question

GAAP are standards and rules recognized as a general guide for financial reporting purposes.

answer

True

question

The FASB conceptual framework identifies information useful to those making investment and credit decisions.

answer

True

question

To be reliable, accounting information should have predictive value or feedback value, and be reported on a timely basis.

answer

False

question

Consistent use of the same accounting principles and methods is unnecessary for meaningful analysis of accounting information and trends.

answer

False

question

Depreciation and amortization policies can be justified on the basis of the going concern assumption.

answer

True

question

The revenue recognition principle dictates that revenue should be recognized in the accounting period in which cash is received.

answer

False

question

The matching principle dictates that expenses are recognized when efforts are expended to generate revenues.

answer

True

question

Conservatism in accounting means the accountant should understate assets and income.

answer

False

question

Generally accepted accounting principles are uniform throughout the world.

answer

False

question

Net income for the period is determined by subtracting total expenses and drawings from total revenues.

answer

False

question

The conceptual framework does not include

answer

quantitative characteristics of accounting information.

question

If generally accepted accounting principles did not exist,

answer

each company would have to develop its own set of accounting practices.

question

Which of the following is not a goal of financial reporting?

answer

To provide information that is useful in understanding everything about the company

question

Information that relates to a firm's solvency is used to assess the firm's ability to

answer

pay its debts.

question

Relevant accounting information

answer

is information that is capable of making a difference in a decision.

question

A company can change to a new method of accounting if management can justify that the new method results in

answer

more meaningful financial information.

question

Which of the following statements is not true?

answer

Comparability means using the same accounting principles from year to year within a company.

question

Which of the following is the correct representation of qualitative characteristics? Relevance, Reliability

answer

Timely, Neutral

question

The economic entity assumption states that

answer

the economic life of a business can be divided into artificial time periods.

question

The going concern assumption assumes that the business

answer

will continue in operation long enough to carry out its existing objectives and commitments.

question

The time period assumption states that the economic life of a business can be divided into

answer

artificial time periods.

question

An example of an expired cost is

answer

sales salaries.

question

The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is

answer

earned.

question

The information provided in the notes that accompany financial statements is required because of the

answer

full disclosure principle.

question

Expenses are recognized when

answer

they make their contribution to revenue.

question

In applying the operating guidelines within the conceptual framework, an item is considered material if

answer

it is likely to influence the decision of a reasonably prudent investor or creditor.

question

A common application of the conservatism constraint is the use of the 1. straight-line depreciation method for plant assets. 2. lower of cost or market method for inventories. 3. FIFO method for inventory valuation.

answer

3

question

The organization that is working toward uniformity in accounting practices throughout the world is the

answer

International Accounting Standards Committee.

question

Accounting for multinational corporations is complicated because

answer

foreign currencies are involved.

question

If Billy's Bus Service purchases promotional items on account for $5,000, then

answer

assets and liabilities both increase by $5,000.

question

Susie's Sweets owes Sugar Surplus $1,000 on account. When Susie's Sweets pays the debt, the transaction recorded on Sugar Surplus' books will

answer

increase an asset $1,000 and decreases an asset $1,000.

question

If expenses are paid in cash, then

answer

assets will decrease.

question

If supplies that have been purchased are used in the course of business, then

answer

Stockholders' equity will decrease.

question

As of June 31, 2008, Hobknob Club's assets are $700,000 and stockholders' equity is $75,000. What are the liabilities for Hobknob Club of June 31, 2008?

answer

$625,000.

question

The accounting equation for Juan's Colombian Restaurant is as follows: Assets Liabilities Stockholders' Equity $500,000 = $200,000 + $300,000 If Juan's purchases kitchen equipment on account for $20,000, the accounting equation will change to:

answer

$520,000 = $220,000 + $300,000

question

Net income results when

answer

Revenues > Expenses.

question

A balance sheet shows

answer

assets, liabilities, and stockholders' equity.

question

An income statement

answer

presents the revenues and expenses for a specific period of time.

question

During the year 2009, Rafael's Restaurant earned revenues of $250,000, had expenses of $50,000, purchased assets with a cost of $30,000 and paid dividends to the shareholders of $10,000. Net income for the year is:

answer

$200,000

question

At September 1, Harry's Hotel reported Stockholders' Equity of $30,000. During September, no additional investments were made and the company earned net income of $10,000. If Stockholders' Equity at September 31 totals $25,000, what amount of dividends were paid during the month?

answer

$15,000

question

For accounting information to be relevant, it must have (1)______________ value, or (2)_______________ value and must be reported on a (3)________________.

answer

Predictive, feedback, timely basis

question

GAAP stands for Generally ____________ Accounting ___________.

answer

accepted, practices

question

The ____________ accounting principle requires that assets be recorded at their historical cost.

answer

cost

question

___________ permit a company to modify generally accepted accounting principles without reducing the usefulness of the reported information.

answer

constraints

question

The ________________ reports the assets, liabilities, and stockholders' equity of a business enterprise at a specific date.

answer

balance sheet

question

Accounting principle that circumstances and events that make a difference to financial statement users should be disclosed.

answer

Full Disclosure Principle

question

Use of the same accounting principles and methods from year to year.

answer

Consistency

question

Accounting principle that expenses should be matched with revenues in the period when efforts are expended to generate revenues.

answer

Matching Principle

question

The constraint of determining if an item is important enough to likely influence the decision of a reasonably prudent investor or creditor.

answer

Materiality

question

The approach of choosing an accounting method when in doubt that will least likely overstate assets and net income.

answer

Conservatism

question

Accounting assumption that only transaction data capable of being expressed in monetary terms should be included in accounting records.

answer

Monetary Unit Assumption

question

Economic events recorded by accountants.

answer

Transactions

question

Selecting those events that are considered evidence of economic activity.

answer

Economic Entity Assumption

question

Ability to compare accounting information of different companies because they use the same accounting principles.

answer

Comparability

question

The assumption that the enterprise will continue in operation long enough to carry out its existing objectives and commitments.

answer

Going Concern Assumption

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