Chapter 2 Flashcards
Generally accepted accounting principles:
derive their authority from legal court proceedings.
have been specified in detail in the FASB conceptual framework.
are fundamental truths or axioms that can be derived from laws of nature.
derive their credibility and authority from general recognition and acceptance by the accounting profession.
derive their credibility and authority from general recognition and acceptance by the accounting profession.
The conceptual framework for financial reporting consists of how many levels?
4
2
1
3
3
Which of the following statements is true regarding the convergence project by the FASB and IASB?
The existing conceptual frameworks underlying U.S. GAAP and IFRS are quite dissimilar, but once they are converged there will be unanimity.
The FASB framework discusses accrual accounting and identifies it as an assumption.
The IASB framework makes two assumptions.
The converged framework will be a series of documents, similar to the two conceptual frameworks that presently exist.
The IASB framework makes two assumptions.
The IASB framework makes two assumptions - accrual basis and going concern. The converged framework will be a single document, the existing frameworks are very similar, and while the FASB framework discusses accrual accounting, it does not identify it as an assumption.
In the conceptual framework for financial reporting, what provides “the how” - the implementation of accounting?
Objective of financial reporting.
Elements of financial statements.
Qualitative characteristics of accounting information.
Measurement and recognition concepts such as assumptions, principles, and constraints.
Measurement and recognition concepts such as assumptions, principles, and constraints.
The underlying theme of the conceptual framework is:
decision usefulness.
reliability.
understandability.
comparability.
decision usefulness.
For information to be relevant, it must have both predictive value and confirmatory value.
True
False
False.
For information to be relevant, it needs to have predictive value or confirmatory value or both.
Which of the following is not among the ingredients of the fundamental quality of faithful representation?
neutrality.
materiality.
completeness.
freedom from error.
materiality.
Enhancing qualities of accounting information include:
comparability and verifiability.
relevance and consistency.
comparability and materiality.
relevance and faithful representation.
comparability and verifiability.
Enhancing qualities of accounting information include all of the following except:
understandability.
neutrality.
timeliness.
comparability.
neutrality.
In order to be relevant, financial information must have:
freedom from error.
comparability.
neutrality.
confirmatory or predictive value.
confirmatory or predictive value.
The change in net assets during a period from transactions and other events and circumstances from non-owner sources is called:
gains.
comprehensive income.
revenues.
net income.
comprehensive income.
An increase in net assets arising from peripheral or incidental transactions is called a(n):
asset.
investment by owners.
gain.
revenue.
Gain
Under current GAAP, inflation is ignored in accounting due to
materiality.
consistency.
the going concern assumption.
the monetary unit assumption.
the monetary unit assumption.
The periodicity assumption specifies that the most appropriate time periods for financial reporting are weekly, bi-monthly, and yearly.
True
False
False
The periodicity assumption suggests that the economic life of a business can be divided into artificial time periods such as a month, quarter or year.
Depreciation and amortization policies are justifiable and appropriate because of the:
going concern assumption.
monetary unit assumption.
periodicity assumption.
economic entity assumption.
going concern assumption.
