1 - Overview of Accounting

b. financial statements

21.These are the principal means through which an entity communicates its financial information to those outside it. a. managerial reports b. financial statements c. segment reports d. directors' statements

a. interpreting

22.The analytical phase of accounting which significantly portrays the liquidity, solvency, profitability of a business a. interpreting b. recording c. summarizing d. classification

a. to provide information useful in making economic decisions

23.The basic purpose of accounting is a. to provide information useful in making economic decisions b. to provide information useful only for investors c. to provide information regarding the economic resources controlled by an entity d. to provide business owners, politicians, and other government officials an opportunity to evade taxes

d. all of these

37.Whether a business is successful and thrives is determined by a. markets. b. free enterprise. c. competition d. all of these

d. all of these.

38.An effective capital allocation process a. promotes productivity. b. encourages innovation. c. provides an efficient market for buying and selling securities. d. all of these.

b. for-profit business

39.A business that operates to earn money for its owners is called a(n) a. economic entity b. for-profit business c. professional organization d. owner financed business

c. External events other than transfers

4. These events involve changes in the economic resources or obligations of entities involving other entities but do not involve transfers of resources or obligations a. External events b. Non-reciprocal transfers c. External events other than transfers d. Internal events

b. produce the goods and services they choose

40.A free enterprise system allows businesses to a. have their government choose their products b. produce the goods and services they choose c. buy goods at a discount d. operate at a profit

c. Accounting is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

1. Accounting has been given various definitions, which of the following is not one of those definitions a. Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. b. Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part of at least, of a financial character and interpreting the results thereof. c. Accounting is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users. d. Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgment and decisions by users of information.

c. payment of accounts payable

10.All of the following are events considered as nonreciprocal transfer, except a. declaration of cash dividends b. declaration of stock dividends c. payment of accounts payable d. imposition of fines

d. Yes, Yes

101. A city taxes merchants for various central district improvements. Which of the following accounting methods assist(s) in assuring that these revenues are expended legally? (Item #1) Fund accounting; (Item #2) Budgetary accounting a. Yes, No b. No, Yes c. No, No d. Yes, Yes

d. I, III, IV, V, VI

102. Which of the following correctly refer to the various branches of accounting? I. Government accounting deals with accounting for the national government and its instrumentalities, focusing attention on the custody of public funds and the purpose or purposes to which such funds are committed. II. Institutional accounting deals with handling of accounts managed by a person entrusted with the custody and management of property for the benefit of another. III. Estate accounting deals with the handling of accounts for fiduciaries who wind up the affairs of a deceased person. IV. Social responsibility accounting is the process of measuring and disclosing the performance of firm in terms of community involvement and related criteria. 16 V. Accounting Systems deals with the installation of accounting procedures for the accumulation of financial data; includes designing of accounting forms to be used in data gathering. VI. Cost accounting is the systematic recording and analysis of the costs of material, labor, and overhead incident to production. VII. Fiduciary accounting is the accounting for not-for-profit entities other than the government. a. I, II, III, IV, V, VI, VII b. I, II, IV, V, VI, VII c. I, III, IV, V, VI, VII d. I, III, IV, V, VI

b. It must be in compliance with the IFRSs.

103. Which of the following is not a characteristic of management accounting? a. The level of detail is greater than financial accounting. b. It must be in compliance with the IFRSs. c. There is one primary user group. d. It deals primarily with segments of an organization.

d. III

104. Which of the following statements correctly refer to financial reporting and accounting? I. Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations. II. Financial statements are the principal means through which financial information is communicated to those inside an enterprise. III. Users of the financial information provided by an entity use that information to make capital allocation decisions. IV. While objectives for financial reporting exist on an informal basis, no formal objectives have been adopted. V. Financial reports in the early 21st century did not provide any information about a company's soft assets. a. I, II, III, IV, V b. II, III, IV, V c. III, IV, V d. III

a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.

106. The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

c. hard assets (inventory and plant assets).

107. Financial statements in the early 2000s provide information related to a. non-financial measurements. b. forward-looking data. c. hard assets (inventory and plant assets). d. none of these.

c. imposition of fines

11.All of the following are events considered as external events other than transfers, except a. obsolescence b. inflation c. imposition of fines d. vandalism

d. vandalism committed by the entity's employees

12.All of the following are events considered as internal events, except a. Transfer of goods from work-in-process to finished goods inventory b. flood, earthquake, fire and other "Acts of God" c. transformation of biological assets from immature to mature d. vandalism committed by the entity's employees

d. conversion of raw materials into finished goods

13.Which of the following events is considered an internal event? a. sale of inventory on account b. provision of capital by owners c. borrowing of money d. conversion of raw materials into finished goods

c. payment of taxes

14.Which of the following events is considered an external event? a. production b. casualty loss c. payment of taxes d. growth of biological assets

d. degeneration of biological assets

15.Which of the following events is considered an internal event? a. theft b. contributions by owners c. vandalism d. degeneration of biological assets

b. II

16.Which of the following correctly relates to accountable events? I. An obsolete asset which has no use was received in exchange of an existing asset. This transaction may be classified as an exchange. II. An entity exchanges a non-cash asset for another non-cash asset in an exchange transaction with commercial substance. This is a reciprocal transfer. III. An entity issues its shares of stocks in exchange for a non-cash asset. This is a reciprocal transfer. a. I b. II c. II, III d. I, II, III

a. compensation received as damages in a successful lawsuit

17.An example of income derived from a nonreciprocal transfer is a. compensation received as damages in a successful lawsuit b. appreciation of property c. land acquired from a stockholder as donation d. settlement of a liability at less than its book value

c. reflect several financial attributes

18.Asset measurements in conventional financial statements a. are confined to historical cost b. are confined to historical cost and current cost c. reflect several financial attributes d. do not reflect output values

c. discount on capital stock

19.Financial statements are said to be a mixture of fact and opinion. Which of the following items is factual? a. cost of goods sold b. retained earnings c. discount on capital stock d. patent amortization expense

c. Net realizable value

20.On December 31, 200A, Annod Co. decided to end its operations and dispose its assets within three months. At December 31, 200A, the carrying amount of an investment property was less than both its fair value and net realizable value. The fair value is greater than the net realizable value. What is the appropriate measurement basis for the investment property in Annod's December 31, 200A statement of financial position? a. Historical cost b. Fair value c. Net realizable value d. Current replacement cost

b. II only

24.One objective of financial reporting is to provide information useful in assessing the amounts, timing, and uncertainty of future cash flows. In regards to this objective, which of the following is (are) correct? I. The emphasis on "assessing cash flow prospects" means that the cash basis is preferred over the accrual basis of accounting. II. Information based on accrual accounting generally better indicates an entity's present and continuing ability to generate favorable cash flows than does information limited to the financial effects of cash receipts and payments. a. I only b. II only c. I and II d. neither I nor II

d. Useful in predicting cash flows

25.The primary objective of financial reporting is to provide information: a. About a firm's financing and investing activities b. About a firm's economic resources and obligations c. About a firm's products and services d. Useful in predicting cash flows

d. All of these

26.Financial accounting applies to which of the following: a. Businesses b. Non-profit organizations c. Governments d. All of these

b. Showing the financial statement reader just how the resources entrusted to the management's care were managed

27.Stewardship reporting focuses on: a. Showing investors what sales revenues were b. Showing the financial statement reader just how the resources entrusted to the management's care were managed c. Showing employees how high their raises will be d. Showing the financial statement reader how many shop stewards are employed

b. Stewardship function

28.The function of measuring and reporting information to absentee investors is called the: a. Accounting function b. Stewardship function c. Auditing function d. Management function

c. II only

29.The following relate to financial reporting. Choose the correct statement(s). I. Since financial statements are historical, they are of little use in making decisions about the future. II. Financial accounting is based on the presumption that all statement users need the same information. III. Financial accounting is expressly designed to measure directly the value of a business enterprise a. I, III b. II, III c. II only d. None

d. III, IV

3. The following statements correctly refer to the accounting process. I. Measuring is the accounting process of analyzing business activities as to whether or not they will be recognized in the books. II. Recognition refers to the process of including the effects of an event in the totals of the statement of financial position or the statement of profit or loss and other comprehensive income through memo entries. III. Disclosure of events in the notes to financial statement without including in the totals of the statement of financial position or statement of profit or loss and other comprehensive income is not an application of the recognition principle. IV. An accountable event is an event that has an effect on the assets, liabilities or equity of an entity and its effect can be measured reliably. V. Sociological and psychological matters are within the scope of accounting. a. I, II, III, IV, V b. I, II, III, IV c. IV d. III, IV

c. Information that is comprehensible only to accountants and auditors who have reasonable understanding of business and economic activities and are willing to study the information with reasonable diligence.

30.Financial reporting should provide all of the following information, except a. Information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. b. Information that helps present and potential investors, creditors, and other users assess the amounts, timing, and uncertainty of prospective cash receipts from dividends or interest and the proceeds from the sale, redemption, or maturity of securities or loans. c. Information that is comprehensible only to accountants and auditors who have reasonable understanding of business and economic activities and are willing to study the information with reasonable diligence. d. Information that clearly portrays the economic resources of an enterprise, the claims to those resources and the effects of transactions, events, and circumstances that change its resources and claims to those resources.

c. environmental factors

31.Apart from the monetary impact, factors of decision making include: a. personal taste b. social factors c. environmental factors d. all of these

b. accounting information provides information about the outcomes of past decisions

32.For the purpose of decision making: a. accounting information provides information about future events b. accounting information provides information about the outcomes of past decisions c. the future is used as a guide to past estimates d. the accountant never becomes involved in the budgeting process.

c. sole proprietorship

34.The most common form of business organization is a a. corporation b. partnership c. sole proprietorship d. cell phone stand

c. III, V, VI

35.Which of the following statements are correct? I. The economic activities of a business enterprise increase or decrease its assets and liabilities but never its equity. II. An internal event involves a transfer or exchange between two or more entities. III. Exchange is an economic activity which involves trading resources and obligations for other resources or obligations. IV. Income recognition is a basic economic activity which involves the process of allocating rights to the use of outputs among individuals and groups in society. V. An event generally is the source or cause of changes in assets, liabilities, and equity. VI. Investment is the process of using current inputs to increase the stock of resources available for future output as opposed to immediately consumable output. a. III, IV, V b. I, II, III, V, VI c. III, V, VI d. II, III, VI

a. I, II

36.Which of the following statements correctly refer to the basic economic activities? I. Production is the process of converting economic resources into outputs of goods and services that are intended to have greater utility than the required inputs. II. Exchange is the process of trading resources or obligations for other resources or obligations. III. Consumption is the process of allocating rights to the use of output among individuals and groups in society. IV. Income distribution is the process of using the final output of the production process. V. Savings is the process of using current inputs to increase the stock of resources available for output as opposed to immediately consumable output. VI. Investment is the process by which individuals and groups set aside rights to present consumption in exchange for rights to future consumption. a. I, II b. I, II, III, IV c. I, II, V, VI d. I, II, III, IV, V, VI

a. I, V

49.Which of the following statements is correct? I. Accounting provides qualitative information, financial information, and quantitative information. II. Qualitative information is found in the notes to the financial statements only. III. Accounting is considered an art because it is supported by an organized body of knowledge IV. Accounting is considered a science because it involves the exercise of skill and judgment. V. Measurement is the process of assigning numbers to objects such inventories or plant assets and to events such as purchases or sales. VI. All quantitative information are also financial in nature. VII. The accounting process of assigning peso amounts or numbers to relevant objects and events is known as Identification. a. I, V b. I, II, VI, V c. I, II, III, IV, V d. II, VI, V

a. External events

5. Events involving an entity and an external party. a. External events b. Non-reciprocal transfers c. External events other than transfers d. Internal events

b. I, II, III, V, VIII

50.Which of the following statements is incorrect? I. The information contained in the financial statements is obtained exclusively from the firm's accounting records. II. Financial accounting is a science rather than an art while management accounting is an art rather than a science. III. Management decisions are oriented to the future whereas the decisions of external users are oriented to the past. IV. Financial accounting is a branch of accounting which deals primarily with the common needs of users while management accounting is a branch of accounting which deals primarily with the specific needs of users. V. Quantitative information is always more useful than non-quantitative information for the purpose of making economic decisions. VI. Financial statements are only one source of information needed by users to make rational economic decisions. VII. Financial statements have the same basic purpose as financial accounting. VIII. Financial statements are the only source of information needed by users to make rational economic decisions. a. IV, VII, VIII b. I, II, III, V, VIII c. IV, VI, VII d. I, II, III, V, VI, VII

a. Accounting system

51.The manner in which the accounting records are organized and employed within a business is referred to as a. Accounting system b. Business document c. Voucher system d. Special journals

b. it is fundamental to the communication of financial information

52.Accounting is often called the "language of business" because a. it is easy to understand b. it is fundamental to the communication of financial information c. all business owners have a good understanding of accounting principles d. accountants in many companies share financial information

a. Creative thinking

53.Accounting as an art involves the considerable use of judgment. Accountants should exercise creative and critical thinking in solving accounting problems. In solving accounting problems, this involves the use of imagination and insight by finding new relationships (ideas) among items of information. It is most important in identifying alternative solutions. a. Creative thinking b. Critical thinking c. Professional Skepticism d. Wishful thinking

c. III, II, V, I, IV

54.Creative skills and judgment is usually exercised in problem solving. State the correct order of the following steps in problem solving. I. Selecting a solution from among the alternatives II. Identifying alternative solutions III. Recognizing a problem IV. Implementing the solution V. Evaluating the alternatives a. III, II, IV, V, I b. I, II, III, V, IV c. III, II, V, I, IV d. I, II, III, VI, V

c. Evaluating the alternatives

55.Critical thinking is most important in which of the following problem-solving steps? a. Recognizing a problem b. Identifying alternative solutions c. Evaluating the alternatives d. Selecting a solution from among the alternatives

a. assign revenues and expenses to the appropriate accounting period.

58.Accrual accounting techniques are used to: a. assign revenues and expenses to the appropriate accounting period. b. record the anticipated effects of actions that may occur at a future date. c. report the results of actions whose monetary effects are difficult to estimate. d. allocate nonoperating revenues and expenses to the appropriate business unit.

b. it provides a better indication of ability to generate cash flows than the cash basis.

59.Accrual accounting is used because a. cash flows are considered less important. b. it provides a better indication of ability to generate cash flows than the cash basis. c. it recognizes revenues when cash is received and expenses when cash is paid. d. none of the above.

b. Non-reciprocal transfers

6. Events in which an entity transfers (or receives) economic resources to (from) another entity without directly receiving (or giving) value in exchange. a. External events b. Non-reciprocal transfers c. External events other than transfers d. Internal events

b. Going concern

61.The valuation of an assurance to receive cash in the future at present value on a business entity's financial statements is well-founded because of the accounting concept of: a. Entity b. Going concern c. Materiality d. Neutrality

b. periodicity

62.Business entity produces financial statements at arbitrary points in time in accordance with which basic accounting concept? a. objectivity b. periodicity c. conservatism d. matching

b. entity theory

63.Treating partners' salaries as an expense rather than as a means of allocating partnership profits is an application of what theory? a. proprietary theory b. entity theory c. residual equity theory d. funds theory

d. a, b or c

66.An accounting (financial reporting) period may be a. One month b. One quarter c. One year d. a, b or c

b. I, IV

67.Which of the following statements best reflects the accounting assumption of periodicity or time period? I. A fiscal year begins in any month and ends in any month but covers a period of 12 months II. A calendar year begins on any month and ends on any month but covers a period of 12 months III. Technically, an accounting year is synonymous with an accounting period. IV. Accounting periods are usually equal in length. a. I, II, III, IV b. I, IV c. I, III, IV d. II, III, IV

d. a and b

68.Which of the following best reflect(s) the reason(s) why companies select accounting periods other than a calendar year? a. to avoid closing books during peak sales period b. to close the books at a time when inventories and business activity are lowest c. to conform to auditors' request in order to reduce audit efforts and cost of counting d. a and b

b. calendar year

69.Most listed corporations in the Philippines have which type of accounting year? a. fiscal year b. calendar year c. quarterly d. indeterminate

d. Casualty

7. These events result to a sudden or unanticipated loss from fortuitous events. a. Internal events b. Non-reciprocal transfers c. External events other than transfers d. Casualty

d. From business' inception up to December 31, 20x2

71.An entity uses calendar year as its accounting period. The statement of financial position prepared on December 31, 20x2 covers the period a. December 31, 20x1 to December 31, 20x2 b. January 1, 20x1 to December 31, 20x2 c. January 1, 20x2 to December 31, 20x2 d. From business' inception up to December 31, 20x2

e. Under the Residual equity theory, the accounting objective is proper valuation of assets. This is applicable when there are two classes of stockholders, common and preferred. Thus, the equation is Assets - Liabilities + Preference Shareholders' Equity = Ordinary Shareholders' Equity.

72.Which of the following statements is incorrect regarding the basic accounting concepts? a. Under the Consistency concept, the financial statements should be prepared on the basis of accounting principles which are followed consistently. b. Under the Entity theory, the accounting objective is geared toward proper income determination. Proper matching of cost against revenue is the ultimate end. Entity theory emphasizes the income statement. This is explained by the equation Assets = Liabilities + Capital. c. Under the Proprietary theory the accounting objective is directed toward proper valuation of assets. This theory emphasizes the importance of the balance sheet. It is exemplified by the equation Assets - Liabilities = Capital. d. Under the Fund theory, the accounting objective is neither proper income determination nor proper valuation of assets but the custody and administration of funds. The objective is directed toward cash flows exemplified by the formula "cash inflows minus cash outflows equals fund." Government accounting and fiduciary accounting are examples of the application of this concept. e. Under the Residual equity theory, the accounting objective is proper valuation of assets. This is applicable when there are two classes of stockholders, common and preferred. Thus, the equation is Assets - Liabilities + Preference Shareholders' Equity = Ordinary Shareholders' Equity.

c. I, III

73.Which of the following statements correctly relate to the basic features of financial accounting? I. The going concern assumption is necessary for asset valuation at historical cost to have meaning. II. Inexact information always makes financial statements useless for decision making. III. Under the residual equity theory, preference share equity is deducted from total equity to arrive at ordinary share equity. IV. Materiality is always a quantitative as opposed to a qualitative concept. a. I, III, IV b. I, II, IV c. I, III d. I, II

c. I and II

74.The Full Disclosure Principle recognizes that the nature and amount of information included in financial reports reflects a series of judgmental trade-offs. The trade-offs strive for I. Sufficient detail to disclose matters that make a difference to users II. Sufficient condensation to make the information understandable, keeping in mind costs of preparing and using it a. I b. II c. I and II d. None

b. IV, V

76.Which of the following statements are correctly stated? I. Under the entity theory, the major accounting effort is accounting effort is directed toward proper valuation of assets rather income determination. What is more important is the valuation of assets because owners are interested in the real worth of their investment. This is expressed in accounting equation "assets - liabilities = capital". II. One of the basic features of financial accounting is the direct measurement of economic resources and obligations and changes in them in terms of money and sociological and psychological impact. III. The accounting process consists of two inter-related parts - the recording phase and the summarizing phase. The preparation of a trial balance is a step under the recording phase. IV. Financial accounting measurements are primarily based on prices at which economic resources and obligations are exchanged. V. Owners' equity is the excess of an enterprise's assets over its liabilities. VI. The financial position and results of operations of an entity are not fundamentally related. a. I, IV, V b. IV, V c. I, III, IV, V d. III, IV, V, VI

c. Sufficient information to be disclosed so that the financial statements are not misleading

79.What does the full disclosure principle require? a. All relevant information to be disclosed in the financial statements b. All relevant information to be disclosed in the financial statements and the notes accompanying the financial statements c. Sufficient information to be disclosed so that the financial statements are not misleading d. Sufficient information to be disclosed so that the financial statements may be used for investment and credit granting decisions

b. I, III, V

8. Which of the following statements is true? I. Loss from theft should be classified as a nonreciprocal transfer II. Internal events are changes in economic resources by actions of other entities that do not involve transfers of enterprise resources and obligations III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from an entity to other entities or from other entities to the entity. IV. Internal events are sudden, substantial, unanticipated reductions in enterprise resources not caused by other entities V. Fire, earthquake and flood are examples of accountable events classified as internal events. a. I, II, III, V b. I, III, V c. II, III, IV, V d. I, III, IV, V

b. materiality

80.Which accounting principle charges low-cost capital items such as waste baskets directly to an expense? a. historical cost b. materiality c. expense recognition d. matching

c. realization convention

82.The body of rules that dictates that the entire profit must be recognized at the moment and in the period of sale is called: a. cost convention b. going concern convent c. realization convention d. conservatism

d. In applying the matching principle, income is not recognized if the related expense cannot be determined reliably.

83.Which statements correctly refer to the basic principles used in accounting? a. The personal assets of the owner of a company will not appear on the company's balance sheet because of the principle of conservatism. b. The growing concern principle/guideline is associated with the assumption that the company will continue on long enough to carry out its objectives. c. An instance of application of the conservatism principle is when a very large corporation's financial statements have the peso amounts rounded to the nearest P1,000. d. In applying the matching principle, income is not recognized if the related expense cannot be determined reliably.

d. Cost

84.Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount? a. Conservatism b. Economic entity c. Monetary unit d. Cost

c. subscription on the entity's own equity instrument

9. All of the following are events considered as exchange or reciprocal transfer, except a. purchase of investment in equity securities b. sale of equipment for non-interest bearing note c. subscription on the entity's own equity instrument d. exchange of a note payable for an account payable e. borrowing of money from a bank

a. disclosure

90.Uncertainty and risk inherent in business situations should be adequately considered in financial reporting. This statement is an example of the concept of a. disclosure b. conservatism c. completeness d. neutrality

d. yes, yes

91.Revenue generally may be recognized when: (Item #1) The earning process is complete; (Item #2) An exchange has taken place a. yes, no b. no, yes c. no, no d. yes, yes

a. I, III, V

92.Which of the following statements is correctly stated? I. Effects of the events on the financial position of the enterprise are measured and represented by money amounts. II. The consistency principles refer to the use of original historical cost in the matching process. III. An accrued expense can best be described as an amount not paid but currently matched with earnings. IV. Generally, revenues should be recognized at a point when an order for a definite amount of merchandise has been received for shipment. V. Accounting process is governed by generally accepted principles which reflect the objectives and the basic features of financial accounting. a. I, III, V b. I, II, III, IV, V c. I, III, IV, V d. I, II, III, V

c. realization

93.Under what principle when revenue is generally recognized and when the earning process is virtually complete and an exchange has taken place a. consistency b. maturing c. realization d. conservatism

d. Proprietary theory

94.The accounting objective or theory that is directed towards proper valuation of assets a. Entity theory b. Residual equity theory c. Funds theory d. Proprietary theory

a. proprietary theory

95.A theory in financial accounting which is exemplified in the equation "Assets - Liabilities = Capital." a. proprietary theory b. entity theory c. residual equity theory d. fund theory

b. only one statement is false

96.The following statements relate to the standard of adequate disclosure: I. In complying with the standard of adequate disclosure, accountants are guided by the doctrine that more information is always better than less. II. Financial accounting information that meets the qualitative objectives of financial accounting also meets the reporting standard of adequate disclosure. III. Adequate disclosure is concerned not only with the kind of information contained in financial statements but also with the manner in which that information is presented. IV. The disclosure standard calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader of the statements. 15 State whether the foregoing statements are false: a. all of the statements are false b. only one statement is false c. only two statements are false d. three statements are false

b. Prudence

97.It is the exercise of care and caution in dealing with uncertainties in measurement so as not to overstate assets and income and not understate liabilities and expenses. a. Completeness b. Prudence c. Faithful representation d. Neutrality

a. conservatism

98.The general tendency toward early recognition of unfavorable events and minimization of the amount of net assets and net income is called: a. conservatism b. consistency c. neutrality d. verifiability

d. Assets and revenues are not overstated; liabilities and expenses are not understated

99.When uncertainty exists, the convention of conservatism uses estimates of a conservative nature in an attempt to ensure which of the following? a. Assets, revenues, liabilities, and expenses are not overstated b. Assets, revenues, liabilities, and expenses are not understated c. Assets and revenues are not understated; liabilities and expenses are not overstated d. Assets and revenues are not overstated; liabilities and expenses are not understated

a. Identifying

It is the first process used in accounting. It refers to the identification of events as to whether they are recognized or not in the financial statements. a. Identifying b. Measuring c. Communicating d. Auditing