Financial Accounting Exam 1 (Chapters 1-4) Questions with Complete Solutions
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Course
Financial Accounting
Institution
Financial Accounting
Revenue should not be recognized until: - Answer-the earnings process is complete and collection is reasonably assured
The matching principle is: - Answer-An accrual accounting principle
A cause and effect relationship between revenue and expense is best exemplified by: - Answer-Units of prod...
Financial Accounting Exam 1 (Chapters
1-4) Questions with Complete Solutions
Revenue should not be recognized until: - Answer-the earnings process is complete and
collection is reasonably assured
The matching principle is: - Answer-An accrual accounting principle
A cause and effect relationship between revenue and expense is best exemplified by: -
Answer-Units of production depreciation expense
The expense that least fits a cause and effect relationship for matching revenues and
expenses would be: - Answer-Advertising expense (not COGS, units of production
depreciation, or sales commission)
TRUE OR FALSE: Purchased $8200 of inventory on account
TRUE OR FALSE: Paid for inventory purchased previously
Accounts Payable 8200
Cash 8200 - Answer-True
Users of financial reports include all the following: - Answer-Creditors, Government
Agencies, Unions
The process by identifying, measuring, analyzing, and communicating financial
information needed by management to plan, evaluate, and control an organization's
operations is called: - Answer-Managerial Accounting
, Which of the following is not an objective of financial reporting: - Answer-Provide
information on the liquidation value of an enterprise.
The actual objectives include providing info that is
- useful in investment and credit decisions
- about enterprise resources, claims to those resources, and changes to them
- useful in assessing cash flow prospects
Accrual accounting is used because: - Answer-It provides a better indication of ability to
generate cash flows than the cash basis
The role of SEC in the formulation of accounting principles can be described as: -
Answer-Sometimes primary and sometimes secondary
The body that has the power to prescribe the accounting principles and standards to be
employed by companies that fall under its jurisdiction is the: - Answer-FASB
Companies that are listed on the stock exchange are required to submit their financial
statements to the: - Answer-SEC
The FASB employs a "due process" system which: - Answer-Enables interested parties
to express their views on issues under consideration
The purpose of Statements of Financial Accounting Concepts is to: - Answer-Form a
conceptual framework for solving existing and emerging problems
Members of the FASB are: - Answer-Independent of any other org
The objectives of financial reporting include all of the following except to provide info
that: - Answer-Is useful to the Internal Revenue Service (IRS) in allocating the tax
burden to the business community
It actually includes providing info that...
- is useful to those making investment and credit decisions
- is helpful in assessing future cash flows
- identifies the economic resources (assets), claims to those resources (liabilities) and
the changes in those resources and claims
The two primary qualities that make accounting info useful for decision making are: -
Answer-Relevance and Reliability
Information is neutral if it: - Answer-Is free from bias toward a predetermined result
The characteristic that is demonstrated when a high degree of consensus can be
secured among interdependent measures using the same measurement methods is: -
Answer-Verifiability
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