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INTERMEDIATE ACCOUNTING EXAM #1 QUESTIONS WITH COMPLETE SOLUTIONS
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INTERMEDIATE ACCOUNTING EXAM #1 QUESTIONS WITH COMPLETE SOLUTIONS
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INTERMEDIATE ACCOUNTING EXAM #1QUESTIONS WITH COMPLETE
SOLUTIONS
Providers of financial information - answer-profit oriented companies, not for profit
entities, households
External users of financial information - answer-investors, creditors, employees, banks,
labor unions, customers, suppliers, gov regulatory agencies
Conceptual framework - answer-underlying structure for the development of accounting
standards
Gaap - answer-generally accepted accounting principles- body of accounting standards
Fasb - answer-financial accounting standards board
3rd level of framework - answer-constraints, assumptions, principles (cap)
2nd level of framework - answer-qualitative characteristics, elements
1st levee of framework - answer-objective: to provide financial information useful to
capital providers
Qualitative characteristics - answer-decision usefulness: 2 parts, relevance and faithful
representation
Relevance - answer-3 parts: predictive, confirmatory value, materiality
Pertinent to a decision at hand
Faithful representation - answer-3 parts: completeness, neutrality, free from error,
conservatism
Exists when there is an agreement between a measure and the phenomenon it purports
to represent
Predictive value - answer-info useful in predicting the future
Confirmatory value - answer-info confirms expectations
Materiality - answer-concerns relative size of an item and its effect on decisions
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