ACCT 2313 D102 Financial Accounting
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Free ACCT 2313 D102 Financial Accounting Questions
Form 10-K is filed with the SEC to update the information a company supplied when filing a registration statement under the Securities Exchange Act of 1934. A large accelerated filer must submit Form 10-K within
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60 days of the end of the company's fiscal year
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45 days of the end of each quarter
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2 weeks of the end of each month
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15 days of significant events
Explanation
Explanation:
Large accelerated filers are companies with a public float of $700 million or more. The SEC requires these companies to file their Form 10-K, which is the annual report containing audited financial statements and other disclosures, within 60 days of the fiscal year-end. This accelerated deadline ensures that investors and regulators have timely access to financial information. Smaller reporting companies and non-accelerated filers are given more time, but large accelerated filers are held to the strictest timeline.
Correct Answer:
60 days of the end of the company's fiscal year
In accounting, the present obligations of an entity to transfer economic benefits are known as:
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Expenses
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Assets
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Liabilities
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Shareholders' equity
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Revenues
Explanation
Explanation:
Liabilities represent present obligations of an entity to transfer economic benefits, typically in the form of cash, goods, or services, as a result of past transactions or events. They arise from borrowing, purchasing on credit, or legal obligations such as taxes. Unlike expenses, which reduce equity through consumption of resources, liabilities are obligations that remain outstanding until settled.
Correct Answer:
Liabilities
What is the minimum number of votes required from FASB members to approve a new accounting standard?
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3 out of 7
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4 out of 7
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5 out of 7
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6 out of 7
Explanation
Explanation:
The Financial Accounting Standards Board (FASB) consists of seven members. For a new accounting standard to be approved, a supermajority is required. This means at least five out of the seven members must vote in favor for the standard to be issued. This voting requirement ensures that accounting standards have broad support among the board members, increasing their legitimacy and reducing the likelihood of overly narrow or biased standards being adopted.
Correct Answer:
5 out of 7
One of the parts in the third level of the conceptual framework, which details recognition and measurement concepts. The accounting profession generally uses four basic principles of accounting to record transactions: (1) measurement, (2) revenue recognition, (3) expense recognition, and (4) full disclosure
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Assumptions
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Accounting Standards UpdatesAccounting Standards Updates
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Principles
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Faithful representation
Explanation
Explanation:
The third level of the FASB Conceptual Framework focuses on recognition, measurement, and disclosure concepts, providing the foundation for applying accounting standards in practice. The four basic principles of accounting—measurement, revenue recognition, expense recognition, and full disclosure—fall under this level, guiding how transactions are recorded and reported. These principles provide practical rules that ensure consistency, relevance, and faithful representation of financial information.
Correct Answer:
Principles
Which of the following best describes the primary objective of financial reporting in relation to external users?
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To provide detailed operational data for internal management decisions
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To ensure compliance with tax regulations and minimize liabilities
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To deliver relevant information that aids in making informed investment and credit decisions
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To present a historical account of all transactions without regard to future implications
Explanation
Explanation:
The primary objective of financial reporting for external users is to provide information that is useful for making decisions regarding investments, lending, and other financial activities. Financial statements deliver relevant and reliable data about the financial position, performance, and cash flows of an entity, enabling external users such as investors, creditors, and regulators to assess the potential risks and returns of their engagements with the company. Internal operational data or tax compliance alone does not satisfy this objective.
Correct Answer:
To deliver relevant information that aids in making informed investment and credit decisions
Which of the following best describes an asset in financial accounting?
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A future obligation of an entity to provide services
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A present right of an entity to an economic benefit
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A liability that represents a claim against the entity's resources
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An expense incurred in the process of generating revenue
Explanation
Explanation:
In financial accounting, an asset is defined as a resource that is presently controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity. This means an asset is not a future obligation, liability, or expense, but rather something that provides value and benefit to the company, such as cash, accounts receivable, or equipment. The defining feature is the present right of the entity to access or use that resource for economic benefit.
Correct Answer:
A present right of an entity to an economic benefit
In the Fair Value hierarchy, which of the following best sums up the traits of Level 3 inputs?
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Inputs derived from observable market data and transactions
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Inputs based on management's assumptions and estimates that are not observable in the market
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Inputs that are directly quoted from active markets for identical assets or liabilities
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Inputs that are based on historical cost and verifiable data
Explanation
Explanation:
Level 3 inputs in the fair value hierarchy are unobservable and require significant judgment and estimation by management. They are used when observable market data is not available for an asset or liability. These inputs often rely on internal models, assumptions, and projections to estimate fair value, unlike Level 1 inputs (quoted prices in active markets) and Level 2 inputs (observable data for similar assets). Level 3 inputs carry higher uncertainty and require detailed disclosure.
Correct Answer:
Inputs based on management's assumptions and estimates that are not observable in the market
Which of the following is false about the FASB
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7 members
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Each member serves 5 year terms
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Can be reappointed to serve one additional year
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SEC appoints members
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Must sever any ties with outside firms and institutions
Explanation
Explanation:
The Financial Accounting Standards Board (FASB) consists of seven full-time members. Each member is appointed for a five-year term and may be reappointed for a second term. Importantly, members must sever ties with any prior employers or institutions to ensure independence. However, the false statement is that the SEC appoints members. In reality, members are appointed by the Financial Accounting Foundation (FAF), not the SEC. The SEC oversees the enforcement of standards but does not directly appoint FASB members.
Correct Answer:
SEC appoints members
One objective of financial reporting is to provide
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information about the investors in the business entity
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information about the liquidation values of the resources held by the enterprise
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information that is useful in assessing cash flow prospects.
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information that will attract new investors.
Explanation
Explanation:
A primary objective of financial reporting is to provide information that helps users, particularly investors and creditors, assess the amount, timing, and uncertainty of future cash flows. This information enables stakeholders to make informed decisions regarding investment, lending, and resource allocation. While knowing liquidation values or attracting new investors may be secondary considerations, the core purpose focuses on the decision-usefulness of financial information in evaluating future cash flow prospects.
Correct Answer:
information that is useful in assessing cash flow prospects
Why was the Private Company Council created to advise the FASB? That is, what is the concern this body was created to address?
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The concern that audit standards for private companies are beginning to diverge from audit standards for public companies due to new PCAOB issuances
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The concern that GAAP for private companies is not adequately converged with IFRS for private companies
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The concern that private companies should be able to follow the same standards as governmental entities
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The concern that GAAP is currently too complex and too costly for private companies to apply
Explanation
Explanation:
The Private Company Council (PCC) was established to provide input to the FASB on the unique needs of private companies. The key concern was that GAAP, while useful for public companies, had become too complex and burdensome for private companies, which often have fewer resources and different reporting needs. The PCC works with FASB to determine when exceptions or modifications to GAAP are appropriate for private companies, making financial reporting more relevant and cost-effective without compromising quality.
Correct Answer:
The concern that GAAP is currently too complex and too costly for private companies to apply
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