Intermediate Accounting Volume 1, 13th Canadian Edition by Donald E. Kieso Test bank

AACSB: Analytic
 
 
49. Which of the following is an argument in favour of a GAAP body of knowledge that is more prescriptive, or rules-based?
a) It always emphasizes communicating the best information for users.
b) The body of knowledge becomes significantly smaller and therefore easier to manage.
c) It may be easier to defend how to account for a particular item.
d) There is a tendency for companies to interpret guidelines loosely, and thus account for items inconsistently.
 
Answer: c
 
Difficulty: Easy
Learning Objective: Discuss some of the challenges and opportunities for accounting.
Section Reference: Challenges and Opportunities for the Accounting Profession
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
50. The collection of processes, roles, policies, standards and metrics that ensure effective and efficient use of information in enabling an organization to achieve its goals is referred to as
a) digitization.
b) data governance.
c) artificial intelligence.
d) machine learning.
 
Answer: b
 
Difficulty: Easy
Learning Objective: Discuss some of the challenges and opportunities for accounting.
Section Reference: Challenges and Opportunities for the Accounting Profession
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
51. Sustainability reporting requires or encompasses a broader stakeholder perspective. Examples of societal issues, as outlined within the text, that are closely related to a company’s ability to create value, include all of the following EXCEPT for:
a) land use and ecosystems.
b) indigenous rights.
c) health and safety.
d) bribery and corruption.
 
Answer: a
 
Difficulty: Easy
Learning Objective: Discuss some of the challenges and opportunities for accounting.
Section Reference: Challenges and Opportunities for the Accounting Profession
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic

 
EXERCISES
 
 
Ex. 1-52
Explain why an efficient use of resources is important. What role does accounting have in efficient resource allocation? Describe how this is also facilitated through an effective capital allocation process.
 

Solution 1-52

Resources are limited. As a result of this, individuals try to use these resources efficiently and in doing so the overall standard of living is increased. Increased standards of living require businesses to be successful. Therefore, accounting plays a role in ensuring that company performance is measured fairly, accurately and on a timely basis. The information must also enable investors and credits to compare company performance in order to assess the relative risks and returns of different investment opportunities. An effective capital resource allocation process encourages innovation, promotes productivity, and provides a platform for buying and selling securities and obtaining and granting credit.
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Communication
CPA: Management Accounting
Bloomcode: Knowledge
AACSB: Communication
 
 
Ex. 1-53 Financial statements in practice and theory
What is the purpose of financial statements? What are the four most frequently provided financial statements? Beside the statements themselves, what other information is required to make the statements meaningful?
 
Solution 1-53
The financial statements are the principal way for communicating financial information to external stakeholders. The statements provide the company’s history. The most frequently used statements include:
1.     Statement of financial position/Balance sheet
2.     Statement of income/comprehensive income/Income statement/ Profit and loss statement
3.     Statement of cash flows/ Cash flow statement
4.     Statement of changes in equity/ Statement of retained earnings
 
Note disclosures are also an important part of each set of statements. Some financial information cannot be expressed in the statements and is best expressed through other means such as corporate annual reports, prospectuses, news releases, management forecasts, sustainability reports and so forth.
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Communication
CPA: Financial Reporting