T 1.

The two groups identified as the principal users of external financial information are
investors and creditors.
T 2.External financial information is generally more highly summarized than the
information reported internally.
T 3.The auditors report that accompanies the financial statements is based on evidence
gathered by the auditor from the detailed records and documents maintained by the
company and from a review of the controls over the accounting system.
F 4.The Securities and Exchange Commission recommends, but does not require, that all
nationally registered companies have an annual independent audit as protection for the
shareholders.
F 5.The standard three-paragraph auditors report deemphasizes the separate
responsibilities of management and the auditors for the accounting system and the
information in the financial statements.
F 6.The Financial Accounting Standards Board is an independent organization consisting
of seven part-time board members who are permitted to retain limited connections with
their firms or institutions after assuming membership on the Board.
T 7.Following the research of a major project by a task force, the FASB issues a
Discussion Memorandum that identifies the principal issues involved.
T 8.The primary responsibilities of the Emerging Issues Task Force are to identify new
accounting issues for which no authoritative statements exist and to discuss alternative
approaches to the issues and arrive at a consensus statement that provides guidance until
such time as they may be addressed by the FASB.
T 9.Congress gave the Securities and Exchange Commission the power to establish
accounting principles.
F 10.Generally accepted accounting principles have, in most cases, eliminated the need
for accountants to exercise professional judgment in interpreting and applying accounting
standards.

T 1.GAAP includes standards and interpretations issued by the FASB and those
pronouncements issued by previous standard-setting bodies that have not been suspended
or superseded.
T 2.One major purpose of the conceptual framework is to provide broad definitions of the
objectives, terms, and concepts involved in the practice of accounting.
T 3.The overriding quality or characteristic of accounting information is decision
usefulness.
F 4.Conservatism means that when accountants have genuine doubt concerning which of
two or more reporting alternatives to select, the alternative with the most favorable
impact on owners equity should be chosen.
F 5.Current general-purpose financial statements would seem to satisfy all there
commendations of Statement of Financial Accounting Concepts No. 5.
T 6.According to the conceptual framework of the FASB, the qualities that distinguish
more useful information from less useful information are primarily the qualities of
relevance and reliability.
T 7.The overall objective of financial reporting is to provide information that is useful for

decision making by present and potential creditors and investors.

F 8.In an attempt to clarify current reporting standards, the FASB has established specific
guidelines for materiality.
F 9.Consistency is synonymous with comparability in financial reporting.
T 10.Comprehensive income is a concept specifically defined in Statement of Financial
Accounting Concepts Statement No. 5 as including all changes in owners equity except
investments by and distributions to owners.

A.Statements of Financial Accounting Concepts

B.Comprehensive income
C. American Accounting Association(AAA)
D.Arm's-length transaction
E. Accounting and Research Bulletins
F.Financial Accounting Standards Board(FASB)
G.Representational faithfulness
H.Financial accounting
I.Net realizable value
J.Governmental Accounting Standards Board (GASB)
K.Materiality
L.Management accounting
M.Financial Accounting Foundation
N.Timeliness
O.Generally accepted accounting principles(GAAP)
P. Accounting Principles Board (APB)
Q.Securities and Exchange Commission(SEC)
__M__ 1.An organization responsible for selecting members and funding the activities of
the FASB, GASB, and their Advisory Councils.
__L__2.The activity associated with financial reporting for internal users.
__O__3.Accounting standards recognized by the profession as required in the preparation
of financial statements for external users.
__H__4.The activity associated with the development and communication of financial
information for external users, primarily in the form of general purpose financial
statements.
__F__5.An independent private organization consisting of seven full-time members with
the responsibility of studying accounting issues and establishing accounting standards to
govern financial reporting to external users.
__C__6.An organization for accounting academicians.
__Q__7.An agency of the federal government.
__P__8.A board of the AICPA that issued Opinions establishing accounting standards
during the period 1959-1973.
__D__9.Transactions occurring between independent parties, each of which is capable of
protecting its own interests.
__B__10.It includes all changes in equity during a period except those resulting from

investments by owners and distributions to owners.

__K__11.Involves the relative size and importance of an item to the business. __
__G__12.Agreement between the information being reported and the actual results of
economic activity being measured.
__N__ 13.The availability of information when it is needed by the users of financial
statements.
___J_14.An independent private organization responsible for establishing standards in
the governmental area.
__A__ 15.A set of guidelines established by the FASB to provide a framework for
establishing and applying accounting standards.