Exam 1: An Introduction to Accounting Theory

Which of the following is not true regarding accounting theory?

Measurement is an integral part of accounting theory.

For which measurement scale must the change in the attribute measured among assigned numbers be equal?

Accounting theory includes the basic rules, definitions, and principles that underlie the drafting of accounting standards and how they are derived.

List arguments for and arguments against the use of historical cost, general price-level adjustment, exit value (net realizable value), and replacement cost (entry value). Explain why the discounted cash flow method is virtually impossible to apply in a real situation.

Which of the following specifically refers to the process of arriving at a pronouncement issued by the FASB or SEC?

Indirect measures are usually preferable to direct measures because they are less costly to obtain.

Identify four qualities that are pertinent to accounting measures.

Which of the following factors is not listed in your text as affecting a direct assessment measure?

Assessment measures are concerned with particular attributes of objects and are always direct measurements.

What is the policy function performed by bodies such as the FASB and the SEC? List and discuss the three sources of inputs to the policy-making function.

Which of the following groups carry out most accounting research?

Which of the following refers to accounting information that is used by investors, creditors, and other outside parties for analyzing management performance and decision-making?

For which measurement scale must the change in the attribute measured among assigned numbers be equal and the zero point imply the absence of the attribute measured?

List the four types of measurement scales in order of measurement rigor. Describe and give examples of each type of scale.

Throughout the financial history of the United States, current value has been the accepted valuation system for published financial statements.

Explain how a firm might use a special purpose entity (SPE) to subvert the standard-setting process.

Objectivity may be defined as the degree of consensus among measurers.

Accounting theory includes conceptual frameworks, accounting legislation, valuation models, and hypotheses and theories.

Both exit value and replacement cost are valuation systems that fall into the current value category.