Testbank Ch01-02 REV Acc Std

Pre-Quiz/Fin Acc1/Kieso IFRS, Ch. 1-2 ACC STANDARDS-CONCEPTUAL FRAMEWORK

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Each correct answer = 5 points.

CHAPTER 1 FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS 1a. General-purpose General-pur pose financial statements are the product of a. financial accounting. b. managerial accounting. c. both financial and managerial accounting. d. neither financial nor managerial accounting. 1b. Users of financial reports include all of of the following except  a. creditors. b. government agencies. c. unions. d. All of these are users. 2a. The financial statements most frequently provided include all of the following except  the a. balance sheet. b. income statement. c. statement of cash flows. d. statement of retained earnings. 2b. The information informati on provided by financial reporting pertains pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries. 3a. All the following are differences between financial and managerial accounting in how accounting information is used except to a. plan and control company's operations. b. decide whether whether to invest in the company. company. c. evaluate borrowing capacity to determine the extent of a loan to grant. d. All the above. 3b. Which of the following represents a form of communication communicati on through financial reporting but not through financial statements? a. Balance sheet. b. President's letter.

Pre-Quiz/Fin Acc1/Kieso IFRS, Ch. 1-2 ACC STANDARDS-CONCEPTUAL FRAMEWORK

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c. Income statement. d. Notes to financial statements. 4a. What is a major objective of financial reporting? a. Provide information that is useful to management in making decisions. b. Provide information that clearly portray nonfinancial transactions. c. Provide information that is useful to assess the amounts, timing, and uncertainty of perspective cash receipts. d. Provide information that excludes claims to the resources. 4b. What is a major objective of financial reporting? a. Provide information that is useful to the Tax Office in determining the amount of federal income taxes payable. b. Provide information that is useful in assessing the amounts and timing of revenue. c. Provide information that is comprehensible only by sophisticated investors. d. Provide information that clearly portrays the economic resources of an enterprise. 5a. Which of the following statements is not  an objective of financial reporting? a. Provide information that is useful in investment and credit decisions. b. Provide information about enterprise resources, claims to those resources, and changes to them. c. Provide information on the liquidation value of an enterprise. d. Provide information that is useful in assessing cash flow prospects. 5b. Accrual accounting is used because a. cash flows are considered less important. b. it provides a better indication of ability to generate cash flows than the cash basis. c. it recognizes revenues when cash is received and expenses when cash is paid. d. none of the above. 6a. One objective of financial reporting is to provide a. information about the investors in the business entity. b. information about the liquidation values of the resources held by the enterprise. c. information that is useful in assessing cash flow prospects. d. information that will attract new investors. 6b. Accounting principles are "generally accepted" only when a. an authoritative accounting rule-making body has established it in an official pronouncement. b. it has been accepted as appropriate because of its universal application. c. both a and b. d. neither a nor b. 7a. Which of the following is a general limitation of "general purpose financial statements"? a. General purpose financial statements may not be the most informative for a specific enterprise. b. General purpose financial statements are comparable. c. General purpose financial statements are assumed to present fairly the company's financial operations. d. None of the above.

Pre-Quiz/Fin Acc1/Kieso IFRS, Ch. 1-2 ACC STANDARDS-CONCEPTUAL FRAMEWORK

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7b. The purpose of the International Accounting Standards Board is to a. issue enforceable standards which regulate the financial accounting and reporting of multinational corporations. b. develop a uniform currency in which the financial transactions of companies throughout the world would be measured. c. promote uniform accounting standards among countries of the world. d. arbitrate accounting disputes between auditors and international companies. 8a. What is NOT a reason that accounting standards may differ across countries? a. Governments. b. Language. c. Culture. d. Past Practice. 8b. What would be an advantage of having all countries adopt and follow the same accounting standards? a. Consistency. b. Comparability. c. Lower preparation costs. d. b and c 9a.

Authoritative standards for iGAAP include: a. International Financial Reporting Standards only. b. International Financial Reporting Standards and International Accounting Standards only. c. International Financial Reporting Standards, International Accounting Standards and U.S. GAAP only. d. International Financial Reporting Standards, International Accounting Standards and any GAAP standard recognized by an organized stock exchange.

9b.

Which of these statements regarding the iGAAP and U.S. GAAP is correct? a. U.S. GAAP is considered to be "principles-based" and more detailed than iGAAP. b. U.S. GAAP is considered to be "rules-based" and less detailed than iGAAP. c. iGAAP is considered to be "principles-based" and less detailed than U.S. GAAP d. Both U.S. GAAP and iGAAP are considered to be "rules-based", but U.S. GAAP tends to be more complex.

CHAPTER 2 CONCEPTUAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING 10a.

A soundly developed conceptual framework of concepts and objectives should a. increase financial statement users' understanding of and confidence in financial reporting. b. enhance comparability among companies' financial statements. c. allow new and emerging practical problems to be more quickly solved. d. all of these.

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10b. Which of the following (a-c) are not true concerning a conceptual framework in accounting? a. It should be a basis for standard-setting. b. It should allow practical problems to be solved more quickly by reference to it. c. It should be based on fundamental truths that are derived from the laws of nature. d. All of the above (a-c) are true. 11a. What is the objective of financial reporting as indicated in the conceptual framework? a. provide information that is useful to those making investing and credit decisions. b. provide information that is useful to management. c. provide information about those investing in the entity. d. All of the above. 11b. What is a purpose of having a conceptual framework? a. To enable the profession to more quickly solve emerging practical problems. b. To provide a foundation from which to build more useful standards. c. Neither a nor b. d. Both a and b. 12a. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes all of the following except: a. Objective of financial reporting. b. Supplementary information c. Elements of financial statements. d. Qualitative characteristics of accounting information. 12b. The second level in the International Accounting Standards Board’s (IASB’s) Conceptual Framework a. Identifies the objective of financial reporting. b. Identifies recognition, measurement, and disclosure concepts used in establishing and applying accounting standards. c. Provides the elements of financial statements. d. Includes assumptions, principles, and constraints. 13a. The objective of financial reporting in the International Accounting Standards Board’s (IASB’s) Conceptual Framework a. Is the foundation for the Framework. b. Includes the qualitative characteristics that make accounting information useful. c. Is found on the third level of the Framework. d. All of the choices are correct regarding the objective of financial reporting. 13b. An implicit assumption of the International Accounting Standards Board’s (IASB’s) Conceptual Framework is that a. Information must be decision-useful to all potential users of financial reporting. b. General-purpose financial reporting is the primary source of information for users of financial reporting. c. Users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements.

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d. All of the choices are correct. 14a. What is meant by comparability when discussing financial accounting information? a. Information has predictive or feedback value. b. Information is reasonably free from error. c. Information that is measured and reported in a similar fashion across companies. d. Information is timely. 14b. What is meant by consistency when discussing financial accounting information? a. Information that 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. 15a. Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information? a. Consistency. b. Verifiability. c. Timeliness. d. Comparability. 15b. Company A issuing its annual financial reports within one month of the end of the year is an example of which ingredient of primary quality of accounting information? a. Neutrality. b. Timeliness. c. Predictive value. d. Representational faithfulness. 16a. What is the quality of information that enables users to better forecast future operations? a. Reliability. b. Materiality. c. Comparability. d. Relevance. 16b. Which of the following ingredients of fundamental qualities is part of faithful representation? a. Neutrality. b. Productive value. c. Confirmatory value. d. Timeliness. 17a.

The second level of the International Accounting Standards Board’s (IASB’s) Conceptual Framework a. provides conceptual building blocks that explain the qualitative characteristics of accounting information. b. defines the elements of financial statements. c. serves as a bridge between the “why” of accounting and the “how” of accounting. d. all of the choices are correct.

17b. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, qualitative characteristics a. Are considered either fundamental or enhancing.

Pre-Quiz/Fin Acc1/Kieso IFRS, Ch. 1-2 ACC STANDARDS-CONCEPTUAL FRAMEWORK

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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. 18a. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an enhancing qualitative characteristic is a. Predictive value. c. Timeliness. b. Free from error. d. Confirmatory value. 18b. In the International Accounting Standards Board’s ingredient of a fundamental qualitative characteristic a. Neutrality. b. Verifiability.

(IASB’s) Conceptual Framework, an is c. Timeliness. d. Understandability.

19a. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, a fundamental qualitative characteristic is a. Materiality. b. Faithful representation. c. Decision usefulness. d. Neutrality. 19b. To be a faithful representation as described by the International Accounting Standards Board’s (IASB’s) Conceptual Framework, information must be all of the following except: a. Complete. b. Free from error. c. Confirmatory. d. Neutral. 20a. Which of the following statements regarding the IASB and FASB conceptual frameworks is not correct? a. The existing IASB and FASB conceptual frameworks are organized in similar ways. b. The two assumptions of the IASB framework are that the financial statements are prepared on an accrual basis and that the reporting entity is a going concern. c. The FASB and IASB agree that the sole objective of financial reporting is to provide users with information that is useful for decision-making. d. The FASB conceptual framework discusses the concept of accrual basis accounting in detail, but does not specifically identity it as an assumption. 20b. The issues which the FASB and IASB must address in developing a common conceptual framework include all of the following except: a. Should the common framework lead to standards that are principles-based or rulesbased? b. Should the role of financial reporting focus on stewardship as well as providing information to assist users in decision making? c. Should the characteristic of reliability be traded-off in favor of information that is verifiable? d. Should a single measurement method such as historical cost be used? -- END --

Pre-Quiz/Fin Acc1/Kieso IFRS, Ch. 1-2 ACC STANDARDS-CONCEPTUAL FRAMEWORK

Multiple Choice Answers— Conceptual Item

1a. 1b. 2a. 2b. 3a. 3b. 4a. 4b.

Ans.

a d d a d b c d

Item

5a. 5b. 6a. 6b. 7a. 7b. 8a. 8b.

Ans.

Item

Ans.

Item

Ans.

Item

Ans.

c b c c a c b d

9a. 9b. 10a. 10b. 11a. 11b. 12a. 12b.

b c d c a d b c

13a. 13b. 14a. 14b. 15a. 15b. 16a. 16b.

a c c a a b d a

17a. 17b. 18a. 18b. 19a. 19b. 20a. 20b.

d d c a b c c a

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