ACC 303 Week 3 Quiz – Strayer NEW
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Chapter 2
CONCEPTUAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
1. A
soundly developed conceptual framework enables the FASB to issue more useful
and consistent pronouncements over time.
2. A
conceptual framework is a coherent system of concepts that flow from an
objective.
3. The
first level of the conceptual framework identifies the recognition,
measurement, and disclosure concepts used in establishing accounting standards.
4. The
IASB has also issued a conceptual framework and the FASB and the IASB have
agreed to develop a common conceptual framework.
5. Although
the FASB has developed a conceptual framework, no Statements of Financial
Accounting Concepts have been issued to date.
6. The
objective of financial reporting is the foundation of the conceptual framework.
7. Users
of financial statements are assumed to need no knowledge of business and
financial accounting matters to understand information contained in financial
statements.
8. Relevance
and faithful representation are the two primary qualities that make accounting
information useful for decision making.
9. The
idea of consistency does not mean that companies cannot switch from one accounting
method to another.
10. Timeliness
and neutrality are two ingredients of relevance.
11. Verifiability
and predictive value are two ingredients of faithful representation.
12. Revenues,
gains, and distributions to owners all increase equity.
13. Comprehensive
income includes all changes in equity during a period except those resulting
from investments by owners and distributions to owners.
14. The
historical cost principle would be of limited usefulness if not for the going
concern assumption.
15. The
economic entity assumption means that economic activity can be identified with
a particular legal entity.
16. The
expense recognition principle states that debits must equal credits in each
transaction.
17. Revenues
are realizable when assets received or held are readily convertible into cash
or claims to cash.
18. Supplementary
information may include details or amounts that present a different perspective
from that adopted in the financial statements.
19. In
order to justify reguiring a particular measurement or disclosure, the benefits
to be derived from it must equal the costs associated with it.
20. Prudence
or conservatism means when in doubt, choose the solution that will be least
likely to overstate liabilities or expenses.
True False Answers—Conceptual
MULTIPLE CHOICE—Conceptual
21. Generally accepted accounting principles
a. are fundamental truths or axioms that can be
derived from laws of nature.
b. derive their authority from legal court
proceedings.
c. derive their credibility and authority from
general recognition and acceptance by the accounting profession.
d. have been specified in detail in the FASB
conceptual framework.
22. A
soundly developed conceptual framework of concepts and objectives should
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.
23. Which
of the following are not true
concerning a conceptual framework in account-ing?
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.
24. What
is a purpose of having a conceptual framework?
a. To enable the profession to more quickly
solve emerging practical problems.
b. To provide a foundation from which to build
more useful standards.
c. Neither a nor b.
d. Both a and b.
S25. Which
of the following is not a benefit associated with the FASB Conceptual Framework
Project?
a. A conceptual framework should increase
financial statement users' understanding of and confidence in financial
reporting.
b. Practical problems should be more quickly
solvable by reference to an existing conceptual framework.
c. A coherent set of accounting standards and
rules should result.
d. Business entities will need far less
assistance from accountants because the financial reporting process will be
quite easy to apply.
26. In
the conceptual framework for financial reporting, what provides "the
why"--the purpose of accounting?
a. Recognition,measurement, and disclosure
concepts such as assumptions, principles, and constraints
b. Qualitative characteristics of accounting
information
c. Elements of financial statements
d. Objective of financial reporting
27. The
underlying theme of the conceptual framework is
a. decision usefulness.
b. understandability.
c. faithful representation.
d. comparability.
28. Which
of the following is not an objective
of financial reporting?
a. To provide information about economic
resources, the claims to those resources, and the changes in them.
b. To provide information that is helpful to
investors and creditors and other users in assessing the amounts, timing, and
uncertainty of future cash flows.
c. To provide information that is useful to
those making investment and credit decisions.
d. All of these are objectives of financial
reporting.
P29. The
objectives of financial reporting include all of the following except to
provide information that
a. is useful to the Internal Revenue Service in
allocating the tax burden to the business community.
b. is useful to those making investment and
credit decisions.
c. is helpful in assessing future cash flows.
d. identifies the economic resources (assets),
the claims to those resources (liabilities), and the changes in those resources
and claims.
30. What is a primary objective of financial reporting as indicated
in the conceptual framework?
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 the above.
31. What is a primary objective of financial reporting as indicated
in the conceptual framework?
a. Provide information that is helpful to
present and potential investors, creditors, and other users in assessing the
amounts, timing, and uncertainty of future cash flows.
b. Provide information that is helpful to
present investors, creditors, and other users in assessing the amounts, timing,
and uncertainty of future cash flows.
c. Provide information that is helpful to
potential investors, creditors, and other users in assessing the amounts,
timing, and uncertainty of future cash flows.
d. None of the above.
32. Which of the following is a fundamental characteristic of useful
accounting information?
a. Comparability.
b. Relevance.
c. Neutrality.
d. Materiality.
33. Which of the following is a primary characteristic of useful
accounting information?
a. Conservatism.
b. Comparability.
c. Faithful representation.
d. Consistency.
34. What is meant by comparability when discussing financial
accounting information?
a. Information has predictive or confirmatory
value.
b. Information is reasonably free from error.
c. Information that is measured and reported in
a similar fashion across companies.
d. Information is timely.
35. What is meant by consistency when discussing financial
accounting information?
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.
36. Which of the following is an ingredient of relevance?
a. Verifiability.
b. Neutrality.
c. Timeliness.
d. Materiality.
37. Which of the following is an ingredient of faithful
representation?
a. Predictive value.
b. Materiality.
c. Neutrality.
d. Confirmatory value.
38. Changing the method of inventory valuation should be reported in
the financial statements under what qualitative characteristic of accounting
information?
a. Consistency.
b. Verifiability.
c. Timeliness.
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