Which statement is an implication of the going concern assumption?

All of these imply the going concern assumption.

The historical cost principle is credible.

Depreciation and amortization policies are justifiable and appropriate.

The current-noncurrent classification of assets and liabilities is justifiable and significant.

The economic entity assumption

Is applicable to all forms of business organizations

Is inapplicable to unincorporated businesses

Recognizes the legal aspects of business organizations

Requires periodic income measurement

In the Conceptual Framework, qualitative characteristics

Are considered either fundamental or enhancing.

Contribute to the decision-usefulness of financial reporting information.

Distinguish better information from inferior information for decision-making purposes.

Fundamental qualitative characteristics of accounting information are

Faithful representation and relevance

Enhancing qualitative characteristics of accounting information include

Comparability, understandability, timeliness and verifiability

Relevance, faithful representation and materiality

Faithful representation and timeliness

Materiality and understandability

The quality of faithful representation includes

Completeness, free from error and neutrality

Predictive value and confirmatory value

Comparability and understandability

Which is the best description of faithful representation?

Freedom from material error and bias

Influence on the economic decision of users

Inclusion of a degree of caution

Comprehensibility to users ovomx

Neutrality is supported by the exercise of prudence. Prudence is the exercise of care and caution when dealing with uncertainties in the measurement process such that

Assets and income are not overstated and liabilities and expenses are not understated.

Assets and income are overstated

Liabilities and expenses are understated

Assets, liabilities, income and expenses are not overstated.

The qualitative characteristic of relevance includes

Predictive value and confirmatory value

Comparability and understandability

Accounting information is considered relevant when it

Is capable of making a difference in a decision

Can be depended on to represent the economic conditions that it is intended to represent

Is understandable by reasonably informed users of accounting information

Which of the following statements about materiality is not correct?

Materiality is a matter of absolute size.

An item must make a difference or it need not be disclosed.

An item is material if omitting, misstating or shsiairing it could reasonably be expected to influence the economic decision of primary users.

Materiality is a subquality of relevance.

What is meant by comparability when discussing financial accounting information?

Information is measured and reported in a similar fashion across entities.

Information has predictive and feedback value.

Information is reasonably free from error

What is meant by consistency when discussing financial accounting information?

Information is measured and reported in a similar fashion across points in time.

Information is measured similarly across the industry.

The enhancing quality of understandability means the information should be understood by

Users with reasonable understanding of business and economic activities

Experts in the interpretation of financial statements

The Conceptual Framework includes which constraint?

All of the choices are constraints in the conceptual framework

Which of the following best describes the cost-benefit constraint?

The benefit of the information must be greater than the cost of providing it.

Financial information should be free from cost to users of the information

Cost of providing financial information is not always evident or measurable but must be considered.

Which statement is true about a reporting entity?

All of these statements are true about a reporting entity.

A reporting entity is an entity that is required or chooses to prepare financial statements.

A reporting entity can be a single entity or a portion of that entity or can comprise more than one entity.

A reporting is not necessarily a legal entity.

Which statement is true about financial statements of a reporting entity?

If the reporting entity is the parent alone, the financial statements are referred to as unconsolidated financial statements.

If the reporting entity comprises two or more entities that are not linked by a parent-subsidiary relationship, the financial statements are referred to as combined financial statements.

If the reporting entity comprises both the parent and its subsidiaries, the financial statements are referred to as unconsolidated financial statements.

All of these statements are true about the financial statements of a reporting entity.

What is the new definition of an asset under the Revised Conceptual Framework?

A present economic resource controlled by the entity as a result of past event.

A resource controlled by the entity as a result of past event and from which future economic benefit is expected to flow to the entity

A resource controlled by the entity and from which future economic benefit is expected to flow o the entity.

A present economic resource controlled by the entity as a result of past event and from which future economic benefit is expected to flow to the entity.

Which is not within the definition of an asset under the Revised Conceptual Framework?

Future economic benefit is expected to flow to entity.

An asset is a present economic resource.

The economic resource is a right that has the potential to produce economic benefits.

The economic resource is controlled by the entity as a result of past event.

What is the new definition of liability' under the Revised Conceptual Framework?

A present obligation of the entity to transfer an economic resource as a result of past event.

A present obligation of the entity arising from past event the settlement of w hich is expected to result in an inflow of economic benefit

A present obligation of the entity arising from present event.

An obligation that the entity has practical ability to avoid.

Under the Revised Conceptual Framework, which of the following criteria need not be satisfied for a liability to exist?

The settlement of the obligation is expected to result in an outflow of economic benefit.

when the entity has an obligation.

The obligation is to transfer an economic resource.

The obligation is a present obligation that exists as a result of a past event.

Which statement is not true about income and expenses?

Income and expenses are the elements that relate to financial position.

Income is increase in asset or decrease in liability that results in increase in equity other than that relating to contribution from equity holders.

Expense is decrease in asset or increase in liability that results in decrease in equity other than that relating to distribution to equity holders.

Income encompasses revenue and gain.

Trade-offs between the characteristics that make information useful may be necessary or beneficial. Issuance of interim financial statements is an example of a trade-off between

understandability and timeliness.

Which of the following statements about materiality is not correct?

All of these are correct statements about materiality.

An item must make a difference or it need not be disclosed.

Materiality is a matter of relative size or importance.

An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.

Which of the following statements concerning the cost-benefit relationship is not true?

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.

Business reporting should exclude information outside of management's expertise.

Management should not be required to report information that would significantly harm the company's competitive position.

Management should not be required to provide forecasted financial information.

Which of the following serves as the justification for the periodic recording of depreciation expense?

Systematic and rational allocation of cost over the periods benefited

Association of efforts (expense) with accomplishments (revenue)

Immediate recognition of an expense

Minimization of income tax liability

The accounting principle of matching is best demonstrated by

associating effort (expense) with accomplishment (revenue).

not recognizing any expense unless some revenue is realized.

recognizing prepaid rent received as revenue.

establishing an Appropriation for Contingencies account.

Revenue generally should be recognized

when realized or realizable and earned.

at the time of cash collection.

ACC 101_First Quiz

Authored by John Servidad

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which statement is true about the Conceptual Framework for Financial Reporting?

The Conceptual Framework is not a Standard.

The Conceptual Framework describes the objective of financial reporting and the concepts for general purpose financial statements.

In cases of conflict, the requirements of the relevant IFRS prevail over those of the Conceptual Framework.

All of these statements are true about the Conceptual Framework.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which is not a purpose of the Revised Conceptual Framework?

To assist the IASB to develop IFRS based on consistent concepts.

To assist preparers to develop consistent accounting policy when no standard applies to a particular transaction or when Standard allows a choice of accounting policy.

To assist all parties to understand and interpret the Standards.

To assist regulatory agencies in issuing rules and regulations for a particular industry.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What provides "the why" or the goal and purpose of accounting?

Measurement and recognition concept

Qualitative characteristic of accounting information

Element of financial statements

Objective of financial reporting

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The objective of financial reporting in the Conceptual Framework

Is the foundation for the Conceptual Framework.

Includes the qualitative characteristics that make accounting information useful.

Is not found in the Conceptual Framework.

All of the choices are correct regarding the objective of financial reporting.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The overall objective of financial reporting is to provide information

That is useful for decision making

About asset, liability and equity

About financial performance

That allows owners to assess management performance

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which statement is not a specific objective of financial reporting?

To provide information that is useful in investment and credit decisions.

To provide information about entity resources, claims against those resources and changes in those resources.

To provide information on the liquidation value of an entity.

To provide information that is useful in assessing cash flow prospects.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The assumption that an entity will not be sold or liquidated in the near future is known as

Economic entity assumption

Monetary unit assumption

Time period assumption

Going concern assumption

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ACC 101_First Quiz

Which statement is true about the Conceptual Framework for Financial Reporting?

Which is not a purpose of the Revised Conceptual Framework?

What provides "the why" or the goal and purpose of accounting?

The objective of financial reporting in the Conceptual Framework

The overall objective of financial reporting is to provide information

Which statement is not a specific objective of financial reporting?

The assumption that an entity will not be sold or liquidated in the near future is known as

Which statement is an implication of the going concern assumption?

The economic entity assumption

Consolidated financial statements are prepared when a parent-subsidiary relationship exists.

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