Solution Manual For Financial Statement Analysis,
13th Edition
By Charles H. Gibson, Verified Chapter's 1 - 13 | Complete
, Chaptery1y Introductio
nytoyFinancialyReporting
QUESTIONS
1- 1. a.
TheyAICPAyisyanyorganizationyofyCPAsythatypriorytoy1973yacceptedytheyp
rimaryyresponsibilityyforytheydevelopmentyofygenerallyyacceptedyaccountin
gyprinciples.yTheiryroleywasysubstantiallyyreducedyiny1973ywhenytheyFinan
cialyAccountingyStandardsyBoardywasyestablished.y Theiryroleywasyfurthery
reducedywithytheyestablishmentyofytheyPublicyCompanyyAccountingyOvers
ightyBoardywasyestablishedyiny2002.
b. TheyFinancialyAccountingyStandardsyBoardyreplacedytheyAccountingy
PrinciplesyBoardyasytheyprimaryyrule-
makingybodyyforyaccountingystandards.yItyisyanyindependentyorganiza
tionyandyincludesymembersyotherythanypublicyaccountants.
c. TheySECyhasytheyauthorityytoydetermineygenerallyyacceptedyaccountingy
principlesyandytoyregulateytheyaccountingyprofession.yTheySECyhasyelec
tedytoyleaveymuchyofytheydeterminationyofygenerallyyacceptedyaccountin
gyprinciplesytoytheyprivateysector.y TheyFinancialyAccountingyStandardsy
Boardyhasyplayedytheymajoryroleyinyestablishingyaccountingystandardsysi
ncey1973.y Regulationyofytheyaccountingyprofessionywasysubstantiallyytur
nedyoverytoytheyPublicyCompanyyAccountingyOversightyBoardyiny2002.
1-y7.
Withytheytimeyperiodyassumption,yinaccuraciesyofyaccountingyforytheyentity,ysho
rtyofyitsycompleteylifeyspan,yareyaccepted.yTheyassumptionyisymadeythatytheyentit
yycanybeyaccountedyforyreasonablyyaccuratelyyforyayparticularyperiodyofytime.y In
yotherywords,ytheydecisionyisymadeytoyacceptysomeyinaccuracyybecauseyofyinco
mpleteyinformationyaboutytheyfutureyinyexchangeyforymoreytimelyyreporting.y The
ystatementsyareyconsideredytoybeymeaningfulybecauseymaterialyinaccuraciesyar
eynotyacceptable.
1- 8.y y Ityisytrueythatytheyonlyyaccurateywayytoyaccountyforytheysuccessyoryfailureyofyanyen
tityyisytoyaccumulateyallytransactionsyfromytheyopeningyofybusinessyuntilytheybu
sinessyeventuallyyliquidates.y Butyityisynotynecessaryythatytheystatementsybeyco
mpletelyyaccurateyinyorderyforythemytoybeymeaningful.
1- 9. a. Ayyearythatyendsywhenyoperationsyareyatyaylowyebbyforytheyyear.
b. TheyaccountingytimeyperiodyisyendedyonyDecembery31.
c. Aytwelve-
monthyaccountingyperiodythatyendsyatytheyendyofyaymonthyotherythanyDec
embery31.
1-10. Money.
1-
11.y y Whenymoneyydoesynotyholdyaystableyvalue,ytheyfinancialystatementsycan
yloseymuchyofytheirysignificance.y Toytheyextentythatymoneyydoesynotyremainyst
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