Basic Concepts

Question 1

Info

Answer 1

Started on 2014 @ Am
Total questions
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Practice session

Question 2

According to the IASB Framework, the two criteria required for incorporating items into the income statement or statement of financial position are that

Answer 2

Recording an item in the financial statements requires classification and a dollar value.
It meets the definition of an element and can be measured reliably.

Question 3

Flagged

Answer 3

Regular sales, cost of regular sales, and general and administrative expenses do not affect the deferred gross profit account.

Question 4

According to the IASB Framework, the financial statement element that is defined as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants, is

Answer 4

Income

Question 5

The FASB’s conceptual framework classifies gains and losses based on whether they are related to an entity’s major ongoing or central operations. These gains or losses may be classified as

Answer 5

Nonoperating are “other” gains and losses.
Gains and losses may be described or classified as “operating” or “nonoperating,” depending on their relation to an entity’s major ongoing or central operations.

Question 6

When a company estimates its bad debt expense using the percent of net credit sales method, which of the following statements is true?

Answer 6

when bad debt expense is estimated based on a percentage of credit sales, the matching principle is being followed. The entity is attempting to estimate what part of this year’s sales will not be collected, thereby matching this year’s expense with this year’s sales.

Question 7

Prepaid insurance

Answer 7

Need to understand.

Question 8

When to use cost recovery method in IFRS

Answer 8

if the outcome of rendering services cannot be measured reliably, IFRS requires use of the cost recovery method.

Question 9

Which of the following organizations is responsible for setting International Financial Reporting Standards?

Answer 9

International Accounting Standards Board.

the International Accounting Standards Board (IASB) issues International Financial Reporting Standards.

Question 10

According to the FASB conceptual framework, earnings

Answer 10

Exclude certain gains and losses that are included in comprehensive income.

Question 11

Recognition of franchise fee

Answer 11

Revenue on a franchise agreement should be recognized when the franchisor has substantially performed all material services and conditions, and collectibility is reasonably assured. Baker should recognize $59,000 in revenue: the initial cash payment ($25,000) plus the present value of the future cash payments ($34,000).

Question 12

Under Statements of Financial Accounting Concepts, comprehensive income includes which of the following?

Answer 12

Comprehensive income consists not only of revenues, expenses, gains, and losses, but also various intermediate components or measures that result from combining the basic components. Examples of intermediate components or measures are gross margin, contribution margin, income from continuing operations, and operating income.

Question 13

comprehensive income includes which of the following?

Answer 13

comprehensive income consists not only of its basic components (revenues, expenses, gains, and losses) but also the various intermediate components or measures that result from combining the basic components (e.g., income from continuing operations).

Question 14

Royalties are recognized when received in year 3 for income tax purposes and recognized when earned in year 4 for financial statement purposes. This an example of a

Answer 14

Temporary difference that gives rise to deferred taxes.

Question 15

interperiod tax allocation?

Answer 15

interperiod tax allocation is the adjustment process that reflects tax expense based on pretax accounting income where the tax expense is different from taxes paid.

Question 16

Which of the following should be disclosed in a company’s financial statements related to deferred taxes?

Answer 16

The types and amounts of existing temporary differences.

The nature and amount of each type of operating loss and tax credit carry forward.

Question 17

At the most recent year-end, a company’s appropriately recognized non current deferred income tax asset exceeded a current deferred income tax liability. Which of the following should be reported in the company’s most recent year-end balance sheet?

Answer 17

The deferred income tax asset as a non current asset.
This answer is correct. Deferred taxes shall be classified into two categories: the net current amount and the net noncurrent amount. Therefore, the company’s balance sheet should report the deferred tax asset as a noncurrent asset and the deferred income tax liability as a current liability.

Question 18

example of the systematic and rational allocation expense recognition principle.

Answer 18

Allocation of insurance cost.

Depreciation of fixed assets.

Question 19

example of the expense recognition principle of associating cause and effect?

Answer 19

Sales commissions.
sales commissions are recognized as an expense on the basis of a presumed direct association with the related sales revenue.

Question 20

example of the immediate recognition expense recognition principle.

Answer 20

Officers’ salaries.

Question 21

what is timeliness?

Answer 21

Timeliness is an enhancing quality belonging to both relevance and faithful representation. It requires that information is available to a decision maker when it is useful to make a decision.

Question 22

Which of the following characteristics of accounting information primarily allows users of financial statements to generate predictions about an organization?

Answer 22

Relevance.

because the fundamental quality of relevance is comprised of predictive value and confirmatory value.

Question 23

Which organizations is responsible for setting International Financial Reporting Standards?

Answer 23

International Accounting Standards Board.