Acct 1 Test 1

why is accounting standard setting a political process?

Standards can have significant effects on companies, investors, and creditors.

1. An example of an economic entity is a) A town b) A business. c) A nonprofit hospital. d) A church.

b

15. Which qualitative characteristic is an ingredient of relevance a) Understandability b) Materiality

b

3. When making decisions equity investors are interested in assessing a. The company's ability to generate cash flows b. Management's ability to increase the capital providers investments c. The company's ability to pay dividends d. All of these choices

d

the accrual accounting model is best able to achieve the goal of predicting

future cash flows

the organization responsible for the code of ethics for accountants working in govt. and industry is the

institute of management accountants

14. Long corp has adopted the policy of caring to expense at the time of purchase all assets having a cost of less than 200 regardless of life expectancy.

materiality

18. Enhancing qualitative characteristics include all except

materiality

the difference between revenue and expenses when revenue is greater is called

net income

Which of the following is a financial statement provided to investors?

statement of shareholders equity

the accounting characteristic that requires a user to comprehend the info within the context of the decision being made is referred to as

understandibility

5. Which of the following is not a decision that external stakeholders of a company's financial info would make? a) whether or not to extend credit to the company\ b) too hold the company's stock c) the company should add a new product line d) to ask for an increase in employees benefits during union contract negotiations.

C

6. Which of the following is a true statement about the objective of gen purpose finance 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 Info provided relates to the entity's economic resources and

D

16. When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic? a) Faithful representation b) Predictive value c) Verifiability d) timeliness

a

19. The enhancing qualitative characteristic of understandability means that info should be understood by a) Those who have a reasonable understanding of business and economic activities b) CPA c) Financial analysts d) Those who are experts in the interpretation of financial informations

a

21. The state legislature is dabating a bill that if passed would require the Roberts co to go out of business. Which of the following principles related to the prep of Roberts financial statements is most directly affected by this impending vote a) Going concern b) Verifiability c) Entity concept.

a

23. Expenses are recognized and matched against revenues on the basis of 3 principles. Which of the following is not 1 of these principles Associating cash flows Immediate consumption Cause and effect Systematic and rational allocation over time

a

7. The securities and exchange commission has the legal authority to prescribe accounting principles and reporting practices for a) All companies issuing publicly traded securities b) All companies issuing any type of securities c) All companies d) All corporations

a

12. What are the statements of financial acct concepts intended to establish?

a) The objectives and concepts for use in developing standards of financial

4. A primary objective of financial accounting is

a) to provide financial statements to help external users analyze an organizations activity

10. The financial accounting standards board a) Is a division of the SEC. b) Is a private body that helps set accounting standards in the U.S. c) Is responsible for setting auditing standards that all auditors must follow

b

13. In other words a primary objective of financial acct is OR which of these isn't managerial accounting. a) To serve the decision-making needs of internal users. b) Provide financial statements to help external users analyze an organizations activity to be able to make informed decisions. c) To monitor and control company activities.

b

20. In classifying the elements of financial statements the primary distinction between revenues and gains is a) The materiality of the amounts involved b) The nature of the activities that gave rise to the transactions involved. c) The costs versus the benefits of the alternative methods of disclosing the transactions involved d) The likelihood that the transactions involved will occur in the future.

b

22. Revenue should not be recognized until a) Collection has been made and warrantees have expired b) The seller has transferred goods or services to a customer

b

9. Which of the following is true regarding the comparison of managerial and financial accounting? a) Managerial accounting is generally more precise b) Managerial accounting need not follow GAAP, while financial accounting must follow them. c) Managerial accounting has a past focus, and financial acct has a future focus.

b

2. Which basis of accounting is most likely to provide the best assessment on an entity's past and future ability to generate net cash flows a) A cash basis b) Modified cash basis c) Accrual basis- they recognize transactions when they are realized. d) Tax basis

c

8. The role of the SEC and the formulation in the formulation of accounting principles can be best described as a) Consistently primary b) Consistently secondary c) Sometimes primary and sometimes secondary d) Non-existent

c

Which of the following is true? a) In order to remain impartial, the FASB discourages public input during development of standards b) FASB acct standards are the result of clearly defined obj an integrated body of theory and the known consequences of actions. c) Accounting standards which reflect social decisions are often the result of compromise. d) The FASB deliberates and issues accounting standards only after receiving a formal letter of request from the SEC.

c

the conceptual frameworks qualitative characteristic of faithful rep includes:

neutrality