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ACCY 391 Chapter 1: Financial Reporting Environment and Conceptual Framework

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ACCY 391 Chapter 1: Financial Reporting Environment and Conceptual Framework

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Questions and Answers

What is the primary purpose of financial accounting?

To regulate companies traded on stock exchanges

To establish accounting standards

To make capital allocation decisions

To assess financial performance and make informed decisions (correct)

What is the term for the process of determining how and at what cost money is allocated among competing interests?

Comparability

Capital Allocation (correct)

Decision-Usefulness

Financial Reporting

Which organization has the authority to set accounting standards for companies traded on stock exchanges?

Securities and Exchange Commission (SEC) (correct)

Financial Accounting Standards Board (FASB)

Government agency

Private sector

What is the primary goal of establishing accounting standards?

To increase the decision-usefulness of accounting information Signup and view all the answers

What is the process followed by the FASB to establish GAAP?

A due process system that includes research and public hearings Signup and view all the answers

What is the final output of the FASB's standard-setting process?

An Accounting Standards Update Signup and view all the answers

What is the main purpose of the conceptual framework in financial reporting?

To provide a basis for adapting to new and emerging problems Signup and view all the answers

Which organization is responsible for setting the International Financial Reporting Standards (IFRS)?

IASB Signup and view all the answers

What is the primary objective of financial reporting?

To provide financial information to present and potential equity investors, lenders, and other creditors Signup and view all the answers

What is the characteristic of accounting information that requires it to be capable of making a difference in a decision?

Relevance Signup and view all the answers

Which of the following is NOT a qualitative characteristic of accounting information?

Auditability Signup and view all the answers

What is the purpose of the FASB Codification?

To provide all the authoritative literature related to a particular accounting topic Signup and view all the answers