Ch. 2

b. conservatism

Accruing net losses on obsolete inventory is an example of the accounting concept of: a. Materiality b. Conservatism c. Consistency d. Historical cost

c. Incurred but not paid

An accrued expense is an expense: a. Incurred and paid b. Paid but not incurred c. Incurred but not paid d. Not reasonably estimable

Asses the return a company has earned on its economic resources and form expectations about its future performance.

External stakeholders use information about a company's comprehensive income and its components to?

relevance and faithful representation

What are two primary qualities of the overall qualitative characteristic of useful accounting information?

a. 1 and 2

Under GAAP, the financial statements should include: 1. Notes to explain the methods and estimates the company used. 2. Required supplementary information. a. 1 and 2. b. 2 only. c. Neither 1 nor 2. d. 1 only

a. Recognition

Under the Statement of Financial Accounting Concepts No. 6, which of the following means the process of formally recording and reporting an item in the financial statements of a company? a. Recognition b. Verification c. Realization d. Allocation

C. timeliness

Under the Statement of Financial Accounting Concepts No. 8, which of the following enhances decision-useful information? a. Neutrality b. Materiality c. Timeliness d. Confirmatory value

To provide information that is useful in making decisions about providing resources to the entity.

What is the most general objective of financial reporting?

d. verifiability

Which characteristic states that accounting information should be supported by sufficient evidence to allow two or more qualified individuals to arrive at similar measures and conclusions? a. Matching b. Periodicity c. Monetary unit d. Verifiability

d. Comparability - accounting methods and procedures are applied in the same manner from period to period.

Which of the following is an incorrect pairing of an enhancing characteristic and its definition? a. Understandability - accounting information should be comprehensible to users who have a reasonable knowledge of business and economic activities and who are willing to study the information carefully. b. Timely - information is available to decision makers when they make their decisions. c. Verifiability - different knowledgeable and independent observers can reach consensus that a particular representation is faithful. d. Comparability - accounting methods and procedures are applied in the same manner from period to period.

D. liquidity - the ability of a company to produce goods and services for a customer.

Which of the following is an incorrect pairing of the term and its definition? a. Risk - the uncertainty or unpredictability of the future results of a company. b. Return on investment - a measure of overall company performance. c. Financial flexibility - the ability of a company to adapt to change. d. Liquidity - the ability of a company to produce goods and services for customers.

d. Benefits > Costs

Which of the following is considered a constraint on useful information by Statement of Financial Accounting Concepts No. 8? a. Timeliness b. Verifiability c. Conservatism d. Benefits > costs

Net realizable value and fair value

Which of the following measurement attributes are used in order to provide financial statement users with the most relevant and faithfully represented measures of companies' resources, obligations, and financial performance? 1. Net realizable value. 2. Fair value. 3. Future value of future cash flows.

d. All of the choices are correct

Which of the following principles may a company use to determine which expenses to recognize in a particular period? a. Cause and effect. b. Systematic and rational allocation. c. Immediate consumption. d. All of the choices are correct.

Means the FASB must have reasonable assurance that the costs of implementing a standard will not exceed the benefits.

the cost constraint:

The user has no need for the information. The amount is too small to make a difference.

A company may decide not to disclose certain information because?

c. Immediate consumption

A patent purchased in 2016 and being amortized over a 10-year life was determined to be worthless in 2019. The write-off of the asset in 2019 is an example of which of the following expense recognition principles? a. Associating cause and effect b. Objectivity c. Immediate consumption d. Systematic and rational allocation

may prevent a company from recognizing assets that represent future economic benefits.

A violation of the going concern assumption

Information helps users from expectations about the future. Information provides feedback to confirm or correct prior predictions and expectations.

Charateristics of relevant accounting information include?

a. a practical approach to avoid misleading investors, lenders, and other creditors when valuations are uncertain.

Conservatism is: a. A practical approach to avoid misleading investors, lenders and other creditors when valuations are uncertain. b. A principle of accounting. c. Desirable. d. All of the choices are correct

Objective: Useful information for expected returns to investors, lenders, and other creditors.

Information that would be useful to existing and potential investors in making decisions about buying, selling, or holding equity instruments is specifically covered by ?

Objective: Useful information about net cash inflows to the company

Information that would be useful to existing and potential investors to help them assess the amount, timing, and uncertainty of the prospects for future net cash inflows to the company is specifically covered by?

A. ensure that CPAs act ethically in discharging their stewardship role.

The Conceptual Framework is expected to do all of the following except: a. Ensure that CPAs act ethically in discharging their stewardship role. b. Provide a frame of reference for auditors for resolving accounting questions in situations where a standard does not exist. c. Increase users' understanding of and confidence in financial reporting. d. Enhance financial statement comparability across firms and over time.

a. is on hold

The FASB and IASB project to develop a joint Conceptual Framework a. Is on hold. b. Is ongoing with major progress expected this year. c. Has been abandoned due to inability to make progress. d. Is complete.

Internally consistent and internationally converged

The FASB's and IASB's joint project to develop a common conceptual framework is essential for developing high-quality standards that are?

a. materials

The characteristics of faithful representation of accouting information include all of the following EXCEPT: a. Material. b. Free from error. c. Neutral. d. Complete.

a. Individual companies, rather than to industries or the economy as a whole or to members of society as consumers.

The information provided by financial reporting pertains to: a. Individual companies, rather than to industries or the economy as a whole or to members of society as consumers. b. Individual companies and the economy as a whole, rather than to industries or to members of society as consumers. c. Individual companies, industries, and the economy as a whole, rather than to members of society as consumers. d. Individual companies and industries, rather than to the economy as a whole or to members of society as consumers.

d. All of the choices are correct

The period-of-time assumption: a. Requires the accountant to measure the assets, liabilities and owners' equity on the balance sheet as of the last day of each period. b. Requires the accountant to measure the financial performance of the corporation during each period. c. Uses an annual reporting period that is called the accounting period or fiscal year. d. All of the choices are correct.

Going Concern

The valuation of a promise to receive cash in the future at present value on the financial statements of a company is valid because of the accounting concept of?

a. Predictive value yes Confirmatory value Yes

eBookCalculator According to Statement of Financial Accounting Concepts No. 8, to be relevant an earnings report is expected to have which of the following? a.Predictive value yes Confirmatory value Yes b. Predictive value No Confirmatory value No c. Predictive value No Confirmatory value Yes d. Predictive value Yes Confirmatory value No