Question 1

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?

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 2

Application of the full disclosure principle

Accepted Answer

A) is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits. 
B) is violated when important financial information is buried in the notes to the financial statements. 
C) is demonstrated by the use of supplementary information presenting the effects of changing prices. 
D) requires that the financial statements be consistent and comparable. 
A) is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits. 
B) is violated when important financial information is buried in the notes to the financial statements. 
C) is demonstrated by the use of supplementary information presenting the effects of changing prices. 
D) requires that the financial statements be consistent and comparable.

Question 3

An enhancing quality as described by the International Accounting Standards Board's (IASB's) Conceptual Framework is comparability.

Accepted Answer

A) True 
 B)False

Question 4

The basic assumptions of accounting used by the International Accounting Standards Board (IASB) include

Accepted Answer

A) Monetary unit. 
B) Decision usefulness 
C) Timeliness. 
D) All of the choices are basic assumptions of accounting. 
A) Monetary unit. 
B) Decision usefulness 
C) Timeliness. 
D) All of the choices are basic assumptions of accounting.

Question 5

A soundly developed conceptual framework enables the International Accounting Standards Board (IASB) to issue more useful and consistent pronouncements over time.

Accepted Answer

A) True 
 B)False

Question 6

Enhancing qualities as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, include all of the following except:

Accepted Answer

A) Comparability. 
B) Neutrality. 
C) Understandability. 
D) Verifiability. 
A) Comparability. 
B) Neutrality. 
C) Understandability. 
D) Verifiability.

Question 7

A soundly developed conceptual framework of concepts and objectives should

Accepted Answer

A) increase financial statement users' understanding of and confidence in financial reporting. 
B) enhance comparability among companies' financial statements. 
C) allow new and emerging practical problems to be more quickly solved. 
D) all of these. 
A) increase financial statement users' understanding of and confidence in financial reporting. 
B) enhance comparability among companies' financial statements. 
C) allow new and emerging practical problems to be more quickly solved. 
D) all of these.

Question 8

Which of the following is not a time when revenue may be recognized?

Accepted Answer

A) At time of sale 
B) At receipt of cash 
C) During production 
D) All of these are possible times of revenue recognition. 
A) At time of sale 
B) At receipt of cash 
C) During production 
D) All of these are possible times of revenue recognition.

Question 9

To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, information must be confirmatory.

Accepted Answer

A) True 
 B)False

Question 10

In the International Accounting Standards Board's (IASB's) Conceptual Framework, an ingredient of a fundamental qualitative characteristic is

Accepted Answer

A) Neutrality. 
B) Verifiability. 
C) Timeliness. 
D) Understandability. 
A) Neutrality. 
B) Verifiability. 
C) Timeliness. 
D) Understandability.

Question 11

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\benefit constraint 
B) Periodicity assumption 
C) Materiality constraint 
D) Expense recognition principle 
A) Cost\benefit constraint 
B) Periodicity assumption 
C) Materiality constraint 
D) Expense recognition principle

Question 12

The objective of financial reporting in the International Accounting Standards Board's (IASB's) Conceptual Framework

Accepted Answer

A) Is the foundation for the Framework. 
B) Includes the qualitative characteristics that make accounting information useful. 
C) Is found on the third level of the Framework. 
D) All of the choices are correct regarding the objective of financial reporting. 
A) Is the foundation for the Framework. 
B) Includes the qualitative characteristics that make accounting information useful. 
C) Is found on the third level of the Framework. 
D) All of the choices are correct regarding the objective of financial reporting.

Question 13

Issuance of common stock for cash affects which basic element of financial statements?

Accepted Answer

A) Revenues. 
B) Losses. 
C) Liabilities. 
D) Equity. 
A) Revenues. 
B) Losses. 
C) Liabilities. 
D) Equity.

Question 14

The periodicity basic assumptions of accounting (used by the International Accounting Standards Board) makes depreciation and amortization policies justifiable and appropriate.

Accepted Answer

A) True 
 B)False

Question 15

One of two assumptions made by the IASB conceptual framework is that the reporting entity is a going concern.

Accepted Answer

A) True 
 B)False

Question 16

A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards.

Accepted Answer

A) True 
 B)False

Question 17

The International Accounting Standards Board's (IASB's) Conceptual Framework includes all of the following except:

Accepted Answer

A) Objective of financial reporting. 
B) Supplementary information 
C) Elements of financial statements. 
D) Qualitative characteristics of accounting information. 
A) Objective of financial reporting. 
B) Supplementary information 
C) Elements of financial statements. 
D) Qualitative characteristics of accounting information.

Question 18

The two fundamental qualities that make accounting information useful for decision making are

Accepted Answer

A) comparability and consistency. 
B) materiality and timeliness. 
C) relevance and faithful representation. 
D) reliability and comparability. 
A) comparability and consistency. 
B) materiality and timeliness. 
C) relevance and faithful representation. 
D) reliability and comparability.

Question 19

An implicit assumption of the International Accounting Standards Board's (IASB's) Conceptual Framework is that

Accepted Answer

A) Information must be decision-useful to all potential users of financial reporting. 
B) General-purpose financial reporting is the primary source of information for users of financial reporting. 
C) Users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements. 
D) All of the choices are correct. 
A) Information must be decision-useful to all potential users of financial reporting. 
B) General-purpose financial reporting is the primary source of information for users of financial reporting. 
C) Users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements. 
D) All of the choices are correct.

Question 20

Under International Financial Reporting Standards (IFRS) supplementary information may be information that is high in relevance but low in reliability.

Accepted Answer

A) True 
 B)False

Exam 2: Conceptual Framework Underlying Financial Accounting

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?

Application of the full disclosure principle

An enhancing quality as described by the International Accounting Standards Board's (IASB's) Conceptual Framework is comparability.

The basic assumptions of accounting used by the International Accounting Standards Board (IASB) include

A soundly developed conceptual framework enables the International Accounting Standards Board (IASB) to issue more useful and consistent pronouncements over time.

Enhancing qualities as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, include all of the following except:

A soundly developed conceptual framework of concepts and objectives should

Which of the following is not a time when revenue may be recognized?

To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, information must be confirmatory.

In the International Accounting Standards Board's (IASB's) Conceptual Framework, an ingredient of a fundamental qualitative characteristic is

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

The objective of financial reporting in the International Accounting Standards Board's (IASB's) Conceptual Framework

Issuance of common stock for cash affects which basic element of financial statements?

The periodicity basic assumptions of accounting (used by the International Accounting Standards Board) makes depreciation and amortization policies justifiable and appropriate.

One of two assumptions made by the IASB conceptual framework is that the reporting entity is a going concern.

A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards.

The International Accounting Standards Board's (IASB's) Conceptual Framework includes all of the following except:

The two fundamental qualities that make accounting information useful for decision making are

An implicit assumption of the International Accounting Standards Board's (IASB's) Conceptual Framework is that

Under International Financial Reporting Standards (IFRS) supplementary information may be information that is high in relevance but low in reliability.

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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