Accounting Exam 1 chapter 2

All of the following are qualities of useful information except

flexibility.

Which of the following is not a current liability?

Bonds Payable

Which of the following is not classified properly as a current asset?

A receivable from the sale of an asset to be collected in two years

Which of the following is not considered an asset?

Dividends

What organization issues U.S. accounting standards?

Financial Accounting Standards Board

Which one of the following is not an enhancing quality of useful information?

Materiality

The agency of the United States Government that oversees the U.S. financial markets is the

Security Exchange Commission.

The convention of consistency refers to consistent use of accounting principles

among accounting periods.

Generally accepted accounting principles

are accounting rules that are recognized as a general guide for financial reporting.

The quality of consistency enhances

comparability.

Accounting information is relevant to business decisions because it

confirms prior expectations.

A company using the same accounting principles from year to year is an application of

consistency.

In a classified balance sheet, assets are usually classified as

current assets; long-term investments; property, plant, and equipment; and intangible assets.

Liabilities are generally classified on a balance sheet as

current liabilities and long-term liabilities.

Declaring a cash dividend will

decrease retained earnings.

An intangible asset

derives its value from the rights and privileges it provides the owner.

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time.

Accounting information should be verifiable in order to enhance

faithful representation.

In order for accounting information to be relevant, it must

help predict future events or confirm prior expectations.

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash.

An item is considered material if

its size is likely to influence the decision of an investor or creditor.

Equipment is classified on the balance sheet as

property, plant, and equipment.

The two fundamental qualities of useful information are

relevance and faithful representation.

Information presented in a clear and concise fashion so that users can comprehend its meaning is an application of

understandability.

Information that is presented in a clear fashion, so that users of that information can interpret it is an example of

understandability.