front 1 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. | back 1 C.
derive their credibility and authority from general recognition and acceptance by the accounting profession. |
front 2 In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting?
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 | back 2 D.
Objective of financial reporting |
front 3 Enhancing qualities include all of the following except
A.
timeliness
B.
comparability.
C.
verifiability.
D.
materiality. | |
front 4 In order to be relevant, financial information must have all of the following ingredients of fundamental qualities except
A.
be free from error.
B.
have predictive value.
C.
be material.
D.
have confirmatory value. | |
front 5 A decrease in net assets arising from peripheral or incidental transactions is called a(n)
A.
capital expenditure.
B.
cost.
C.
loss.
D.
expense. | |
front 6 Under current GAAP, inflation is ignored in accounting due to the
A.
economic entity assumption.
B.
going concern assumption.
C.
monetary unit assumption.
D.
periodicity assumption. | back 6 C.
monetary unit assumption. |
front 7 Revenue is generally recognized when realized or realizable and earned. This statement describes the
A.
completeness characteristic.
B.
matching principle.
C.
revenue recognition principle.
D.
relevance characteristic. | back 7 C.
revenue recognition principle. |
front 8 Which of the following statements concerning the cost-benefit relationship is not true?
A.
Business reporting should exclude information outside of management's expertise.
B.
Management should not be required to report information that would significantly harm the company's competitive position.
C.
Management should not be required to provide forecasted financial information.
D.
If needed by financial statement users, management should gather information not included in the financial statements that would not otherwise be gathered for internal use. | back 8 D.
If needed by financial statement users, management should gather information not included in the financial statements that would not otherwise be gathered for internal use. |
front 9 Which of the following is/are not true concerning a conceptual framework in accounting?
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 these are true. | back 9 C.
It should be based on fundamental truths that are derived from the laws of nature. |
front 10 Which level of the conceptual framework is devoted to recognition and measurement concepts?
A.
4th
B.
3rd
C.
2nd
D.
1st | |
front 11 The underlying theme of the conceptual framework is
A.
decision usefulness.
B.
understandability.
C.
reliability.
D.
comparability. | |
front 12 Accounting information is considered to be relevant when it
A.
can be depended on to represent the economic conditions and events that it is intended to represent.
B.
is capable of making a difference in a decision.
C.
is understandable by reasonably informed users of accounting information.
D.
is verifiable and neutral. | back 12 B.
is capable of making a difference in a decision. |
front 13 One of the elements of financial statements is comprehensive income. As described in Statement of FinancialAccounting Concepts No. 6, "Elements of Financial Statements," comprehensive income is equal to
A.
revenues minus expenses plus gains minus losses.
B.
revenues minus expenses plus gains minus losses plus investments by owners minus distributions to owners.
C.
revenues minus expenses plus gains minus losses plus investments by owners minus distributions to owners plus assets minus liabilities.
D.
none of these. | |
front 14 Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the
A.
economic entity assumption.
B.
relevance characteristic.
C.
comparability characteristic.
D.
neutrality characteristic. | back 14 A.
economic entity assumption. |
front 15 "When products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash" is a definition of
A.
allocated revenue.
B.
realized revenue.
C.
realizable revenue.
D.
earned revenue. | |
front 16 Expensing the cost of a wastebasket with an estimated useful life of 10 years as an expense of the period when purchased is an example of applying the
A.
consistency characteristic.
B.
expense recognition principle.
C.
materiality quality.
D.
historical cost principle. | |
front 17 All of the following statements about the conceptual framework are correct except it:
A.
is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards.
B.
prescribes the nature, function, and limits of financial accounting and financial statements.
C.
increases financial statement users' understanding of and confidence in financial reporting.
D.
All of these options are correct. | back 17 D.
All of these options are correct. |
front 18 The first level of the conceptual framework is the:
A.
elements of financial statements.
B.
objective of financial reporting.
C.
qualitative characteristics of accounting information.
D.
recognition and measurement concepts. | back 18 B.
objective of financial reporting. |
front 19 Which of the following is an ingredient of the fundamental quality of faithful representation?
A.
freedom from error.
B.
predictive value.
C.
materiality.
D.
confirmatory value. | |
front 20 All of the following are ingredients of relevance except:
A.
feedback value.
B.
predictive value.
C.
materiality.
D.
neutrality. | |
front 21 Enhancing qualities of accounting information include:
A.
comparability and verifiability.
B.
cost/benefits and materiality.
C.
relevance and faithful representation.
D.
completeness and neutrality. | back 21 A.
comparability and verifiability. |
front 22 Which of the following statements about comprehensive income is incorrect?
A.
It is more inclusive than the traditional notion of net income.
B.
Unrealized holding gains on available-for-sale securities are included in comprehensive income.
C.
It includes all changes in equity during a period except net income.
D.
Changes in equity of an entity during a period from transactions and other events from nonowner sources are included in comprehensive income. | back 22 C.
It includes all changes in equity during a period except net income. |
front 23 Increases in equity from peripheral or incidental transactions of an entity are:
A.
expenses.
B.
gains.
C.
investments by owners.
D.
revenues. | |
front 24 Depreciation and amortization policies are justifiable and appropriate because of the:
A.
economic entity assumption.
B.
going concern assumption.
C.
monetary unit assumption.
D.
periodicity assumption. | back 24 B.
going concern assumption. |
front 25 The assumption that implies that the economic activities of an enterprise can be divided into artificial time periods is the:
A.
economic entity assumption.
B.
going concern assumption.
C.
monetary unit assumption.
D.
periodicity assumption. | back 25 D.
periodicity assumption. |
front 26 Generally, revenue should be recognized:
A.
during production.
B.
at the end of production.
C.
at the time of sale.
D.
at the time cash is received. | |
front 27 Generally, expenses are recognized when the:
A.
wages are paid.
B.
work is performed.
C.
product is produced.
D.
work or product actually makes its contribution to revenue. | back 27 D.
work or product actually makes its contribution to revenue. |