Question 1

The revenue/expense approach emphasizes determining the appropriate amounts of revenue and expense in each reporting period.

Accepted Answer

A) True 
 B)False

Question 2

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Full disclosure

Accepted Answer

A)  Basis of measurement for fixed assets.
B)  Reporting of all information that could affect decisions.
C)  Occurs when goods or services are transferred to the customer.
D)  Discounts future cash flows.
E)  Application of GAAP sometimes avoided under this constraint.F) All of the above
G) A) and E)

Question 3

The enhancing qualitative characteristic of understandability means that information should be understood by:

Accepted Answer

A)   Those who are experts in the interpretation of financial information.
B)   Those who have a reasonable understanding of business and economic activities.
C)   Financial analysts.
D)   CPAs.E) B) and D)
F) None of the above

Question 4

The FASB's due process invites various interested parties to indicate their opinions about whether financial accounting standards should be changed.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following was the first private-sector entity that set accounting standards in the United States?

Accepted Answer

A)   Accounting Principles Board.
B)   Committee on Accounting Procedure.
C)   Financial Accounting Standards Board.
D)   AICPA.E) A) and B)
F) A) and D)

Question 6

Identify or define the following terms: economic entity, going concern.

Accepted Answer

Economic entity: All economic eve...

Question 7

One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves, which is often articulated in:

Accepted Answer

A)   Its conceptual framework.
B)   Its code of ethics.
C)   Federal laws.
D)   State laws.E) A) and B)
F) A) and C)

Question 8

The revenue/expense approach emphasizes:

Accepted Answer

A)   Recognition of revenues.
B)   Recognition of expenses.
C)   The income statement.
D)   All of these answer choices are correct.E) All of the above
F) A) and C)

Question 9

Which of the following has the statutory authority to set accounting standards in the United States?

Accepted Answer

A)   FASB.
B)   IRS.
C)   SEC.
D)   AICPA.E) C) and D)
F) B) and C)

Question 10

GAAP is an abbreviation for:

Accepted Answer

A)   Generally authorized accounting procedures.
B)   Generally applied accounting procedures.
C)   Generally accepted auditing practices.
D)   Generally accepted accounting principles.E) A) and D)
F) C) and D)

Question 11

Which of the following is typically characterized as a principle, rather than an assumption?

Accepted Answer

A)   Periodicity.
B)   Monetary unit.
C)   Conservatism.
D)   Full disclosure.E) A) and C)
F) None of the above

Question 12

Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information?

Accepted Answer

If a country experiences severe inflatio...

Question 13

Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

Accepted Answer

A) True 
 B)False

Question 14

The asset/liability approach emphasizes matching to determine what assets and liabilities should be reflected on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

Ford Motor Company purchases services from suppliers on account and sells its products to distributors on short-term credit. As a result, do each of these events affect net income faster than they affect net operating cash flows?

Accepted Answer

A)   Option a.
B)   Option b.
C)   Option c.
D)   Option d.E) All of the above
F) None of the above

Question 16

-Compute Amazon's cost of goods sold for the year.

Accepted Answer

Gross profit = Net sales - Cos...

Question 17

When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic?

Accepted Answer

A)   Verifiability.
B)   Predictive value.
C)   Faithful representation.
D)   Timeliness.E) C) and D)
F) None of the above

Question 18

Listed below are ten organizations followed by a list of phrases that describe or characterize the organizations. Match each phrase with the correct organization.
-SEC

Accepted Answer

A)  FASB's predecessor.
B)  Primary national organization of accountants working in industry.
C)  Regulates the financial reporting for public companies.
D)  The FASB's parent organization.
E)  National organization of certified public accountants.F) Sets accounting standards in the United States.G) Provides timely responses to financial reporting issues.H) Advises the FASBI) Sets global accounting standards.J) Establishes auditing standards in the US for public companies.K) C) and F)
L) D) and E)

Question 19

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Comprehensive income

Accepted Answer

A)  Net outflows from peripheral transactions.
B)  Probable future economic benefits controlled by an entity.
C)  Results if an asset is sold for more than book value.
D)  Increases in equity from the sale of goods and/or services.
E)  All changes in equity except owner transactions.F) C) and E)
G) A) and B)

Question 20

Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

Accepted Answer

A)   Timeliness.
B)   Better reflecting economic activity.
C)   Periodicity.
D)   Better matching of revenues and expenses.E) C) and D)
F) A) and B)

Exam 1: Environment and Theoretical Structure of Financial Accounting

Which of the following is typically characterized as a principle, rather than an assumption?

Correct AnswerverifiedShow Answer

Which of the following has the statutory authority to set accounting standards in the United States?

Correct AnswerverifiedShow Answer

One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves, which is often articulated in:

Correct AnswerverifiedShow Answer

Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

Correct AnswerverifiedShow Answer

Which of the following was the first private-sector entity that set accounting standards in the United States?

Correct AnswerverifiedShow Answer

-Compute Amazon's cost of goods sold for the year.

Correct AnswerverifiedGross profit = Net sales - Cos...View AnswerShow Answer

Listed below are ten organizations followed by a list of phrases that describe or characterize the organizations. Match each phrase with the correct organization. -SEC

Correct AnswerverifiedShow Answer

GAAP is an abbreviation for:

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Full disclosure

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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Comprehensive income

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Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

Correct AnswerverifiedShow Answer

The revenue/expense approach emphasizes determining the appropriate amounts of revenue and expense in each reporting period.

Correct AnswerverifiedShow Answer

The enhancing qualitative characteristic of understandability means that information should be understood by:

Correct AnswerverifiedShow Answer

Ford Motor Company purchases services from suppliers on account and sells its products to distributors on short-term credit. As a result, do each of these events affect net income faster than they affect net operating cash flows?

Correct AnswerverifiedShow Answer

The revenue/expense approach emphasizes:

Correct AnswerverifiedShow Answer

The FASB's due process invites various interested parties to indicate their opinions about whether financial accounting standards should be changed.

Correct AnswerverifiedShow Answer

The asset/liability approach emphasizes matching to determine what assets and liabilities should be reflected on the balance sheet.

Correct AnswerverifiedShow Answer

When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic?

Correct AnswerverifiedShow Answer

Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information?

Correct AnswerverifiedIf a country experiences severe inflatio...View AnswerShow Answer

Identify or define the following terms: economic entity, going concern.

Correct AnswerverifiedEconomic entity: All economic eve...View AnswerShow Answer

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Gross profit = Net sales - Cos...
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If a country experiences severe inflatio...
View Answer

Correct Answer
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Economic entity: All economic eve...
View Answer