Financial Statements and Accounting Principles
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Questions and Answers

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

  • The user's goal (correct)
  • The company's profitability
  • The company's size
  • The company's industry

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

  • Securities and Exchange Commission (SEC) guidelines (correct)
  • International Financial Reporting Standards (IFRS)
  • Financial Accounting Standards Board (FASB)
  • Internal Revenue Service (IRS) regulations

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

  • Eventually (correct)
  • Within the next 5 years
  • Never
  • Within the next 2 years

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

    <p>Proprietorships</p> Signup and view all the answers

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

    <p><strong>Rules of a game</strong></p> Signup and view all the answers

    What must the accounting equation always equal?

    <p>$Assets = Liabilities + Equity$</p> Signup and view all the answers

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

    <p>Financial Accounting</p> Signup and view all the answers

    What is the purpose of the accounting equation?

    <p>To represent the relationship between assets, liabilities, and equity</p> Signup and view all the answers

    Who are considered users of financial information?

    <p>Investors and creditors</p> Signup and view all the answers

    Which organization governs the accounting profession?

    <p>IASB - International Accounting Standards Board</p> Signup and view all the answers

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

    <p>Sole Proprietorship</p> Signup and view all the answers

    What is the primary function of financial statements?

    <p>To evaluate business performance</p> Signup and view all the answers

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

    <p>To provide useful information for investment and lending decisions</p> Signup and view all the answers

    Which of the following is considered an asset?

    <p>Merchandise inventory</p> Signup and view all the answers

    What is the significance of equity in accounting?

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

    Which of the following is NOT an example of equity?

    <p>Mortgages</p> Signup and view all the answers

    In accounting, what do liabilities primarily represent?

    <p>Debts payable to outsiders</p> Signup and view all the answers

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

    <p>Assets</p> Signup and view all the answers

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