Question 1

What is the primary objective of financial reporting as indicated in the conceptual framework?

Accepted Answer

A)  Provide information that is useful to those making investing and credit decisions. 
B)  Provide information that is useful to management. 
C)  Provide information about those investing in the entity. 
D)  All of these answer choices are correct. 
A)  Provide information that is useful to those making investing and credit decisions. 
B)  Provide information that is useful to management. 
C)  Provide information about those investing in the entity. 
D)  All of these answer choices are correct.

Question 2

Under Statement of Financial Accounting Concepts No. 2, free from error is an ingredient of the fundamental quality of

Accepted Answer

The answer of Under Statement of Financial Accounting Concepts No....

Question 3

The assumption that a company will not be sold or liquidated in the near future is known as the

Accepted Answer

A)  economic entity assumption. 
B)  monetary unit assumption. 
C)  periodicity assumption. 
D)  None of these answer choices are correct. 
A)  economic entity assumption. 
B)  monetary unit assumption. 
C)  periodicity assumption. 
D)  None of these answer choices are correct.

Question 4

Which basic assumption is illustrated when a firm reports financial results on an annual basis?

Accepted Answer

A)  Economic entity assumption. 
B)  Going concern assumption. 
C)  Periodicity assumption. 
D)  Monetary unit assumption. 
A)  Economic entity assumption. 
B)  Going concern assumption. 
C)  Periodicity assumption. 
D)  Monetary unit assumption.

Question 5

Although the FASB has developed a conceptual framework, no Statements of Financial Accounting Concepts have been issued to date.

Accepted Answer

A) True 
 B)False

Question 6

During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept?

Accepted Answer

A)  Cost constraint 
B)  Periodicity assumption 
C)  Conservatism constraint 
D)  Expense recognition principle 
A)  Cost constraint 
B)  Periodicity assumption 
C)  Conservatism constraint 
D)  Expense recognition principle

Question 7

Expensing the cost of copy paper when the paper is acquired is an example

Accepted Answer

A)  materiality. 
B)  expense recognition. 
C)  conservatism. 
D)  industry practices. 
A)  materiality. 
B)  expense recognition. 
C)  conservatism. 
D)  industry practices.

Question 8

What is prudence or conservatism?

Accepted Answer

A)  Understating assets and net income. 
B)  When in doubt, recognizing the option that is least likely to overstate assets and income. 
C)  Recognizing the option that is least likely to overstate assets and income. 
D)  Recognizing revenue when earned and realized. 
A)  Understating assets and net income. 
B)  When in doubt, recognizing the option that is least likely to overstate assets and income. 
C)  Recognizing the option that is least likely to overstate assets and income. 
D)  Recognizing revenue when earned and realized.

Question 9

Which of the following is not a required component of financial statements prepared in accordance with generally accepted accounting principles?

Accepted Answer

A)  President's letter to shareholders. 
B)  Balance sheet. 
C)  Income statement. 
D)  Notes to financial statements. 
A)  President's letter to shareholders. 
B)  Balance sheet. 
C)  Income statement. 
D)  Notes to financial statements.

Question 10

According to the FASB's conceptual framework, earnings

Accepted Answer

A)  is the same as comprehensive income. 
B)  excludes certain gains and losses that are included in comprehensive income. 
C)  includes certain gains and losses that are excluded from comprehensive income. 
D)  includes certain losses that are excluded from comprehensive income. 
A)  is the same as comprehensive income. 
B)  excludes certain gains and losses that are included in comprehensive income. 
C)  includes certain gains and losses that are excluded from comprehensive income. 
D)  includes certain losses that are excluded from comprehensive income.

Question 11

Neutrality means that information

Accepted Answer

A)  provides benefits which are at least equal to the costs of its preparation. 
B)  can be compared with similar information about an enterprise at other points in time. 
C)  would have no impact on a decision maker. 
D)  cannot favor one set of interested parties over another. 
A)  provides benefits which are at least equal to the costs of its preparation. 
B)  can be compared with similar information about an enterprise at other points in time. 
C)  would have no impact on a decision maker. 
D)  cannot favor one set of interested parties over another.

Question 12

Matching concept.
A concept is a group of related ideas. Matching could be considered a concept because it includes ideas related to expense recognition. Briefly explain the ideas in expense recognition.

Accepted Answer

The ideas in expense recognition include

Question 13

Revenues, gains, and distributions to owners all increase equity.

Accepted Answer

A) True 
 B)False

Question 14

What accounting concept justifies the usage of depreciation and amortization policies?

Accepted Answer

A)  Going concern assumption 
B)  Fair value principle 
C)  Full disclosure principle 
D)  Monetary unit assumption 
A)  Going concern assumption 
B)  Fair value principle 
C)  Full disclosure principle 
D)  Monetary unit assumption

Question 15

Which of the following is not a basic assumption underlying the financial accounting structure?

Accepted Answer

A)  Economic entity assumption. 
B)  Going concern assumption. 
C)  Periodicity assumption. 
D)  Historical cost assumption. 
A)  Economic entity assumption. 
B)  Going concern assumption. 
C)  Periodicity assumption. 
D)  Historical cost assumption.

Question 16

The underlying theme of the conceptual framework is

Accepted Answer

A)  decision usefulness. 
B)  understandability. 
C)  faithful representation. 
D)  comparability. 
A)  decision usefulness. 
B)  understandability. 
C)  faithful representation. 
D)  comparability.

Question 17

According to Statement of Financial Accounting Concepts No. 2, completeness is an ingredient of the fundamental quality of

Accepted Answer

The answer of According to Statement of Financial Accounting Concepts...

Question 18

Information about different companies and about different periods of the same company can be prepared and presented in a similar manner. Comparability and consistency are related to which of these objectives?

Accepted Answer

The answer of Information about different companies and about different...

Question 19

What is meant by consistency when discussing financial accounting information?

Accepted Answer

A)  Information that is measured and reported in a similar fashion across points in time. 
B)  Information is timely. 
C)  Information is measured similarly across the industry. 
D)  Information is verifiable. 
A)  Information that is measured and reported in a similar fashion across points in time. 
B)  Information is timely. 
C)  Information is measured similarly across the industry. 
D)  Information is verifiable.

Question 20

The idea of consistency does not mean that companies cannot switch from one accounting method to another.

Accepted Answer

A) True 
 B)False

Exam 2: Conceptual Framework for Financial Reporting

What is the primary objective of financial reporting as indicated in the conceptual framework?

Under Statement of Financial Accounting Concepts No. 2, free from error is an ingredient of the fundamental quality of

The assumption that a company will not be sold or liquidated in the near future is known as the

Which basic assumption is illustrated when a firm reports financial results on an annual basis?

Although the FASB has developed a conceptual framework, no Statements of Financial Accounting Concepts have been issued to date.

During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept?

Expensing the cost of copy paper when the paper is acquired is an example

What is prudence or conservatism?

Which of the following is not a required component of financial statements prepared in accordance with generally accepted accounting principles?

According to the FASB's conceptual framework, earnings

Neutrality means that information

Matching concept. A concept is a group of related ideas. Matching could be considered a concept because it includes ideas related to expense recognition. Briefly explain the ideas in expense recognition.

Revenues, gains, and distributions to owners all increase equity.

What accounting concept justifies the usage of depreciation and amortization policies?

Which of the following is not a basic assumption underlying the financial accounting structure?

The underlying theme of the conceptual framework is

According to Statement of Financial Accounting Concepts No. 2, completeness is an ingredient of the fundamental quality of

Information about different companies and about different periods of the same company can be prepared and presented in a similar manner. Comparability and consistency are related to which of these objectives?

What is meant by consistency when discussing financial accounting information?

The idea of consistency does not mean that companies cannot switch from one accounting method to another.

Financial Accounting and Accounting Standards

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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