ACG 3131 - Exam 1 - CH. 2 Practice Questions and Correct Answers
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Module
ACG 3131`
Institution
ACG 3131`
Faithful Representation One of the qualitative characteristics of accounting information that is complete, free from error, and neutral.
Confirmatory Value One of the ingredients of the fundamental quality of relevance which helps to confirm or correct prior expectations based on previous evaluati...
ACG 3131 - Exam 1 - CH. 2 Practice
Questions and Correct Answers
Faithful Representation ✅One of the qualitative characteristics of accounting
information that is complete, free from error, and neutral.
Confirmatory Value ✅One of the ingredients of the fundamental quality of relevance
which helps to confirm or correct prior expectations based on previous evaluations of
financial reporting information.
Free From Error ✅The extent to which information is accurate in representing the
economic substance of a transaction.
Completeness ✅Includes all the information that is necessary for a faithful
representation of the economic phenomena that it purports to represent.
Understandability ✅Quality of information that allows users to comprehend its
meaning.
Comparability ✅Quality of information that permits users to identify similarities in and
differences between two sets of economic phenomena.
Timeliness ✅Having information available to users before it loses its capacity to
influence decisions.
Predictive Value ✅One of the characteristics of relevant information that has value as
an input to the processes used by capital providers to form their own expectations about
the future.
Relevance ✅Information that is capable of making a difference in the decisions of
users in their capacity as capital providers.
Neutrality ✅One of the ingredients of the fundamental quality of faithful representation
which indicates that a company cannot select information to favor one set of interested
parties over another.
Verifiability ✅The annual reports of Best Buy Co. are audited by certified public
accountants. This is an example of which enhancing characteristic?
Comparability ✅Black & Decker and Cannondale Corporation both use the FIFO cost
flow assumption. This is an example of which enhancing characteristic?
, Consistency ✅Starbucks Corporation has used straight-line depreciation since it
began operations. This is an example of which enhancing characteristic?
Timeliness ✅Motorola issues its quarterly reports immediately after each quarter ends.
This is an example of which enhancing characteristic?
Equity ✅Retained Earnings. This is an example of which element of financial
statements?
Revenues ✅Sales. This is an example of which element of financial statements?
Equity ✅Additional Paid-In-Capital. This is an example of which element of financial
statements?
Assets ✅Inventory. This is an example of which element of financial statements?
Expenses ✅Depreciation. This is an example of which element of financial
statements?
Losses ✅Loss on sale of equipment. This is an example of which element of financial
statements?
Liabilities ✅Interest Payment. This is an example of which element of financial
statements?
Distribution to Owners ✅Dividends. This is an example of which element of financial
statements?
Gains ✅Gain on sale of investment. This is an example of which element of financial
statements?
Investments by Owners ✅Issuance of Common Stock. This is an example of which
element of financial statements?
Periodicity Assumption ✅The economic activities of FedEx Corporation are divided
into 12-month periods for the purpose of issuing annual reports. This is an example of
which assumption of accounting?
Monetary Unit Assumption ✅Solectron Corporation, Inc. does not adjust amounts in its
financial statements for the effects of inflation. This is an example of which assumption
of accounting?
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