CFAS V. FINANCIAL REPORTING

Question 1

1. What is the objective of financial reporting
   (a) to provide the necessary information for the management of an enterprise to managers of that
   enterprise
   (b) to provide information that the creditors of an enterprise can use in deciding whether to make
   additional loans to the enterprise.
   (c) to measure the periodic net income of an enterprise
   (d) to provide external users with financial information that is useful in making rational
   investment, credit and similar decisions.

Answer 1

(d) to provide external users with financial information that is useful in making rational
investment, credit and similar decisions.

Question 2

2. These include not only financial statements but also other information such as financial
   hghights, analysis of financial statements, description of major products and list of
   directors and officers.
   (a) audit reports (c) note to financial statements
   (b) financial reports (d) financial statements

Answer 2

(b) financial reports

Question 3

3. Which uses need financial information to enable them to assess the ability of the
   enterprise to provide remuneration, retirement benefits and employment opportunities?
   (a) customers (c)public in general
   (b) government and its agencies (d) employees

Answer 3

(d) employees

Question 4

4. The objectives of financial reporting for business enterprise are based on:
   (a) the need for conservatism.
   (b) reporting on management’s stewardship.
   (c) generally accepted accounting principles.
   (d) the needs of the users of the information.

Answer 4

(d) the needs of the users of the information.

Question 5

5. The information provided by financial reporting pertains to:
   (a) individual business enterprises, rather than to industries or an economy as a whole or
   to members of society as consumers.
   (b)individual business enterprises and an economy as a whole or to members of society as
   consumers.
   (c)individual business enterprises and the economy as a whole, rather than to industries or to
   members of society as consumers.

Answer 5

(a) individual business enterprises, rather than to industries or an economy as a whole or
to members of society as consumers.

Question 6

6. During a period when an enterprise is under the direction of a particular management,
   financial reporting will directly provide information about:
   (a) both enterprise performance and management performance.
   (b) management performance but not enterprise performance.
   (c) enterprise performance but not management performance.
   (d) nether enterprise performance nor managemerk performance

Answer 6

(c) enterprise performance but not management performance.

Question 7

7. What is the objective of financial reporting?
   (a) assist investors in analyzing the economy.
   (b) assist inventors in predicting future cash flows.
   (c) assist suppliers in determining an appropriate discount to offer a particular company.
   (d) enable banks to determine an appropriate interest rate on their guaranteed investment
   certificates.

Answer 7

(b) assist inventors in predicting future cash flows.

Question 8

8. The overall objective of financial reporting is to:
   (a) provide information that is useful for decision making by external users
   (b) provide information for income tax preparation and payment
   (c) provide information only for stockholders
   (d) provide information for management to make decisions for controlling the operators

Answer 8

(a) provide information that is useful for decision making by external users

Question 9

9. Which one of the following items is not listed as a major objective of financial reporting?
   (a) financial reporting should provide information about enterprise resources, daims to those
   resources, and changes in them
   (b) financial reporting should provide information useful in evaluating management’s
   stewardship
   (c) financial reporting should provide information useful in investment, credit, and similar
   decisions
   (d) financial reporting should provide information useful in assessing cash flow projects

Answer 9

(b) financial reporting should provide information useful in evaluating management’s
stewardship

Question 10

10. Financial reporting is concerned only with information that is significant enough to
    affect evaluation or decision
    (a) timeliness (c)materiality
    (b) cost and benefit (d) comparability

Answer 10

(c)materiality