Term
T or F
Companies consider only quantitative factors in determining whether an item is material. |
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Definition
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Term
T or F
Revenues, gains, and distributions to owners all increase equity. |
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Definition
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Term
T or F
The conceptual framework for accounting has been discovered through empirical research. |
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Definition
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Term
T or F
The economic entity assumption means that economic activity can be identified with a particular legal entity |
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Definition
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Term
T or F
The IASB has issued a conceptual framework that is broadly consistent with that of the United States. |
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Definition
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Term
T or F
Users of financial statements are assumed to have no knowledge of business and financial accounting matters by financial statement preparers. |
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Definition
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Term
T or F
Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. |
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Definition
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Term
T or F
Revenues are realizable when assets received or held are readily convertible into cash or claims to cash. |
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Definition
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Term
T or F
Supplementary information may include details or amounts that present a different perspective from that adopted in the financial statements. |
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Definition
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Term
T or F
The first level of the conceptual framework identifies the recognition and measurement concepts used in establishing accounting standards. |
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Definition
| False Recognition and measuremetn are the 3rd level |
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Term
T or F
The idea of consistency does not mean that companies cannot switch from one accounting method to another. |
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Definition
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Term
T or F
A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards. |
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Definition
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Term
| According to Statement of Financial Accounting Concepts No. 2, timeliness is an ingredient of the primary quality of |
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Definition
| Relevance, Yes; Reliability, No |
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Term
| A company has a factory building that originally cost the company $250,000. The current fair value of the factory building is $3 million. The president would like to report the difference as a gain. The write-up would represent a violation of which accounting assumption or principle? |
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Definition
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Term
| Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between |
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Definition
| timeliness and verifiability. |
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Term
| During the lifetime of an entity accountants produce financial statements at artificial points in time in accordance with the concept of |
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Definition
| . Objectivity, No; Periodicity, Yes |
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Term
| Financial information exhibits the characteristic of consistency when |
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Definition
| accounting entities give accountable events the same accounting treatment from period to period. |
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Term
| Information is neutral if it |
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Definition
| is free from bias toward a predetermined result. |
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Term
| Not adjusting the amounts reported in the financial statements for inflation is an example of which basic principle of accounting? |
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Definition
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Term
| The accounting principle of matching is best demonstrated by |
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Definition
| associating effort (expense) with accomplishment (revenue). |
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Term
| The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as the |
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Definition
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Term
| The overriding criterion by which accounting information can be judged is that of |
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Definition
| usefulness for decision making. |
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Term
| Valuing assets at their liquidation values rather than their cost is inconsistent with the |
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Definition
| historical cost principle. |
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Term
| What is a primary objective of financial reporting as indicated in the conceptual framework? |
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Definition
| 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. |
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Term
| What is a primary objective of financial reporting as indicated in the conceptual framework? |
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Definition
| 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. |
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Term
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Definition
| When in doubt, recognizing the option that is least likely to overstate assets and income. |
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Term
| When products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash" is a definition of |
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Definition
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Term
| 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? |
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Definition
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Term
| Which basic assumption may not be followed when a firm in bankruptcy reports financial results? |
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Definition
| Going concern assumption. |
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Term
| Which of the following is not a basic assumption underlying the financial accounting structure? |
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Definition
| Historical cost assumption.--Historical cost is a principal not an assumption |
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Term
| Which of the following practices may not be an acceptable deviation from recognizing revenue at the point of sale? |
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Definition
A. Upon receipt of cash.
B. During production.
C. Upon receipt of order.<--------
D. End of production. |
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Term
| Which of the following is not a required component of financial statements prepared in accordance with generally accepted accounting principles? |
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Definition
| President's letter to shareholders. |
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Term
| Which of the following elements of financial statements is not a component of compre-hensive income? |
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Definition
A. Revenues
B. Distributions to owners <------
C. Losses
D. Expenses |
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Term
| According to Statement of Financial Accounting Concepts No. 2, which of the following relates to both relevance and reliability? |
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Definition
A. Materiality
B. Understandability
C. Usefulness
D. All of these <--------- |
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Term
| According to the FASB conceptual framework, earnings |
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Definition
A. are the same as comprehensive income.
B. exclude certain gains and losses that are included in comprehensive income. <-----------
C. include certain gains and losses that are excluded from comprehensive income.
D. include certain losses that are excluded from comprehensive income. |
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Term
| 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? |
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Definition
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Term
| A soundly developed conceptual framework of concepts and objectives should |
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Definition
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.<-------- |
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Term
| In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting? |
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Definition
| Objectives of financial reporting |
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Term
| Issuance of common stock for cash affects which basic element of financial statements? |
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Definition
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Term
| Representational faithfulness is an ingredient of which primary quality of information? |
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Definition
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Term
| The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the |
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Definition
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Term
| The quality of information that gives assurance that it is reasonably free of error and bias and is a faithful representation is |
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Definition
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Term
| Valuing assets at their liquidation values rather than their cost is inconsistent with the |
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Definition
| historical cost principle. |
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Term
| Under Statement of Financial Accounting Concepts No. 5, which of the following, in the most precise sense, means the process of converting noncash resources and rights into cash or claims to cash? |
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Definition
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Term
| What is a purpose of having a conceptual framework? |
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Definition
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. <--------- |
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Term
| When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristic of |
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Definition
A. relevance.
B. reliability.
C. consistency.
D. none of these. <----- it is comparablility |
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Term
| Which basic assumption is illustrated when a firm reports financial results on an annual basis? |
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Definition
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Term
| Which of the following is not a time when revenue may be recognized? |
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Definition
A. At time of sale
B. At receipt of cash
C. During production
D. All of these are possible times of revenue recognition.<------------ |
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Term
| Which of the following is not a benefit associated with the FASB Conceptual Framework Project? |
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Definition
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. <------ |
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Term
| Which of the following statements concerning the cost-benefit relationship is not true? |
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Definition
A. Business reporting should exclude information outside of management's expertise.
B. Management should not be required to report information that would significantly harm the company's competitive position.
C. Management should not be required to provide forecasted financial information.
D. If needed by financial statement users, management should gather information not included in the financial statements that would not otherwise be gathered for internal use.<------ |
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Term
| Which of the following is a primary characteristic of useful accounting information? |
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Definition
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Term
| First level of the conceptual framework |
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Definition
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Term
| What are three objectives of the first level of the conceptputal framework? |
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Definition
1. Useful to those making investment and credit decision,
2.Helpful to present and potential investors, creditors, and ohter users in assessing the amounts, timing and uncertainity of cash flows
3. aout the economic resources and the claims to those and the changes in them |
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Term
| Second level of the conceptual framwork |
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Definition
1.Qualitive characteristics of acconting information
2. the elements |
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Term
| What are the two primary and two secondary charatisics |
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Definition
Primary- 1. Relavance a)Predictive
b) feedback
c) Timliness
(2) Reliablilty a)verifibiltiy
b)faithful Repenstation
c) Neutlaity
Secondary 3.Comparibilty 4. Consistency |
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Term
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Definition
1. Assets
2.Liabliliies
3. equity
4. investment by owner
5distribution to owners
6. omprehensive income
7. revenue
8. Expenses
9. Gains
10 losses |
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Term
| What is the the third level of the conceptual framework |
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Definition
Recongition and measurement concepts:
1. Assumptions 2. Principals 3. Constraints |
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Term
| what are the four assumptions |
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Definition
Economic entity assumption
Going concern assumption
monetary unit
perdiocity assumption |
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Term
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Definition
measurement- hisotric Cost principal, ecomonic enity principal, fair value principal
Revenue recognition principal-a)when realized or realiable b)when earned
Expense recognition principal-a) let the expense follow the revenue b) rational and systematic allocation
Full disclosure principle-make a differnce in the decisions. |
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Term
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Definition
1.cost-benfit
2. materiality
3. industry practise
4. conservatism |
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