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CHAPTER 1
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS
1a. General-purpose 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 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 provided by financial reporting 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, 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 to invest in the 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 through financial reporting but
not through financial statements?
a. Balance sheet.
b. President's letter.
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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.
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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.
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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 Boards (IASBs) 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 Boards (IASBs) 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 Boards
(IASBs) 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 Boards (IASBs)
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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The second level of the International Accounting Standards Boards (IASBs) 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.
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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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