CFAS - CHAPTER 4 Flashcards
What is the general objective of financial statements?
a. To provide information about economic resources of an entity, claims against the entity and changes in the economic resources and claims.
b. To assess future cash flows to the entity.
c. To assess management stewardship.
d. To satisfy the information needs of primary users.
a. To provide information about economic resources of an entity, claims against the entity and changes in the economic resources and claims.
A reporting entity is
a. Necessarily a legal entity.
b. Necessarily an economic entity.
c. An entity that is required or chooses to prepare financial statements.
d. A regulatory government authority.
c. An entity that is required or chooses to prepare financial statements.
A reporting entity
a. Can be a single entity
b. Can be a portion of a single entity
c. Can comprise more than one entity
d. All of these can be considered a reporting entity
d. All of these can be considered a reporting entity
If the reporting entity comprises both the parent and its subsidiaries, the financial statements are referred to as
a. Consolidated financial statements
b. Unconsolidated financial statements
c. Combined financial statements
d. Separate financial statements
a. Consolidated financial statements
Combined financial statements provide financial information about
a. The parent and its subsidiaries
b. The parent
c. The subsidiaries
d. Two or more entities without a parent-subsidiary relationship
d. Two or more entities without a parent-subsidiary relationship
Which best describes the term going concern?
a. When current liabilities exceed current assets
b. The ability of the entity to continue in operation for the foreseeable future
c. The potential to contribute to the flow of cash and cash equivalents to the entity
d. The expenses exceed income
b. The ability of the entity to continue in operation for the foreseeable future
Which is an implication of the going concern assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are justifiable and appropriate.
c. The current and noncurrent classification of assets and liabilities is justifiable and significant.
d. All of these are an implication of going concern.
d. All of these are an implication of going concern.
The relatively stable economic, political and social environment supports
a. Conservatism
b. Materiality
c. Timeliness
d. Going concern
d. Going concern
Which of the following is not a basic assumption underlying financial accounting?
a. Economic entity assumption
b. Going concern assumption
c. Periodicity assumption
d. Historical cost assumption
d. Historical cost assumption
Which basic assumption may not be followed when an entity in bankruptcy reports financial results?
a. Economic entity assumption
b. Going concern assumption
c. Periodicity assumption
d. Monetary unit assumption
b. Going concern assumption
The economic entity assumption
a. Is inapplicable to unincorporated businesses.
b. Recognizes the legal aspects of business organizations.
c. Requires periodic income measurement.
d. Is applicable to all forms of business organizations.
d. Is applicable to all forms of business organizations.
What is being violated if an entity provides financial reports in connection with a new product introduction?
a. Economic entity
b. Periodicity
c. Monetary unit
d. Continuity
a. Economic entity
Which underlying assumption serves as the basis for preparing financial statements at artificial points in time?
a. Accounting entity
b. Going concern
c. Accounting period
d. Stable monetary unit
c. Accounting period
Which basic accounting assumption is threatened by the existence of severe inflation in the economy?
a. Monetary unit assumption
b. Periodicity assumption
c. Going concern assumption
d. Economic entity assumption
a. Monetary unit assumption
Inflation is ignored in accounting due to
a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Time period assumption
c. Monetary unit assumption
