| Q 1-1 | What is the function and primary focus of financial accounting? |
| Q 1-2 | What is meant by the phrase efficient allocation of resources? What mechanism fosters the efficient allocation of resources in the United States? |
| Q 1-3 | Identify two important variables to be considered when making an investment decision. |
| Q 1-4 | What must a company do in the long run to be able to provide a return to investors and creditors? |
| Q 1-5 | What is the primary objective of financial accounting? |
| Q 1-6 | Define net operating cash flows. Briefly explain why periodic net operating cash flows may not be a good indicator of future operating cash flows. |
| Q 1-7 | What is meant by GAAP? Why should all companies follow GAAP in reporting to external users? |
| Q 1-8 | Explain the roles of the SEC and the FASB in the setting of accounting standards. |
| Q 1-9 | Explain the role of the auditor in the financial reporting process. |
| Q 1-10 | List three key provisions of the Sarbanes-Oxley Act of 2002. Order your list from most important to least important in terms of the likely long-term impact on the accounting profession and financial reporting. |
| Q 1-11 | Explain what is meant by adverse economic consequences of new or changed accounting standards. |
| Q 1-12 | Why does the FASB undertake a series of elaborate information-gathering steps before issuing a substantive accounting standard? |
| Q 1-13 | What is the purpose of the FASB’s conceptual framework project? |
| Q 1-14 | Discuss the terms relevance and reliability as they relate to financial accounting information. |
| Q 1-15 | What are the components of relevant information? What are the components of reliable information? |
| Q 1-16 | Explain what is meant by: The benefits of accounting information must exceed the costs. |
| Q 1-17 | What is meant by the term materiality in financial reporting? |
| Q 1-18 | Briefly define the financial accounting elements: (1) assets, (2) liabilities, (3) equity, (4) investments by owners, (5) distributions to owners, (6) revenues, (7) expenses, (8) gains, (9) losses, and (10) comprehensive income. |
| Q 1-19 | What are the four basic assumptions underlying GAAP? |
| Q 1-20 | What is the going concern assumption? |
| Q 1-21 | Explain the periodicity assumption. |
| Q 1-22 | What are the four key broad accounting principles that guide accounting practice? |
| Q 1-23 | What are two important reasons to base the valuation of assets and liabilities on their historical cost? |
| Q 1-24 | Describe the two criteria that must be satisfied before revenue can be recognized. |
| Q 1-25 | What are the four different approaches to implementing the matching principle? Give an example of an expense that is recognized under each approach. |
| Q 1-26 | In addition to the financial statement elements arrayed in the basic financial statements, what are some other ways to disclose financial information to external users? |
