Question 1

In recent years, it has been reported that several large companies have manipulated business transactions and accounting records to change the net income reported on their income statements. Suggest five concepts, assumptions, principles, or conventions that such manipulation would violate.

Accepted Answer

Misstating net income on the i...

Question 2

The accounting assumption that the financial statements of a business reflect the activities of the business and not the activities of the owners is the:

Accepted Answer

A)  matching assumption.
B)  periodicity of income assumption.
C)  separate economic entity assumption.
D)  monetary unit assumption.E) A) and B)
F) A) and C)

Question 3

When Tamar Snyder opened a shoe store, her accountant did not include the cash in her personal savings account as one of the assets of the business. This is an example of

Accepted Answer

A)  the conservatism constraint.
B)  the materiality constraint.
C)  industry practice constraint.
D)  the separate entity assumption.E) All of the above
F) B) and D)

Question 4

The separate entity assumption permits businesses to record property and equipment as assets that will provide benefits in future periods.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Under the accrual basis of accounting, revenue is recorded in the period in which it is received.
B)  Under the accrual basis of accounting, revenue is recorded in the period in which it is earned.
C)  Under the accrual basis of accounting, revenue is recorded in the period in which it is paid.
D)  Under the accrual basis of accounting, expenses are recorded in the period in which they are paid.E) A) and B)
F) None of the above

Question 6

Which of the following statements is NOT true?

Accepted Answer

A)  The SEC has authority to accept or reject financial accounting principles and standards developed by the FASB.
B)  The Sarbanes-Oxley Act places great emphasis on internal controls and fraud prevention.
C)  Because of the Sarbanes-Oxley Act, it is probable that the FASB's conceptual framework will become less important in developing accounting principles and standards.
D)  The American Institute of CPA's has in the past had strong influence on the development of accounting principles.E) None of the above
F) A) and B)

Question 7

For convenience, accountants assume that the value of money is stable or that changes in its value are not great enough to affect the recorded financial data.

Accepted Answer

A) True 
 B)False

Question 8

What is meant by the concept of neutrality in accounting?

Accepted Answer

Neutrality means that the stat...

Question 9

Footnotes to financial statements are used to disclose information that may influence investor decisions.

Accepted Answer

A) True 
 B)False

Question 10

The Cervantes Company uses the same method of depreciation for its equipment in each fiscal period. This practice is an example of

Accepted Answer

A)  materiality.
B)  matching.
C)  consistency.
D)  conservatism.E) B) and C)
F) B) and D)

Question 11

The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of the

Accepted Answer

A)  consistency principle.
B)  realization principle.
C)  matching principle.
D)  conservatism constraint.E) C) and D)
F) B) and C)

Question 12

The process used by FASB in developing conceptual framework statements reflects deductive reasoning and involves which steps?

Accepted Answer

1. Define the goals and objectives of ac...

Question 13

Paige Turner Publishing paid cash in advance for a one year insurance policy. According to the matching principle, Paige Turner Publishing should recognize the policy as insurance expense

Accepted Answer

A)  after the one year policy has expired.
B)  in equal installments over the one year policy period, as the expense is incurred.
C)  at the time the cash is paid.
D)  in two equal installments, six months apart.E) A) and B)
F) None of the above

Question 14

The   cost-benefit test constraint refers to:

Accepted Answer

A)  the requirement that all benefit transactions must conform to "industry practice."
B)  the benefit of complying with an accounting principle should outweigh the cost of compliance.
C)  the idea that "when in doubt, take the most beneficial action."
D)  the recording of assets at their historical cost rather than their fair market value.E) C) and D)
F) A) and D)

Question 15

Define the two aspects of the monetary unit assumption.

Accepted Answer

1. Expressing financial facts ...

Question 16

Depreciating equipment over its useful life is an example of

Accepted Answer

A)  following the objectivity assumption.
B)  applying the realization principle.
C)  applying the matching principle.
D)  applying the conservatism constraint.E) A) and B)
F) A) and C)

Question 17

A deviation from generally accepted accounting principles is

Accepted Answer

A)  never allowed.
B)  permissible only if its required in order to conform to the monetary unit assumption.
C)  permissible if the amount involved is immaterial.
D)  permissible if the amount involved is material.E) All of the above
F) None of the above

Question 18

The SEC's 2003 report to the Congress on "principles-based" accounting observed that the first characteristic of objectives-based standards, as dictated by the Sarbanes-Oxley Act, is that any standard must be based on

Accepted Answer

A)  qualitative characteristics.
B)  transparency.
C)  an improved and consistently applied framework.
D)  the cost-benefit test.E) A) and B)
F) B) and C)

Question 19

Hour Place Clock Repair paid $2,400 cash in advance for a six month advertising contract with the local newspaper. According to the matching principle, if 2 months of the contract has expired by the end of the current fiscal year, how much should Hour Place Clock Repair report as Advertising Expense on the Income Statement?

Accepted Answer

A)  $400
B)  $2,400
C)  $800
D)  $1,600E) A) and B)
F) None of the above

Question 20

Match between columns
                        Premises: This qualitative characteristic means that accounting information is capable of making a difference in a decision by the report user.
This qualitative characteristic is indicated when independent measurers obtain similar results.
Often referred to as objectivity; it is the idea that the financial statements are not prepared in a way to favor one group of users (management, owners, creditors, employees, etc.)over other groups.
Information that helps the statement user confirm fulfillment or no fulfillment of prior expectations or decisions is said to have this qualitative characteristic.
This is the concept that data shown in the financial reports reflect what really happened.
Information that is presented soon enough after events are reported to be useful in decision making would meet this qualitative characteristic.
When the financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies, it meets this qualitative characteristic.financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies, it meets this qualitative characteristic.
This qualitative characteristic means simply that the information should be dependable; such information is verifiable, is a faithful representation of the company's financial affairs, and is reasonably free of error and bias.
If information is relevant, it will have this qualitative characteristic and enable statement users in making predictions about the meaning and ultimate outcome of events giving rise to the information.
If an entity uses the same accounting treatment for similar events and data from period to period, this qualitative characteristic is being met.

Accepted Answer

The Answer of Comparability and Reliability and Timeliness and Representational is...

Exam 14: Accounting Principles and Reporting Standards

The cost-benefit test constraint refers to:

Correct Answer
verified

In recent years, it has been reported that several large companies have manipulated business transactions and accounting records to change the net income reported on their income statements. Suggest five concepts, assumptions, principles, or conventions that such manipulation would violate.

Correct Answer
verified
Misstating net income on the i...
View Answer

What is meant by the concept of neutrality in accounting?

Correct Answer
verified
Neutrality means that the stat...
View Answer

The SEC's 2003 report to the Congress on "principles-based" accounting observed that the first characteristic of objectives-based standards, as dictated by the Sarbanes-Oxley Act, is that any standard must be based on

Correct Answer
verified

Define the two aspects of the monetary unit assumption.

Correct Answer
verified
1. Expressing financial facts ...
View Answer

Match the descriptions by entering the proper letter in the space provided with the qualitative characteristics of accounting information.

A deviation from generally accepted accounting principles is

Correct Answer
verified

When Tamar Snyder opened a shoe store, her accountant did not include the cash in her personal savings account as one of the assets of the business. This is an example of

Correct Answer
verified

The process used by FASB in developing conceptual framework statements reflects deductive reasoning and involves which steps?

Correct Answer
verified
1. Define the goals and objectives of ac...
View Answer

Which of the following statements is correct?

Correct Answer
verified

Paige Turner Publishing paid cash in advance for a one year insurance policy. According to the matching principle, Paige Turner Publishing should recognize the policy as insurance expense

Correct Answer
verified

The accounting assumption that the financial statements of a business reflect the activities of the business and not the activities of the owners is the:

Correct Answer
verified

The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of the

Correct Answer
verified

For convenience, accountants assume that the value of money is stable or that changes in its value are not great enough to affect the recorded financial data.

Correct Answer
verified

The Cervantes Company uses the same method of depreciation for its equipment in each fiscal period. This practice is an example of

Correct Answer
verified

The separate entity assumption permits businesses to record property and equipment as assets that will provide benefits in future periods.

Correct Answer
verified

Footnotes to financial statements are used to disclose information that may influence investor decisions.

Correct Answer
verified

Depreciating equipment over its useful life is an example of

Correct Answer
verified

Which of the following statements is NOT true?

Correct Answer
verified

Correct Answer
verified

Exam 14: Accounting Principles and Reporting Standards

The cost-benefit test constraint refers to:

Correct AnswerverifiedShow Answer

In recent years, it has been reported that several large companies have manipulated business transactions and accounting records to change the net income reported on their income statements. Suggest five concepts, assumptions, principles, or conventions that such manipulation would violate.

Correct AnswerverifiedMisstating net income on the i...View AnswerShow Answer

What is meant by the concept of neutrality in accounting?

Correct AnswerverifiedNeutrality means that the stat...View AnswerShow Answer

The SEC's 2003 report to the Congress on "principles-based" accounting observed that the first characteristic of objectives-based standards, as dictated by the Sarbanes-Oxley Act, is that any standard must be based on

Correct AnswerverifiedShow Answer

Define the two aspects of the monetary unit assumption.

Correct Answerverified1. Expressing financial facts ...View AnswerShow Answer

Match the descriptions by entering the proper letter in the space provided with the qualitative characteristics of accounting information.

A deviation from generally accepted accounting principles is

Correct AnswerverifiedShow Answer

When Tamar Snyder opened a shoe store, her accountant did not include the cash in her personal savings account as one of the assets of the business. This is an example of

Correct AnswerverifiedShow Answer

The process used by FASB in developing conceptual framework statements reflects deductive reasoning and involves which steps?

Correct Answerverified1. Define the goals and objectives of ac...View AnswerShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Paige Turner Publishing paid cash in advance for a one year insurance policy. According to the matching principle, Paige Turner Publishing should recognize the policy as insurance expense

Correct AnswerverifiedShow Answer

The accounting assumption that the financial statements of a business reflect the activities of the business and not the activities of the owners is the:

Correct AnswerverifiedShow Answer

The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of the

Correct AnswerverifiedShow Answer

For convenience, accountants assume that the value of money is stable or that changes in its value are not great enough to affect the recorded financial data.

Correct AnswerverifiedShow Answer

The Cervantes Company uses the same method of depreciation for its equipment in each fiscal period. This practice is an example of

Correct AnswerverifiedShow Answer

The separate entity assumption permits businesses to record property and equipment as assets that will provide benefits in future periods.

Correct AnswerverifiedShow Answer

Footnotes to financial statements are used to disclose information that may influence investor decisions.

Correct AnswerverifiedShow Answer

Depreciating equipment over its useful life is an example of

Correct AnswerverifiedShow Answer

Which of the following statements is NOT true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Misstating net income on the i...
View Answer

Correct Answer
verified
Neutrality means that the stat...
View Answer

Correct Answer
verified

Correct Answer
verified
1. Expressing financial facts ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1. Define the goals and objectives of ac...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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