Financial Statements and Accounting Principles

What determines which pieces of the financial statements a user finds most useful?

The user's goal

Which standard must a publicly traded U.S. company follow in addition to GAAP?

Securities and Exchange Commission (SEC) guidelines

When is it expected that all public U.S. companies will report using IFRS rules?

Eventually

What type of business organization has the advantage of reduced regulation and lower taxes compared to corporations?

Proprietorships Signup and view all the answers

What are the underlying rules used when recording financial information for a business similar to?

Rules of a game Signup and view all the answers

What must the accounting equation always equal?

$Assets = Liabilities + Equity$ Signup and view all the answers

Which type of accounting provides information for external decision-makers?

Financial Accounting Signup and view all the answers

What is the purpose of the accounting equation?

To represent the relationship between assets, liabilities, and equity Signup and view all the answers

Who are considered users of financial information?

Investors and creditors Signup and view all the answers

Which organization governs the accounting profession?

IASB - International Accounting Standards Board Signup and view all the answers

Which type of business organization is characterized by a single owner who has unlimited liability?

Sole Proprietorship Signup and view all the answers

What is the primary function of financial statements?

To evaluate business performance Signup and view all the answers

What are the main goals of Generally Accepted Accounting Principles (GAAP)?

To provide useful information for investment and lending decisions Signup and view all the answers

Which of the following is considered an asset?

Merchandise inventory Signup and view all the answers

What is the significance of equity in accounting?

It signifies the owner's rights or claims to the property of the business Signup and view all the answers

Which of the following is NOT an example of equity?

Mortgages Signup and view all the answers

In accounting, what do liabilities primarily represent?

Debts payable to outsiders Signup and view all the answers

Which term best describes economic resources that benefit a business in the future?

Assets Signup and view all the answers