Accounting Principles Quiz

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9 Questions

What is the default accounting standard used by companies based in the United States?

Generally Accepted Accounting Principles (GAAP)

What is the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities?

Accounting Standards Codification (ASC)

What represents practices followed by the staff in administering SEC disclosure requirements?

Staff Accounting Bulletins

What are the four basic assumptions of GAAP?

Economic entity, going concern, monetary unit, and periodicity

Under what circumstances must a member of the AICPA depart from GAAP?

If following GAAP would lead to a material misstatement on the financial statements, or otherwise be misleading

What did the FASB create in 1984 to assist in improving financial reporting?

The Emerging Issues Task Force (EITF)

What did the FASB issue in 2008 that reorganized the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics?

The Accounting Standards Codification (ASC)

What other organizations are involved in determining United States accounting standards besides the FASB and SEC?

The American Accounting Association, Institute of Management Accountants, and Financial Executives Institute

What is the IASB-FASB convergence project?

A project to reduce or eliminate the differences between U.S. GAAP and the International Financial Reporting Standards (IFRS)

Study Notes

Accounting Principles and Rules Used in the United States:

  • Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC) and is the default accounting standard used by companies based in the United States.
  • The Financial Accounting Standards Board (FASB) publishes and maintains the Accounting Standards Codification (ASC), which is the single source of authoritative nongovernmental U.S. GAAP.
  • The FASB Accounting Standards Codification is the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities.
  • In addition to the SEC's rules and interpretive releases, the SEC staff issues Staff Accounting Bulletins that represent practices followed by the staff in administering SEC disclosure requirements.
  • To achieve basic objectives and implement fundamental qualities, GAAP has four basic assumptions, four basic principles, and four basic constraints.
  • Under the AICPA's Code of Professional Ethics under Rule 203 – Accounting Principles, a member must depart from GAAP if following it would lead to a material misstatement on the financial statements, or otherwise be misleading.
  • The FASB replaced the Accounting Principles Board (APB) in 1973 under the supervision of the Financial Accounting Foundation.
  • The FASB created the Emerging Issues Task Force (EITF) in 1984 to assist in improving financial reporting.
  • In 2008, the FASB issued the FASB Accounting Standards Codification, which reorganized the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics.
  • Other organizations involved in determining United States accounting standards include the American Accounting Association, Institute of Management Accountants, and Financial Executives Institute.
  • The FASB began working with the International Accounting Standards Board (IASB) in 2006 to reduce or eliminate the differences between U.S. GAAP and the International Financial Reporting Standards (IFRS), known as the IASB-FASB convergence project.
  • As of 2022, the convergence project is coming to an end and no new projects will be added to the agenda.

Test your knowledge of accounting principles and rules used in the United States with this informative quiz. From the Generally Accepted Accounting Principles (GAAP) to the Financial Accounting Standards Board (FASB) Accounting Standards Codification, this quiz covers the basics of U.S. GAAP and the organizations involved in determining accounting standards. Challenge yourself to see how much you know about the principles, assumptions, and constraints that guide financial reporting in the U.S.

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