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Question 1

Benefit versus cost

Answer 1

Companies must weigh the cost of providing the information with the benefits derived from using it.

Question 2

Understandability

Answer 2

Quality of information that lets reasonably informed users see its significance

Question 3

Decision usefulness

Answer 3

Useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity

Question 4

Relevance

Answer 4

Accounting information must be capable of making a difference in a decision

Question 5

Predictive Value

Answer 5

Has value as an input to predictive processes used by investors to form their own expectations about the future.

Question 6

Confirmatory Value

Answer 6

Helps users confirm or correct prior decisions expectations

Question 7

Materiality

Answer 7

Omitting it or misstating it could influence decisions decisions that users make on the basis of the reported financial information

Question 8

Faithful representation

Answer 8

That the numbers and descriptions match what really existed or happened

Question 9

Completeness

Answer 9

Means that all information that is necessary for faithful representation is provided

Question 10

Neutrality

Answer 10

A company cannot select information to favor on set of interested parties over another

Question 11

Free from error

Answer 11

More accurate (faithful) representation of a financial item

Question 12

Comparability

Answer 12

Enables users to identify the real similarities and differences in economic events between companies

Question 13

Verifiability

Answer 13

When independent measures, using the same methods, obtain similar results

Question 14

Timeliness

Answer 14

Having information available to decision-makers before it loses its capacity to influence decisions

Question 15

Understandability

Answer 15

Qualify of information that lets reasonably informed users see its significance

Question 16

Economic entity

Answer 16

Company keeps its activity separate from its owners and other businesses

Question 17

Going concern

Answer 17

Company to last long enough to fulfill objectives and commitments.

Question 18

Arm’s length transactions

Answer 18

Condition or the fact that the parties to a transaction are independent and on an equal footing

Question 19

Monetary Unit

Answer 19

Money is the common denominator

Question 20

Periodicity

Answer 20

Company can divide its economic activities into time periods

Question 21

Historical cost

Answer 21

Provides a reliable benchmark for measuring historical trends

Question 22

Revenue recognition

Answer 22

Requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied

Question 23

Expense recognition

Answer 23

Let the expenses follow the revenues

Question 24

Matching

Answer 24

Match the revenues and expenses in the periods that they are earned and incurred

Question 25

Conservatism

Answer 25

When in doubt choose the solution that will be least likely to overstate assets or income and / or liabilities or expenses

Question 26

Product cost

Answer 26

Materials, labor, and overhead, attached to the product

Question 27

Period cost

Answer 27

Officer's salaries and other administrative expenses attached to the period.