Theory of Accounts 1-2

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1. Generally accepted accounting principles

a. are accounting adaptations based on the laws of economic science
b. derive their credibility and authority from legal rulings and court precedents
c. derive their credibility and authority from the national government through the SEC
d. derive their credibility and authority from general recognition and acceptance by the accountancy profession

2. Which of the following statements best describes generally accepted accounting principles?

a. they have been formulated in the public sector
b. they have been developed on the basis of such factors as usage and practical necessity
c. they are the same as laws within our legal system
d. they do not apply to small entities

3. Proper application of accounting principles is most dependent upon the

a. existence of specific guidelines
b. oversight of regulatory bodies
c. external audit function
d. professional judgment of the accountant

4. The process of establishing financial accounting standards

a. is a democratic process in that a majority of practicing accountants must agree with a standard before it becomes implemented
b. is a legislative process based on rules promulgated by government agencies
c. is based solely on economic analysis of the effects each standard will have if it is implemented
d. is a social process which incorporates political actions of various interested user groups as well as professional research and logic

5. Once an accounting standard has been established

a. the standard is continually reviewed to see if modification is necessary
b. the standard is not reviewed unless the SEC makes a complaint
c. the task of reviewing the standard to see if modification is necessary is given to the PICPA
D. the principle of consistency requires that no revisions ever be made to the standard

6. As independent or external auditors, CPAs are primarily responsible form

a. preparing financial statements in conformity with GAAP
b. certifying the accuracy of financial statements
c. expressing an opinion as to the fairness of financial statements
d. filing financial statements with the SEC

7. The singularly unique function performed by Certified Public Accountant is

a. tax preparation
b. management advisory services
c. the attest function
d. the preparation of financial statements

8. The purpose of the International Financial Reporting Standards is to

a. Issue enforceable standards which regulate the financial accounting and reporting of multinational entities
b. develop a uniform currency in which the financial transactions of entities  throughout the world would be measured
c. promote uniform accounting standards among countries of the world
d. arbitrate accounting disputes between auditors and international entities

9. The International Accounting Standards Board was formed to

a. enforce IFRS in foreign countries
b. develop worldwide accounting standards
c. establish accounting standards for multinational entities
d. develop accounting standards for countries that do not have their own standard-setting bodies

10. It is a global phenomenon intended to bring about transparency and a higher degree of comparability in financial reporting, both of which will benefit the investors and are essential to achieve the goal of one uniform and globally accepted financial reporting standards

a. IFRS
b. Borderless accounting
c. world trade
d. information technology


Answers:
1. d
2. b
3. d
4. d
5. a
6. c
7. c
8. c
9. b
10. a

Questions are lifted from the following sources: PHILCPA,AICPA,IAA,ACP,PAS,PFRS,IAS,IFRS

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