Accounting Ch. 2

The notes to the financial statements include all except

Accounting policies. Inventory methods. Contingencies. Analyst reports. The Answer is Analyst.

Which of the following establish the authoritative guidance on how U.S. companies should account for and report specific transactions, events, and arrangements in their financial statements?

Accounting standards in GAAP. Accounting standards in IASB. FASB's Statements of Financial Accounting Concepts. All of these choices. The Answer is All of Them.

Recognizing an economic effect in the current period even though the cash flows will occur in a later period is known as

An accrual.

The four characteristics that can enhance the decision usefulness of relevant and faithfully represented information are

comparability, verifiability, timeliness, and understandability.

In adopting new accounting standards, the FASB and IASB must have reasonable assurance that the costs of implementing a standard will not exceed the benefits. This is known as the

cost constraint.

The going-concern assumption states that

A company will continue to operate into the foreseeable future.

Which of the following is an enhancing qualitative characteristic of decision-useful financial information?

Comparability. Timeliness. Understandability. All of these choices. The Answer is All of Them.

Faithful representation of financial information includes all except

Completeness. Neutrality. Accuracy (error free). Materiality. The Answer is M.

Which of the following statements is not true?

Concepts Statements are narrow and open to interpretation.

A company's cash flow information is used by investors, lenders, and other creditors to

Help understand its operations and cash-generating ability. Evaluate its strategic sourcing and use of cash for financing and investing activities. Assess its liquidity and solvency. Do all of these choices. The Answer is All of Them.

Which of the following would not be disclosed in the notes to the financial statements?

Management discussion and analysis

Which accounting assumption or principle states that historical cost can lose relevance and other valuation methods may be more relevant to financial statement users?

Mixed attribute measurement model.

The FASB's Conceptual Framework does all except

Provide the Accounting Standards Codification.

The primary objective of financial reporting is to

Provide useful information for decision making.

__________ is the uncertainty or unpredictability of the future profitability of a company.

Risk

Which source of information useful for investors and lenders is not directly affected by existing FASB standards?

Statement of cash flows. Notes to the financial statements. Management's discussion and analysis. Statement of shareholders' equity. The Answer is Management.

What single, pervasive constraint bounds the qualitative characteristics of financial reports?

The time constraint. The cost constraint. The verifiability constraint. The accessibility constraint. The Answer is Cost constraint.

Which of the following would not be disclosed in the notes to the financial statements?

a. Accounting policies b. Contingencies c. Number of shares outstanding d. Management discussion and analysis The Answer is Managment.

Which of the following qualitative characteristics is related to predictive value?

a. Relevance b. Verifiability c. Comparability d. Timeliness The Answer is Relevance.

All of the following are methods in which expenses are recognized in a particular period except

a. cause and effect. b. immediate consumption. c. systematic and rational allocation over time. d. going-concern assumption. The Answer is going.

Concepts Statements are general proclamations that establish all of the following except

a. objectives of financial reporting. b. definitions of basic elements like assets and liabilities. c. how transactions, events, and arrangements should be presented and classified in financial statements. d. fundamental principles of auditing. The Answer is Fundamental.

The three primary sources of information used in the financial reporting model that are directly affected by existing FASB standards are

financial statements, notes to financial statements, and supplementary information.

Concepts Statements are general proclamations that establish all of the following except

fundamental principles of auditing.

The __________ is that the company will continue to operate in the foreseeable future.

going-concern assumption

All of the following are methods in which expenses are recognized in a particular period except

going-concern assumption.

Under current GAAP, most resources of a business entity are to be valued in its financial statements at

historical cost.

Information that is complete, neutral, and reasonably free from error and bias

is faithfully represented.

Recognition is the process of formally recording and reporting an item in the financial statements of a company. To be recognized, an item must

meet the definition of an element, be measurable, be relevant, and be representationally faithful.

According to the Conceptual Framework, the basic financial statements include the financial statements and

notes to the financial statements.

The three specific objectives of financial reporting are

provide information about changes in a company's economic resources and claims resulting from its financial performance, provide information about a company's comprehensive income and its components, and provide information about a company's cash flows.

The FASB stated that the objectives of financial reporting are those that

relate to a variety of external users.

The __________ states that a business enterprise is a legally and economically distinct entity, so that financial statements can be prepared and reported specifically for that entity.

reporting entity assumption

Financial reporting should provide information about how efficiently and effectively the company's management and governing board have discharged their responsibilities to use the company's resources. This is commonly referred to as management's __________ responsibility.

stewardship

The accounting projects portion of the FASB's recognized framework project does not include

when the accounting elements should be measured.