Free FAU Accounting Competency Questions and Answers

Question 1

What area of accounting is based on the needs of the users?

Accepted Answer

Managerial

Answer

Explanation:
Managerial accounting is the area of accounting that is primarily based on the needs of the users. It provides financial information and analysis to internal users, such as management, to assist in decision-making, planning, and controlling activities within the organization. While financial accounting serves external users like investors and creditors, and tax accounting deals with tax-related matters, managerial accounting is focused on meeting the needs of internal management for effective decision-making and operational control.

Question 2

What area of accounting follows rules set by the government?

Accepted Answer

Tax

Answer

Explanation:
Tax accounting is the area of accounting that follows rules set by the government. These rules include tax laws, regulations, and guidelines established by governmental authorities, such as the Internal Revenue Service (IRS). Tax accountants ensure compliance with these rules and help individuals and businesses accurately calculate and report their tax liabilities. Financial accounting also involves adherence to certain government regulations, but tax accounting specifically revolves around government-set rules related to taxation. Managerial accounting, however, focuses on internal decision-making and does not primarily deal with government regulations.

Question 3

What area of accounting prepares multi-purpose reports?

Accepted Answer

Financial

Answer

Explanation:
Financial accounting prepares multi-purpose reports. These reports, such as balance sheets, income statements, and cash flow statements, are designed to provide information to both internal and external users, including investors, creditors, regulators, and management. Financial accounting ensures transparency and accountability by presenting the financial performance and position of an organization in a standardized format, facilitating comparisons and decision-making. Managerial accounting, while also generating reports, focuses more on internal decision-making and planning rather than external communication. Tax accounting deals specifically with tax-related matters and may not always produce multi-purpose reports.

Question 4

Why does accounting exist?

Accepted Answer

Help people make decisions

Answer

Explanation:
Accounting exists primarily to help people make decisions. It provides financial information and analysis that individuals, businesses, investors, and other stakeholders use to make informed decisions about allocating resources, evaluating performance, and planning for the future. While accounting can contribute to managing businesses profitably (option A), creating job opportunities (option C), and preparing tax returns (option D), its fundamental purpose is to assist decision-making by providing accurate and relevant financial information.

Question 5

What rules are followed in preparing financial accounting reports?

Accepted Answer

Generally Accepted Accounting Principles (GAAP)

Answer

Explanation:
Financial accounting reports are prepared following Generally Accepted Accounting Principles (GAAP). GAAP is a set of standardized accounting principles, standards, and procedures that companies use to prepare and present their financial statements. These principles ensure consistency, comparability, and transparency in financial reporting, enabling users to make meaningful comparisons and decisions.

FAU - Florida Atlantic University Practice Test

FAU - Florida Atlantic University Practice Test

Free FAU Accounting Competency Questions and Answers