c. The objectives and concepts for use in developing standards of financial accounting and reporting
What are the Statements of Financial Accounting Concepts intended to establish? a. GAAP in financial reporting by business enterprises b. The meaning of "present fairly in accordance with GAAP" c. The objectives and concepts for use in developing standards of financial accounting and reporting d. The hierarchy of sources of GAAP
d. The needs of the users of the information
According to the FASB's conceptual framework the objective of general-purpose financial reporting is most likely based on a. GAAP b. Reporting on how well management has discharged its responsibilities c. The need for conservatism d. The needs of the users of the information
d. The information provided relates to the entity's economic resources and claims.
Which of the following is a true statement about the objective of general-purpose financial reporting? a. Financial reporting is ordinarily focused on industries rather than individual entities b. The objective applies only to information that is useful for investment professionals c. Financial reporting directly measures management performance d. The information provided relates to the entity's economic resources and claims
d. Investment and credit decisions often are based, at least in part, on evaluations of the past performance of an entity
Which of the following best reflects the objective of general-purpose financial reporting? a. The primary focus of financial reporting is information about an entity's resources b. The best indication of an entity's ability to generate favorable cash flows is information based on previous cash flows c. Financial accounting is expressly designed to accurately measure the value of a business d. Investment and credit decisions often are based, at least in part, on valuations of an entity
c. Relevance and faithful representation
According to the FASB's conceptual framework the two fundamental qualitative characteristics that make accounting information useful for decision making are a. Neutrality and completeness b. Fairness and precision c. Relevance and faithful representation d. Consistency and comparability
b. faithful representation
According to the FASB's conceptual framework neutrality relates to a. both faithful representation and relevance b. faithful representation c. relevance d. none
a. relevance and materiality
According to the FASB conceptual framework, which of the following correctly pairs a fundamental qualitative characteristic of useful information with one of its aspects? a. relevance and materiality b. relevance and neutrality c. faithful representation and predictive value c. faithful representation and confirmatory value
Which of the following is considered a pervasive constraint by the FASB's conceptual framework? a. Cost b. Conservatism c. Timeliness d. Verifiability
According to Statements of Financial Accounting Concepts, predictive value relates to a. Relevance b. Faithful representation c. both d. neither
According to the FASB's cocneptual framework, what does the concept of faithful representation in financial reporting include? a. predictive value b. certainty c. perfect accuracy d. neutrality
According to the FASB's conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of a. consistency b. cost c. relevance d. representational faitfulness
b. Report data on segments having the same expected risks and growth rates to analysts estimating future profits
According to the FASB's conceptual framework, which of the following most likely does not violate the concept of faithful representation? a. Financial statements were issued 9 months late b. Report data on segments having the same expected risks and growth rates to analysts estimating future profits c. Financial statements included property with a carrying amount increased to management's estimate of market value d. Management reports to shareholders regularly refer to new projects undertaken, but the financial statements never report project results
Under SFAC 8, the ability, through consensus among measurers, to ensure that information represents what it purports to represent is an example of a. Relevance b. Verifiability c. Comparability d. Predictive value
According to the FASB's conceptual framework, which of the following enhances information that is relevant and faithfully represented? a. comparability b. confirmatory value c. neutrality d. materiality
Which of the following accounting concepts states that an accounting transaction should be supported by sufficient evidence to allow two or more individuals to arrive at essentially similar measures and conclusions? a. matching b. verifiability c. periodicity d. stable monetary unit
a. involves an arms length transaction between 2 independent interests
Financial information is most likely to be verifiable when an accounting transaction occurs that a. involves an arms length transaction between two independent interests b. furthers the objectives of the entity c. is promptly recorded in a fixed amount of monetary units d. allocates revenues or expense items in a rational and systematic manner
d. change in accounting principle when the cumulative effect on any prior period is not known
The concept of consistency is sacrificed in the accounting for which of the following income statement items? a. discontinued operations b. loss on disposal of a component of an entity c. extraordinary items d. change in accounting principle when the cumulative effect on any prior period is not known
According to the FASB's conceptual framework, the quality of information that enables users to identify similarities and differences between two sets of economic phenomena is a. conservatism b. neutrality c. matching d. comparability
According to the FASB's conceptual framework the quality of information that helps users increase likelihood of correctly forecasting the outcome of present events is called a. confirmatory value b. predictive value c. representational faithfulness d. comparability
To be relevant, financial information should have which of the following? a. neutrality b. confirmatory value c. understandability d. cost and benefits
Which of the following characteristics relates to both accounting relvance and faithful representation? a. verifiability b. timeliness c. comparability d. understandability e. all of the above
b. The revenue is realized and earned
Revenues of an entity are usually measured by the exchange values of the assets or liabilities involved. Recognition of revenue does not occur until a. The revenue is realizable b. The revenue is realized and earned c. Products or services are exchanged for cash or claims to cash d. The entity has substantially accomplished what it agreed to do
b. The service is provided
The Star company is a service entity that requires customers to place their orders 2 weeks in advance. Star bills its customers on the 15th day of the month following the date of service and requires the payment be made within 30 days of the billing date.. Conceptually, Star should recognize revenue from its services at the date when a. A customer places an order b. The service is provided c. A billing is mailed d. A customer's payment is received
Which of the following is not a theoretical basis for the allocation of expenses? a. systematic allocation b. cause and effect c. profit maximization d. immediate recognition
Ande Co. estimates uncollectible accounts expense using the ratio of past actual losses from uncollectible accounts to past net credit sales, adjusted for anticipated conditions. The practice follows the accounting concept of a. consistency b. going concern c. matching d. substance over form
c. to match the costs of production with revenues earned
Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles? a. to reduce the federal income tax liability b. to aid management in the decision-making process c. to match the costs of production with revenues earned d. to adhere to the accounting concept of conservatism
Which of the following is an example of the expense recognition principle of associating cause and effect? a. allocation of insurance cost b. sales commissions c. depreciation of fixed assets d. officers salaries
During the lifetime of an entity accountants produce financial statements at arbitrary moments in time in accordance with which basic accounting concept? a. verifiability b. periodicity c. conservatism d. matching
Continuation of an accounting entity in the absence of evidence to the contrary is an example of the basic concept of a. accounting entity b. consistency c. going concern d. substance over form