Analytic Reflective thinking Reflective thinking Reflective......

Words: 7572 - Pages: 31

Audit Chapter 1 Answers

...CHAPTER 1 The Role of the Public Accountant in the American Economy Review Questions 1–1 The “crisis of credibility” largely arose from the number of companies that restated their previously issued financial statements as a result of accounting irregularities and fraud. Especially responsible were the very visible Enron and WorldCom fraud cases. Both companies filed for bankruptcy and constituted the largest companies in American history to do so. The extent of the accounting irregularities and fraud being investigated and disclosed brought into question the effectiveness of financial statement audits. In addition, the criminal conviction of Arthur Andersen, LLP, one of the then Big 5 accounting firms, on charges of destroying documents related to the Enron case brought into question the ethical standards of the profession. 1–2 Assurance services are professional services that enhance the quality of information, or its context, for decision making. The two types are: (a) those that increase the reliability of information and (b) those that involve putting information in a form or context that facilitates decision making. 1–3 A financial statement audit is, by far, the most common type of attest engagement. The overall assertion, made by management, most frequently is that the financial statements follow generally accepted accounting principles. 1–4 A large corporation with securities listed on a stock exchange is required by the rules of the......

Words: 5310 - Pages: 22

Advanced Accounting Chapter 1

...Chapter 1 the equity method of accounting for investments Chapter Outline I. Three methods are principally used to account for an investment in equity securities along with a fair value option. A. Fair value method: applied by an investor when only a small percentage of a company’s voting stock is held. 1. Income is recognized when the investee declares a dividend. 2. Portfolios are reported at fair value. If fair values are unavailable, investment is reported at cost. B. Consolidation: when one firm controls another (e.g., when a parent has a majority interest in the voting stock of a subsidiary or control through variable interests, their financial statements are consolidated and reported for the combined entity. C. Equity method: applied when the investor has the ability to exercise significant influence over operating and financial policies of the investee. 1. Ability to significantly influence investee is indicated by several factors including representation on the board of directors, participation in policy-making, etc. 2. GAAP guidelines presume the equity method is applicable if 20 to 50 percent of the outstanding voting stock of the investee is held by the investor. Current financial reporting standards allow firms to elect to use fair value for any new investment in equity shares including those where the equity method would otherwise apply. However, the option, once taken, is irrevocable. Investee......

Words: 11637 - Pages: 47

Financial Accounting Chapters 1 and 2 Complete Outline

...(1) Uses of Accounting Information and the Financial Statements a. Accounting as an Information System i. Accounting is an information system that measures, processes, and communicates financial information about an economic entity. Accountants focus on the needs of decision makers. ii. External decision makers use financial accounting reports to evaluate how well a business has achieved its goals. These reports are called financial statements. iii. The primary external users of accounting information are investors and creditors. Users with indirect financial interests include, among others, tax authorities (IRS) and regulatory agencies (SEC). b. The Corporate Form of Business i. There are three basic forms of business: 1. Sole Proprietorship: One person is the owner, takes all the profits or losses of the business, and is liable for all of its obligations. 2. Partnership: Two or more owners (“partners”) share the profits and losses of the business according to a prearranged formula. Legally, there is no economic separation between the owners and the business. This unlimited liability of its partners is a key disadvantage of a partnership. 3. Corporation: A business unit chartered by the state that is legally separate from its owners (“stockholders”). Stockholders enjoy limited liability. 4. Limited Liability Company (MM addition): c. The Financial Statements and their Elements i. Income Statement 1. Many people consider the income statement (aka the......

Words: 1535 - Pages: 7

Cost Accounting Chapter 1

...CHAPTER 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment ANSWERS TO REVIEW QUESTIONS 1-1 The explosion in e-commerce will affect managerial accounting in significant ways. One effect will be a drastic reduction in paper work. Millions of transactions between businesses will be conducted electronically with no hard-copy documentation. Along with this method of communicating for business transactions comes the very significant issue of information security. Businesses need to find ways to protect confidential information in their own computers, while at the same time sharing the information necessary to complete transactions. Another effect of e-commerce is the dramatically increased speed with which business transactions can be conducted. In addition to these business-to-business transactional issues, there will be dramatic changes in the way managerial accounting procedures are carried out, one example being e-budgeting, which is the enterprise-wide and electronic completion of a company’s budgeting process. 2. Plausible goals for the organizations listed are as follows: (a) (1) To achieve and maintain profitability, and (2) to grow on-line sales of books, music, and other goods. (b) American Red Cross: (1) To raise funds from the general public sufficient to have resources available to meet any disaster that may occur, and (2) to provide assistance to people who are victims of a......

Words: 4230 - Pages: 17

Answer to Financial Accounting Theory

...CHAPTER 2 SUGGESTED SOLUTIONS TO QUESTIONS AND PROBLEMS 1. P.V. Ltd. Income Statement for Year 2 Accretion of discount (10% × 286.36) $28.64 P.V. Ltd. Balance Sheet As at Time 2 Financial Asset Cash $315.00 Shareholders’ Equity Opening balance Net income Capital Asset Present value 0.00 $315.00 $315.00 $286.36 28.64 Note that cash includes interest at 10% on opening cash balance of $150. 2. Suppose that P.V. Ltd. paid a dividend of $10 at the end of year 1 (any portion of year 1 net income would do). Then, its year 2 opening net assets are $276.36, and net income would be: Copyright © 2009 Pearson Education Canada 8 P.V. Ltd. Income Statement For Year 2 Accretion of discount (10% × 276.36) $27.64 P.V.’s balance sheet at time 2 would be: P.V. Ltd. Balance Sheet As at Time 2 Financial Asset Cash: (140 + 14 + 150) $304.00 Shareholders’ Equity Opening balance: $276.36 (286.36 - 10.00 dividend) Capital Asset, at Present value 0.00 $304.00 $304.00 Net income 27.64 Thus, at time 2 the shareholders have: Cash from dividend Interest at 10% on cash dividend, for year 2 Value of firm per balance sheet $10.00 1.00 304.00 $315.00 This is the same value as that of the firm at time 2, assuming P.V. Ltd. paid no dividends (see Question 1). Consequently, the firm’s dividend policy does not matter to the shareholders under ideal conditions. It may be worth noting that a Copyright © 2009 Pearson Education Canada 9 crucial requirement here, following......

Words: 9627 - Pages: 39

Search Party | Dream League APK | LCD Writing Tablet Electronic Writing & Drawing Board 5 Inches