Accounting Exam 1 chapter 2
All of the following are qualities of useful information except
flexibility.
Which of the following is not a current liability?
Bonds Payable
Which of the following is not classified properly as a current asset?
A receivable from the sale of an asset to be collected in two years
Which of the following is not considered an asset?
Dividends
What organization issues U.S. accounting standards?
Financial Accounting Standards Board
Which one of the following is not an enhancing quality of useful information?
Materiality
The agency of the United States Government that oversees the U.S. financial markets is the
Security Exchange Commission.
The convention of consistency refers to consistent use of accounting principles
among accounting periods.
Generally accepted accounting principles
are accounting rules that are recognized as a general guide for financial reporting.
The quality of consistency enhances
comparability.
Accounting information is relevant to business decisions because it
confirms prior expectations.
A company using the same accounting principles from year to year is an application of
consistency.
In a classified balance sheet, assets are usually classified as
current assets; long-term investments; property, plant, and equipment; and intangible assets.
Liabilities are generally classified on a balance sheet as
current liabilities and long-term liabilities.
Declaring a cash dividend will
decrease retained earnings.
An intangible asset
derives its value from the rights and privileges it provides the owner.
A current asset is
expected to be converted to cash or used in the business within a relatively short period of time.
Accounting information should be verifiable in order to enhance
faithful representation.
In order for accounting information to be relevant, it must
help predict future events or confirm prior expectations.
On a classified balance sheet, companies usually list current assets
in the order in which they are expected to be converted into cash.
An item is considered material if
its size is likely to influence the decision of an investor or creditor.
Equipment is classified on the balance sheet as
property, plant, and equipment.
The two fundamental qualities of useful information are
relevance and faithful representation.
Information presented in a clear and concise fashion so that users can comprehend its meaning is an application of
understandability.
Information that is presented in a clear fashion, so that users of that information can interpret it is an example of
understandability.