Question 1

Generally accepted accounting principles

Accepted Answer

derive their credibility and authority from general recognition and acceptance by the accounting profession.

Question 2

A soundly developed conceptual framework of concepts and objectives should  A) increase financial statement users\' understanding of and confidence in financial reporting.  B) enhance comparability among companies\' financial statements.  C) allow new and emerging practical problems to be more quickly solved.  D) all of these answer choices are correct.

Accepted Answer

all of these answers are correct

Question 3

What is a purpose of having a conceptual framework?

Accepted Answer

To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

Question 4

Which of the following is not a benefit associated with the FASB Conceptual Framework Project?  A) Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.   B) Practical problems should be more quickly solvable by reference to an existing conceptual framework.  C) A coherent set of accounting standards and rules should result.  D)A conceptual framework should increase financial statement users\' understanding of and confidence in financial reporting.

Accepted Answer

Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.

Question 5

The underlying theme of the conceptual framework is

Accepted Answer

decision usefulness.

Question 6

The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except  A) potential equity investors. B) potential lenders. C) present investors. D) all of these answers are correct.

Accepted Answer

all of these answers are correct.

Question 7

The objective of general-purpose financial reporting is?

Accepted Answer

to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers

Question 8

Which of the following is a characteristic describing the fundamental quality of relevance?

Accepted Answer

Predictive value.

Question 9

Which of the following is a fundamental quality of useful accounting information?

Accepted Answer

Faithful representation

Question 10

What is meant by comparability when discussing financial accounting information?

Accepted Answer

Information is measured and reported in a similar fashion across companies.

Question 11

What is meant by consistency when discussing financial accounting information?

Accepted Answer

Information presented by a company applies the same accounting treatment to similar events, from period to period.

Question 12

Which of the following is an ingredient of relevance?

Accepted Answer

Materiality

Question 13

Which of the following is an ingredient of faithful representation?

Accepted Answer

Neutrality

Question 14

A company issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?

Accepted Answer

Timeliness

Question 15

What is the quality of information that is capable of making a difference in a decision?

Accepted Answer

Relevance

Question 16

The two fundamental qualities that make accounting information useful for decision making are

Accepted Answer

relevance and faithful representation.

Question 17

Accounting information is considered to be relevant when it

Accepted Answer

is capable of making a difference in a decision.

Question 18

Which of the following does not relate to relevance?  A) Materiality. B) Predictive value. C) Confirmatory value. D) All of these answer choices relate to relevance

Accepted Answer

All of these answer choices relate to relevance

Question 19

Neutrality means that information

Accepted Answer

cannot be selected to favor one set of interested parties over another.

Question 20

The characteristic that is demonstrated when a high degree of consensus can be secured among independent measurers using the same measurement methods is

Accepted Answer

verifiability

Question 21

According to Statement of Financial Accounting Concepts No. 8, predictive value is an ingredient of the fundamental quality(ies) of:

Accepted Answer

Relevance: YES Faithful Representation: NO

Question 22

Under Statement of Financial Accounting Concepts No. 2, free from error is an ingredient of the fundamental quality of

Accepted Answer

Faithful Representation: YES Relevance: NO

Question 23

In classifying the elements of financial statements, the primary distinction between revenues and gains is

Accepted Answer

the nature of the activities that gave rise to the transactions involved.

Question 24

Which of the following elements of financial statements is not a component of comprehensive income?  A) Expenses B) Losses C) Revenues D) Distributions to owners

Accepted Answer

Distributions to owners

Question 25

According to the FASB conceptual framework, which of the following elements describes transactions or events that affect a company during a period of time?

Accepted Answer

Expenses

Question 26

According to the FASB Conceptual Framework, the elements-assets, liabilities, and equity-describe amounts of resources and claims to resources at/during a

Accepted Answer

Moment in Time: YES Period of Time: NO

Question 27

Which of the following is not a basic element of financial statements?  A) Assets B) Balance sheet C) Losses D) Revenue

Accepted Answer

Balance sheet

Question 28

Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement?

Accepted Answer

Equity

Question 29

Which of the following is not a basic assumption underlying the financial accounting structure?  A) Historical cost assumption B) Economic entity assumption C) Going concern assumption D)Periodicity assumption

Accepted Answer

Historical cost assumption

Question 30

Which basic assumption is illustrated when a firm reports financial results on an annual basis?

Accepted Answer

Periodicity assumption

Question 31

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?  A) Monetary unit assumption B) Economic entity assumption C) Going concern assumption D)Periodicity assumption

Accepted Answer

Going concern assumption

Question 32

Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?

Accepted Answer

Monetary unit assumption

Question 33

Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the

Accepted Answer

economic entity assumption.

Question 34

Proponents of historical cost ordinarily maintain that in comparison with all other valuation alternatives for general purpose financial reporting, statements prepared using historical costs are more

Accepted Answer

verifiable

Question 35

Revenue is recognized in the accounting period in which the performance obligation is satisfied. This statement describes the

Accepted Answer

revenue recognition principle.

Question 36

Revenue generally should be recognized

Accepted Answer

when the performance obligation is satisfied.

Question 37

Recognizing expenses not when a company pays wages, but when the work actually contributes to revenue in in accordance with the

Accepted Answer

expense recognition principle.

Question 38

Which of the following serves as the justification for the periodic recording of depreciation expense?  A) Systematic and rational allocation of cost over the periods benefited.  B) Minimization of income tax liability.  C) Immediate recognition of an expense.  D) Association of efforts (expense) with accomplishments (revenue).

Accepted Answer

Systematic and rational allocation of cost over the periods benefited

Question 39

is demonstrated by the use of supplementary information explaining the effects of financing arrangements.

Accepted Answer

Application of the full disclosure principle

Question 40

Which of the following is not a required component of financial statements prepared in accordance with generally accepted accounting principles?  A) Income statement. B) Notes to financial statements. C) President\'s letter to shareholders. D) Balance sheet.

Accepted Answer

President\'s letter to shareholders.

Question 41

Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company\'s stock price?

Accepted Answer

Full disclosure.

Question 42

Materiality is used in all of the following situations of providing financial information, except  A) where it would not make a difference in the actions of a decision maker.  B) where it would impact the judgment of a reasonable person.  C) where an amount is of relative large size and importance.  D) where omission of the information would result in bias.

Accepted Answer

where it would not make a difference in the actions of a decision maker.

Question 43

The second level of the conceptual framework includes each of the following except:  A) principles. B) enhancing qualities. C) elements. D) fundamental qualities.

Accepted Answer

principles.

Question 44

According to the FASB\'s conceptual framework, predictive value is an ingredient of

Accepted Answer

Relevance: YES Faithful Representation: NO

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