ACC 303 WEEK 3 QUIZ 2
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ACC 303 WEEK 3 QUIZ 2
ACC 303 Week 3 Quiz 2
All Questions Included.
TRUE-FALSE—Conceptual
1. The conceptual framework for accounting has been
discovered through empirical research.
2. A conceptual framework is a coherent system of
interrelated objectives and fundamentals that can lead to consistent standards.
3. The first level of the conceptual framework identifies
the recognition and measurement concepts used in establishing accounting
standards.
4. The IASB has issued a conceptual framework that is
broadly consistent with that of theUnited States.
5. Although the FASB intends to develop a conceptual
framework, no Statements of Financial Accounting Concepts have been issued to
date.
6. Decision usefulness is the underlying theme of the
conceptual framework.
7. Users of financial statements are assumed to have no
knowledge of business and financial accounting matters by financial statement
preparers.
8. Relevance and reliability are the two primary qualities
that make accounting information useful for decision making.
9. The idea of consistency does not mean that companies
cannot switch from one accounting method to another.
10. Timeliness and neutrality are two ingredients of
relevance.
11. Verifiability and predictive value are two ingredients
of reliability.
12. Revenues, gains, and distributions to owners all
increase equity.
13. Comprehensive income includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners.
14. The historical cost principle would be of limited
usefulness if not for the going concern assumption.
15. The economic entity assumption means that economic
activity can be identified with a particular legal entity.
16. The expense recognition principle states that debits
must equal credits in each transaction.
17. Revenues are realizable when assets received or held
are readily convertible into cash or claims to cash.
18. Supplementary information may include details or
amounts that present a different perspective from that adopted in the financial
statements.
19. Companies consider only quantitative factors in
determining whether an item is material.
20. Conservatism in accounting means the accountant should
attempt to understate assets and income when possible.
MULTIPLE CHOICE—Conceptual
21. Generally accepted accounting
principles
a. are fundamental truths or axioms that can be
derived from laws of nature.
b. derive their authority from legal court
proceedings.
c. derive their credibility and authority from
general recognition and acceptance by the accounting profession.
d. have been specified in detail in the FASB
conceptual framework.
22. 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.
23. Which of the following (a-c)
are not true
concerning a conceptual framework in account-ing?
a. It should be a basis for standard-setting.
b. It should allow practical problems to be solved
more quickly by reference to it.
c. It should be based on fundamental truths that are
derived from the laws of nature.
d. All of the above (a-c) are true.
24. What is a purpose of having a
conceptual framework?
a. To enable the profession to more quickly solve
emerging practical problems.
b. To provide a foundation from which to build more
useful standards.
c. Neither a nor b.
d. Both a and b.
S25. Which of the following is not a
benefit associated with the FASB Conceptual Framework Project?
a. A conceptual framework should increase financial statement
users’ understanding of and confidence in financial reporting.
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. Business entities will need far less assistance
from accountants because the financial reporting process will be quite easy to
apply.
26. In the conceptual framework for
financial reporting, what provides “the why”–the goals and purposes of
accounting?
a. Measurement and recognition concepts such as
assumptions, principles, and constraints
b. Qualitative characteristics of accounting
information
c. Elements of financial statements
d. Objectives of financial reporting
27. The underlying theme of the
conceptual framework is
a. decision usefulness.
b. understandability.
c. reliability.
d. comparability.
28. Which of the following is not an objective of
financial reporting?
a. To provide information about economic resources,
the claims to those resources, and the changes in them.
b. To provide information that is helpful to
investors and creditors and other users in assessing the amounts, timing, and
uncertainty of future cash flows.
c. To provide information that is useful to those
making investment and credit decisions.
d. All of these are objectives of financial
reporting.
P29. The objectives of financial
reporting include all of the following except to provide information that
a. is useful to the Internal Revenue Service in
allocating the tax burden to the business community.
b. is useful to those making investment and credit
decisions.
c. is helpful in assessing future cash flows.
d. identifies the economic resources (assets), the
claims to those resources (liabilities), and the changes in those resources and
claims.
30. What is a primary objective of
financial reporting as indicated in the conceptual framework?
a. provide information that is useful to those
making investing and credit decisions.
b. provide information that is useful to management.
c. provide information about those investing in the
entity.
d. All of the above.
31. What is a primary objective of
financial reporting as indicated in the conceptual framework?
a. Provide information that is helpful to present
and potential investors, creditors, and other users in assessing the amounts,
timing, and uncertainty of future cash flows.
b. Provide information that is helpful to present
investors, creditors, and other users in assessing the amounts, timing, and
uncertainty of future cash flows.
c. Provide information that is helpful to potential
investors, creditors, and other users in assessing the amounts, timing, and
uncertainty of future cash flows.
d. None of the above.
32. Which of the following is a primary
characteristic of useful accounting information?
a. Comparability.
b. Relevance.
c. Consistency.
d. Materiality.
33. Which of the following is a primary
characteristic of useful accounting information?
a. Conservatism.
b. Comparability.
c. Reliability.
d. Consistency.
34. What is meant by comparability when
discussing financial accounting information?
a. Information has predictive or feedback value.
b. Information is reasonably free from error.
c. Information that is measured and reported in a
similar fashion across companies.
d. Information is timely.
35. What is meant by consistency when
discussing financial accounting information?
a. Information that is measured and reported in a
similar fashion across points in time.
b. Information is timely.
c. Information is measured similarly across the
industry.
d. Information is verifiable.
36. Which of the following is an
ingredient of relevance?
a. Verifiability.
b. Representational faithfulness.
c. Neutrality.
d. Timeliness.
37. Which of the following is an
ingredient of reliability?
a. Predictive value.
b. Timeliness.
c. Neutrality.
d. Feedback value.
38. Changing the method of inventory
valuation should be reported in the financial statements under what qualitative
characteristic of accounting information?
a. Consistency.
b. Verifiability.
c. Timeliness.
d. Comparability.
39. Company A issuing its annual
financial reports within one month of the end of the year is an example of
which ingredient of primary quality of accounting information?
a. Neutrality.
b. Timeliness.
c. Predictive value.
d. Representational faithfulness.
40. What is the quality of information
that enables users to better forecast future operations?
a. Reliability.
b. Materiality.
c. Comparability.
d. Relevance.
41. Representational faithfulness is an
ingredient of which primary quality of information?
a. Reliability.
b. Comparability.
c. Relevance.
d. Consistency.
42. Decision makers vary widely in the
types of decisions they make, the methods of decision making they employ, the
information they already possess or can obtain from other sources, and their
ability to process information. Consequently, for information to be useful
there must be a linkage between these users and the decisions they make. This
link is
a. relevance.
b. reliability.
c. understandability.
d. materiality.
43. The overriding criterion by which
accounting information can be judged is that of
a. usefulness for decision making.
b. freedom from bias.
c. timeliness.
d. comparability.
44. The two primary qualities that make
accounting information useful for decision making are
a. comparability and consistency.
b. materiality and timeliness.
c. relevance and reliability.
d. reliability and comparability.
45. Accounting information is considered
to be relevant when it
a. can be depended on to represent the economic
conditions and events that it is intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of
accounting information.
d. is verifiable and neutral.
46. The quality of information that
gives assurance that it is reasonably free of error and bias and is a faithful
representation is
a. relevance.
b. reliability.
c. verifiability.
d. neutrality.
47. According to Statement of Financial Accounting
Concepts No. 2, which of the following relates to both
relevance and reliability?
a. Materiality
b. Understandability
c. Usefulness
d. All of these
48. According to Statement of Financial Accounting
Concepts No. 2, timeliness is an ingredient of the primary
quality of
Relevance
Reliability
a.
Yes
Yes
b.
No
Yes
c.
Yes
No
d.
No
No
49. According to Statement of Financial Accounting
Concepts No. 2, verifiability is an ingredient of the primary
quality of
Relevance
Reliability
a.
Yes
No
b.
Yes
Yes
c.
No
No
d.
No
Yes
50. According to Statement of Financial Accounting
Concepts No. 2, neutrality is an ingredient of the primary
quality of
Relevance
Reliability
a.
Yes
Yes
b.
No
Yes
c.
Yes
No
d.
No
No
51. Information is neutral if it
a. provides benefits which are at least equal to the
costs of its preparation.
b. can be compared with similar information about an
enterprise at other points in time.
c. would have no impact on a decision maker.
d. is free from bias toward a predetermined result.
52. The characteristic that is
demonstrated when a high degree of consensus can be secured among independent
measurers using the same measurement methods is
a. relevance.
b. reliability.
c. verifiability.
d. neutrality.
53. According to Statement of Financial Accounting
Concepts No. 2, predictive value is an ingredient of the
primary quality of
Relevance
Reliability
a.
Yes
No
b.
Yes
Yes
c.
No
No
d.
No
Yes
54. Under Statement of Financial Accounting
Concepts No. 2, representational faithfulness is an ingredient
of the primary quality of
Reliability
Relevance
a.
Yes
Yes
b.
No
Yes
c.
Yes
No
d.
No
No
55. Financial information does not
demonstrate consistency when
a. firms in the same industry use different
accounting methods to account for the same type of transaction.
b. a company changes its estimate of the salvage
value of a fixed asset.
c. a company fails to adjust its financial
statements for changes in the value of the measuring unit.
d. none of these.
56. Financial information exhibits the
characteristic of consistency when
a. expenses are reported as charges against revenue
in the period in which they are paid.
b. accounting entities give accountable events the
same accounting treatment from period to period.
c. extraordinary gains and losses are not included
on the income statement.
d. accounting procedures are adopted which give a
consistent rate of net income.
57. Information about different entities
and about different periods of the same entity can be prepared and presented in
a similar manner. Comparability and consistency are related to which of these
objectives?
Comparability
Consistency
a.
Entities
Entities
b.
Entities
Periods
c.
Periods
Entities
d.
Periods
Periods
58. When information about two different
enterprises has been prepared and presented in a similar manner, the
information exhibits the characteristic of
a. relevance.
b. reliability.
c. consistency.
d. none of these.
59. The elements of financial statements
include investments by owners. These are increases in an entity’s net assets
resulting from owners’
a. transfers of assets to the entity.
b. rendering services to the entity.
c. satisfaction of liabilities of the entity.
d. all of these.
60. In classifying the elements of
financial statements, the primary distinction between revenues and gains is
a. the materiality of the amounts involved.
b. the likelihood that the transactions involved
will recur in the future.
c. the nature of the activities that gave rise to
the transactions involved.
d. the costs versus the benefits of the alternative
methods of disclosing the transactions involved.
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