CH 1 Accounting 1
Which of the following types of companies may currently utilize IFRS for financial reporting in the U.S.?
Foreign companies that issue stock in the U.S.
Recording depreciation on fixed assets is an example of which approach to expense recognition?
Systematic and rational allocation.
What element of the financial statements is described by the following definition? "Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions."
assets
Matching cost of goods sold with the revenues generated during the period is an example of which approach to expense recognition?
cause and effect relationship
Which of the following are enhancing characteristics of financial information?
comparability timeliness
Accounting information is if similar items are treated the same way among various companies highlighting similarities and
comparable
Before they can be recognized, favorable items tend to require more verification than unfavorable items. Accountants refer to this as
conservatism
The tendency to recognize unfavorable items more quickly than favorable items is referred to as
conservatism
The overriding objective in the hierarchy of qualitative characteristics of financial reporting information is
decision usefulness
The primary focus of the qualitative characteristics of accounting information is:
decision usefulness
A code or moral system that provides criteria for evaluating right or wrong is referred to as
ethics
The FASB recently issued a standard that requires companies recognize revenue
for the amount the company expects to be entitled to receive when goods or services are transferred to customers at a point in time or over a period of time
The four basic accounting assumptions
identify the denomination in which reporting occurs assume the entity will continue to exist identify the frequency of reporting identify the entity being reported on
Which of the following is a probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events?
liability
Who has the responsibility to appropriately apply GAAP when preparing financial statements?
management
Predictive value, confirmatory value, and all relate to the fundamental characteristic of relevance in financial information.
material
The process of associating numerical amounts to the elements in the financial statements is called
measurement
Faithful representation requires information to have which of the following characteristics?
neutrality completeness free from material error
Which of the following are among the basic assumptions underlying U.S. GAAP?
periodicity going concern economic entity monetary unit
The primary purpose of financial reporting is to provide useful information for decision making to
providers of capital
The two fundamental characteristics of financial information are
relevance and faithful representation.
For accounting information to be , it must possess predictive value and/or confirmatory value.
relevant
Expenses are matched to from the same transaction.
revenue
Expense recognition is implemented by which of the following ways?
systematic and rational allocation. cause-and-effect relationship. in the period incurred associating expenses and revenues in a specific period of time.
According to SFAC 5, the four criteria that must be met for an item to be recognized in the basic financial statements are
the information about the item is reliable. the item has relevant attributes that are measurable. the information about the item is relevant to decision making. The item meets the definition of an element.
The International Accounting Standards Committee provides oversight, appoints members, and raises funds to support the:
IASB
Measurement is the process of associating numerical amounts to the reported in financial statements.
elements
Recognition refers to the process of
recording information in the basic financial statements.