Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACC124 > CFAS - CHAPTER 3 > Flashcards

CFAS - CHAPTER 3 Flashcards

1
Q

What are the attributes that make the information provided in the financial statements useful to the readers?

a. Qualitative characteristics of financial information
b. Quantitative characteristics of financial information
c. Elements of financial statements
d. Objectives of financial reporting

A

a. Qualitative characteristics of financial information

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Qualitative characteristics

a. Are considered either fundamental or enhancing.
b. Contribute to the decision-usefulness of financial reporting information.
c. Distinguish better information from inferior information for decision-making purposes.
d. All of the choices are correct.

A

d. All of the choices are correct.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

The fundamental qualitative characteristics are

a. Relevance and faithful representation
b. Relevance, faithful representation and materiality
c. Relevance and reliability
d. Faithful representation and materiality

A

a. Relevance and faithful representation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Accounting information is considered 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.

A

b. Is capable of making a difference in a decision.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

The ingredients of relevant financial information are

a. Predictive value and confirmatory value
b. Predictive value, confirmatory value and timeliness
c. Predictive value, confirmatory value and materiality
d. Predictive value, confirmatory value, timeliness and materiality

A

a. Predictive value and confirmatory value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the quality of information that gives assurance that it is reasonably free of error and bias?

a. Relevance
b. Faithful representation
c. Verifiability
d. Neutrality

A

b. Faithful representation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Which of the following is the best description of faithful representation in relation to information in financial statements?

a. Influence on the economic decisions of users
b. Inclusion of a degree of caution
c. Freedom from material error
d. Comprehensibility to users

A

c. Freedom from material error

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

To achieve faithful representation, the financial statements

a. Must have predictive and confirmatory value.
b. Must be complete, neutral and reasonably free from error.
c. Are understandable, comparable, verifiable and timely.
d. Must possess all of these.

A

b. Must be complete, neutral and reasonably free from error

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users.

a. Relevance
b. Verifiability
c. Neutrality
d. Completeness

A

c. Neutrality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

In the event of conflict between the economic substance of a transaction and the legal form, the economic substance shall prevail.

a. Form over substance
b. Substance over form
c. Relevance
d. Completeness

A

b. Substance over form

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The enhancing qualitative characteristics of financial information are

a. Comparability and understandability
b. Verifiability and timeliness
c. Comparability, understandability and verifiability
d. Comparability, understandability, verifiability and timeliness

A

d. Comparability, understandability, verifiability and timeliness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Financial information exhibits consistency when

a. Accounting procedures are adopted which smooth net income and make results consistent between years.
b. Gains and losses are shown separately on the income statement.
c. Accounting entities give similar events the same accounting treatment each period.
d. Expenditures are reported as expenses.

A

c. Accounting entities give similar events the same accounting treatment each period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

When information about two different entities engaged in the same industry has been prepared and presented in similar manner, the information exhibits the enhancing qualitative characteristic of

a. Relevance.
b. Faithful representation
c. Consistency
d. Comparability

A

d. Comparability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

The characteristic that is demonstrated when a high. degree of consensus can be secured among independent measurers using the same measurement method is

a. Relevance
b. Understandability
c. Verifiability
d. Neutrality

A

c. Verifiability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Which concept of accounting holds that, to the maximum extent possible, financial statements shall be based on arm’s length transactions?

a. Revenue realization
b. Verifiability
c. Monetary unit
d. Matching

A

b. Verifiability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

An entity issuing the annual financial reports within one month after the end of reporting period is an example of which enhancing quality of accounting information?

a. Neutrality
b. Timeliness
c. Predictive value
d. Representational faithfulness

A

b. Timeliness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Allowing entities to estimate rather than physically count inventory at interim periods is an example of a tradeoff between

a. Verifiability and comparability
b. Timeliness and comparability
c. Timeliness and verifiability
d. Neutrality and consistency

A

c. Timeliness and verifiability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which qualitative characteristic of financial information requires that information should not be biased in favor of one group of users to the detriment of others?

a. Relevance
b. Free from error
c. Completeness
d. Neutrality

A

d. Neutrality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

For information to be useful, the linkage between the users and the decisions made is

a. Relevance
b. Faithful representation
c. Understandability
d. Verifiability

A

c. Understandability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Which statement is true in relation to the enhancing quality of understandability?

a. Users have a reasonable knowledge of business and economic activities and review the information with reasonable diligence.

b. Users are expected to have significant business knowledge.

c. Financial statements shall exclude complex matters.

d. Financial statements shall be free from material error.

A

a. Users have a reasonable knowledge of business and economic activities and review the information with reasonable diligence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

The overriding qualitative characteristic of accounting information is

a. Relevance
b. Understandability
c. Faithful representation
d. Decision usefulness

A

d. Decision usefulness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Which of the following terms best describes information that influences the economic decisions of users?

a. Reliable
b. Prospective
c. Relevant
d. Understandable

A

c. Relevant

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is the quality of information that enables users to better forecast future operations?

a. Faithful representation
b. Materiality
c. Comparability
d. Relevance

A

d. Relevance

24
Q

According to the Conceptual Framework, predictive value and confirmatory value are ingredients of

a. Relevance
b. Faithful representation
c. Understandability
d. Comparability

A

a. Relevance

25
Q

Which term best describes information in financial statements that is neutral?

a. Understandable
b. Comparable
c. Relevant
d. Unbiased

A

d. Unbiased

26
Q

What is meant by comparability when discussing financia
accounting information?

a. Information has predictive and confirmatory value.
b. Information is reasonably free from error.
c. Information is measured and reported in a similar fashion across entities.
d. Information is timely.

A

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

27
Q

What is meant by consistency when discussing financial
accounting inforination?

a. Information 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.

A

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

28
Q

Which of the following is not an enhancing qualitative characteristic?

a. Understandability
b. Profit-oriented
c. Timeliness
d. Comparability

A

b. Profit-oriented

29
Q

Changing the method of inventory valuation should be reported in the financial statements under what enhancing quality of accounting information?

a. Understandability
b. Verifiability
c. Timeliness
d. Comparability

A

d. Comparability

30
Q

When an entity applies the same accounting treatment to similar events from period to period, the entity is exhibiting which quality?

a. Verifiability
b. Consistency
c. Predictive value
d. Neutrality

A

b. Consistency

31
Q

When there is agreement between a measure or description and the phenomenon it purports to represent, the information possesses which characteristic?

a. Verifiability
b. Predictive value
c. Faithful representation
d. Timeliness

A

c. Faithful representation

32
Q

The qualitative characteristic of faithful representation includes

a. Predictive value
b. Neutrality
c. Confirmatory value
d. Timeliness

A

b. Neutrality

33
Q

Enhancing qualitative characteristics of accounting information include all of the following, except

a. Timeliness
b. Materiality
c. Comparability
d. Verifiability

A

b. Materiality

34
Q

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

a. Those who are experts in the interpretation of financial information
b. Those who have a reasonable understanding of business and economic activities.
c. Financial analysts
d. CPAs

A

b. Those who have a reasonable understanding of business and economic activities.

35
Q

Enchancing qualitative characteristics of accounting information include

a. Relevance and comparability
b. Comparability and timeliness
c. Understandability and relevance
d. Neutrality and comparability

A

b. Comparability and timeliness

36
Q

When different competent accountants independently agree on the amount and method of reporting an economic event, what is the concept demonstrated?

a. Reliability
b. Comparability
c. Completeness
d. Verifiability

A

d. Verifiability

37
Q

According to the conceptual framework, verifiability implies

a. Legal evidence
b. Logic
c. Consensus
d. Legal verdict

A

c. Consensus

38
Q

When an entity has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors, the qualitative concept involved is

a. Comparability
b. Consistency
c. Timeliness
d. Faithful representation

A

c. Timeliness

39
Q

When an entity changed the inventory valuation method, which characteristic is jeopardized by this change?

a. Comparability
b. Representational faithfulness
c. Consistency
d. Feedback value

A

c. Consistency

40
Q

Recognizing expected losses immediately but deferring expected gains is an example of

a. Materiality
b. Conservatism
c. Cost effectiveness
d. Timeliness

A

b. Conservatism

41
Q

Which statement about materiality is true?

a. An item must make a difference or it need not be disclosed.
b. Materiality is a matter of relative size or importance.
c. An item is material if the omission or mistatement would influence the judgment of a primary user.
d. All of these statements are true about materiality.

A

d. All of these statements are true about materiality.

42
Q

An item would be considered material when

a. The expected benefit exceeds the additional cost.
b. The impact on earnings is greater than 10%.
c. The standard definition of materiality is met.
d. Omitting, misstating or obscuring the information would make a difference to the primary users.

A

d. Omitting, misstating or obscuring the information would make a difference to the primary users.

43
Q

The Conceptual Framework includes which constraint?

a. Prudence
b. Conservatism
c. Cost
d. All of the choices are constraints

A

c. Cost

44
Q

Which best describes the cost-benefit constraint?

a. The benefit of the information must be greater than the cost of providing it.
b. Financial information should be free from cost to users.
c. Cost of providing financial information is not always evident or measurable but must be considered.
d. All of the choices are correct.

A

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

45
Q

Conservatism is selecting an accounting alternative that

a. Understates assets and net income
b. Has the least favorable impact on equity
c. Overstates liabilities.
d. Is least likely to mislead users of financial information

A

b. Has the least favorable impact on equity

46
Q

The ability through consensus among measurers to ensure that information represents what it purports to represent is an example of the concept of

a. Relevance
b. Verifiability
c. Comparability
d. Feedback value

A

b. Verifiability

47
Q

Which of the following accounting concepts states that an accounting transaction shall be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion?

a. Conservatism
b. Objectivity
c. Periodicity
d. Stable monetary unit

A

b. Objectivity

48
Q

Objectivity is assumed to be achieved when a transaction

a. Is recorded in a fixed amount of pesos
b. Involves the payment or receipt of cash
c. Involves an arm’s length transaction between two independent parties
d. Allocates revenue and expenses in a rational and systematic manner

A

c. Involves an arm’s length transaction between two independent parties

49
Q

The principle of objectivity includes the concept of

a. Summarization
b. Classification
c. Conservatism
d. Verifiability

A

d. Verifiability

50
Q

Proponents of historical cost maintain that statements prepared using historical cost are more

a. Objective
b. Relevant
c. Indicative of purchasing power
d. Conservative

A

a. Objective

51
Q

The consistency standard requires that

a. Expenses should be reported when incurred.
b. The effect of accounting changes upon income should be properly disclosed.
c. Gains and losses should not be recognized.
d. Accounting procedures should be adopted when the result is a consistent rate of return.

A

b. The effect of accounting changes upon income should be properly disclosed.

52
Q

Which of the following relates to both relevance and faithful representation?

a. Comparability
b. Feedback value
c. Neutrality
d. Free from error

A

a. Comparability

53
Q

Which of the following situations violates the concept of faithful representation?

a. Financial statements were issued nine months late.

b. Data on segments having the same expected risks are reported to analysts estimating future profit.

c. Financial statements included an item of property, plant and equipment with carrying amount increased to management estimate of market value.

d. Management reports to shareholders regularly refer to new projects undertaken.

A

c. Financial statements included an item of property, plant and equipment with carrying amount increased to management estimate of market value.

54
Q

What is the underlying concept governing the GAAP pertaining to recording gain contingencies?

a. Conservatism
b. Relevance
c. Consistency
d. Reliability

A

a. Conservatism

55
Q

The usefulness of providing information in financial statements is subject to the constraint of

a. Consistency
b. Cost-benefit
c. Reliability
d. Representational faithfulness

A

b. Cost-benefit

ACC124 (23 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions