Question 1

In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting?

Accepted Answer

A) Measurement and recognition concepts such as assumptions, principles, and constraints 
B) Qualitative characteristics of accounting information 
C) Elements of financial statements 
D) Objective of financial reporting 
A) Measurement and recognition concepts such as assumptions, principles, and constraints 
B) Qualitative characteristics of accounting information 
C) Elements of financial statements 
D) Objective of financial reporting

Question 2

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 3

Revenue is generally recognized when a sale occurs.This statement describes the

Accepted Answer

A) consistency characteristic. 
B) matching principle. 
C) revenue recognition principle. 
D) relevance characteristic. 
A) consistency characteristic. 
B) matching principle. 
C) revenue recognition principle. 
D) relevance characteristic.

Question 4

Companies consider only quantitative factors in determining whether an item is material.

Accepted Answer

A) True 
 B)False

Question 5

Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the

Accepted Answer

A) economic entity assumption. 
B) relevance characteristic. 
C) comparability characteristic. 
D) neutrality characteristic. 
A) economic entity assumption. 
B) relevance characteristic. 
C) comparability characteristic. 
D) neutrality characteristic.

Question 6

Which of the following basic elements of financial statements is not associated with the statement of financial position?

Accepted Answer

A) Income. 
B) Equity. 
C) Liability. 
D) Asset. 
A) Income. 
B) Equity. 
C) Liability. 
D) Asset.

Question 7

Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company's stock price?

Accepted Answer

A) Full disclosure. 
B) Going concern. 
C) Historical cost. 
D) Matching. 
A) Full disclosure. 
B) Going concern. 
C) Historical cost. 
D) Matching.

Question 8

Which of the following (a-c) are not true concerning a conceptual framework in account-ing?

Accepted Answer

A) It should be a basis for standard-setting. 
B) It should allow practical problems to be solved more quickly by reference to it. 
C) It should be based on fundamental truths that are derived from the laws of nature. 
D) All of the above (a-c) are true. 
A) It should be a basis for standard-setting. 
B) It should allow practical problems to be solved more quickly by reference to it. 
C) It should be based on fundamental truths that are derived from the laws of nature. 
D) All of the above (a-c) are true.

Question 9

The International Accounting Standards Board has given companies the option of using fair value to report financial liabilities.

Accepted Answer

A) True 
 B)False

Question 10

The International Accounting Standards Board (IASB) defines one of the 5 elements as follows: "the residual interest in the assets of the entity after deducting all its liabilities" Which element matches this description?

Accepted Answer

A) Retained earnings. 
B) Income. 
C) Equity. 
D) All of the choices match this definition. 
A) Retained earnings. 
B) Income. 
C) Equity. 
D) All of the choices match this definition.

Question 11

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 12

The quality of information that gives assurance that it is reasonably free of error and bias

Accepted Answer

A) relevance. 
B) faithful representation. 
C) verifiability. 
D) neutrality. 
A) relevance. 
B) faithful representation. 
C) verifiability. 
D) neutrality.

Question 13

Which of the following is a fundamental quality of useful accounting information?

Accepted Answer

A) Comparability. 
B) Relevance. 
C) Consistency. 
D) Materiality. 
A) Comparability. 
B) Relevance. 
C) Consistency. 
D) Materiality.

Question 14

Which of the following is an implication of the going concern assumption?

Accepted Answer

A) The historical cost principle is credible. 
B) Depreciation and amortization policies are justifiable and appropriate. 
C) The current-noncurrent classification of assets and liabilities is justifiable and signify-cant. 
D) All of these. 
A) The historical cost principle is credible. 
B) Depreciation and amortization policies are justifiable and appropriate. 
C) The current-noncurrent classification of assets and liabilities is justifiable and signify-cant. 
D) All of these.

Question 15

The International Accounting Standards Board (IASB) defines five interrelated elements of financial statements.Which of the following is not one of those elements?

Accepted Answer

A) Asset. 
B) Income. 
C) Equity. 
D) All of the choices are elements defined by the IASB. 
A) Asset. 
B) Income. 
C) Equity. 
D) All of the choices are elements defined by the IASB.

Question 16

In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative characteristics distinguish better information from inferior information for decision-making purposes.

Accepted Answer

A) True 
 B)False

Question 17

Generally, revenue from sales should be recognized at a point when

Accepted Answer

A) management decides it is appropriate to do so. 
B) the product is available for sale to the ultimate consumer. 
C) the entire amount receivable has been collected from the customer and there remains no further warranty liability. 
D) none of these. 
A) management decides it is appropriate to do so. 
B) the product is available for sale to the ultimate consumer. 
C) the entire amount receivable has been collected from the customer and there remains no further warranty liability. 
D) none of these.

Question 18

To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, information must be all of the following except:

Accepted Answer

A) Complete. 
B) Free from error. 
C) Confirmatory. 
D) Neutral. 
A) Complete. 
B) Free from error. 
C) Confirmatory. 
D) Neutral.

Question 19

Under International Financial Reporting Standards (IFRS) companies must consider both quantitative and qualitative factors in determining whether an item is material.

Accepted Answer

A) True 
 B)False

Question 20

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) Statement of financial position. 
C) Income statement. 
D) Notes to financial statements. 
A) President's letter to shareholders. 
B) Statement of financial position. 
C) Income statement. 
D) Notes to financial statements.

Exam 2: Conceptual Framework Underlying Financial Accounting

In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting?

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

Revenue is generally recognized when a sale occurs.This statement describes the

Companies consider only quantitative factors in determining whether an item is material.

Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the

Which of the following basic elements of financial statements is not associated with the statement of financial position?

Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company's stock price?

Which of the following (a-c) are not true concerning a conceptual framework in account-ing?

The International Accounting Standards Board has given companies the option of using fair value to report financial liabilities.

The International Accounting Standards Board (IASB) defines one of the 5 elements as follows: "the residual interest in the assets of the entity after deducting all its liabilities" Which element matches this description?

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

The quality of information that gives assurance that it is reasonably free of error and bias

Which of the following is a fundamental quality of useful accounting information?

Which of the following is an implication of the going concern assumption?

The International Accounting Standards Board (IASB) defines five interrelated elements of financial statements.Which of the following is not one of those elements?

In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative characteristics distinguish better information from inferior information for decision-making purposes.

Generally, revenue from sales should be recognized at a point when

To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, information must be all of the following except:

Under International Financial Reporting Standards (IFRS) companies must consider both quantitative and qualitative factors in determining whether an item is material.

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

Financial Accounting and Accounting Standards

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position 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, Provisions, and Contingencies

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

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