Chp 2

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

1) which accounting elements should be recognized in financial statements. 2) when the accounting elements should be reported. 3) how the accounting elements should be measured. 4) when the accounting elements should be measured. Does include 4

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

1. cause and effect. 2. immediate consumption. 3. systematic and rational allocation over time. 4. None of these choices are exceptions. (X)

All of the following are sources of financial reporting except

1. financial statements. 2. notes to the financial statements. 3. supplementary information. 4. other information. (X)

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 _______________.

1. neutrality constraint 2. materiality constraint 3. understandability constraint 4. cost constraint (X)

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

1. possesses consistency. 2. has relevance. 3. is material. 4. is faithfully represented. (X)

According to the FASB hierarchy of decision-useful financial information, the two primary qualities making accounting information useful are

1. understandability and decision usefulness. 2. relevance and faithful representation. (X) 3. verifiability and comparability. 4. predictive value and confirmatory value.

FASB's financial reporting model identifies the five specific financial statements as

balance sheet, income statement, comprehensive income statement, statement of cash flows, and statement of shareholders' equity.

The conceptual framework is expected to accomplish all of the following except

enhance financial statement comparability only for companies in the financial services industry.

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

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

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

going concern assumption

Accrual accounting involves

matching expenses incurred to earn revenues in a particular period to those revenues earned during that period.

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.

Concept Statements are general proclamations that establish all of the following:

objectives of financial reporting. definitions of basic elements like assets and liabilities. how transactions, events, and arrangements should be presented and classified in 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.