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AC321 Exam #2 (Chapters 4 and 5 of AC 321) Questions With All Correct Answers.
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AC321 Exam #2 (Chapters 4 and 5 of AC 321) Questions With All Correct Answers.
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Name: Score:69 Multiple choice questions
Term 1 of 69
What is timeliness?
Information that is measured and reported in a similar manner for different companies for
the purposes of comparison.
Occurs when independent measures, using the same methods, obtain similar results.
It means having information available to the decision-makers before it loses capacity to
influence decisions.
The fact that balances in the point in time elements are the accumulation of the over period
time elements.
Term 2 of 69
What is the largest constraint in financial reporting?
Largest: the cost benefit constraint
It says that assets and liabilities are to be reported at their fair value.
1) RELEVANCE
2) FAITHFUL REPRESENTATION
a. Cost basis
b. fair value
,Definition 3 of 69
identifies the purpose of financial reporting. The other concepts provide guidance on 1)
identifying the boundaries of financial reporting; 2) selecting the transactions, other events, and
circumstances to be represented; 3) how they should be recognized and measured; 4) how they
should be summarized and reported.
What is the monetary unit assumption?
*Comprehensive income is...
First level of the FASB's conceptual framework
Objective of Financial Reporting
Definition 4 of 69
OBJECTIVE--the "why" purpose of accounting
First level of the FASB's conceptual framework
Second level (includes 2) of the FASB's conceptual framework
Why do many users prefer historical cost?
What is the largest constraint in financial reporting?
Term 5 of 69
What does Neutrality mean?
All information that is necessary for faithful representation is provided.
The company will continue om business for the foreseeable future.
It means having information available to the decision-makers before it loses capacity to
influence decisions.
A company cannot select information to favor one set of interested parties over another.
,Definition 6 of 69
Change in equity (net assets) of an entity during a period from transactions and other events and
circumstances from NON-OWNER sources. It includes all changes in equity during a period
except those resulting from investments by owners and distributions to owners.
Liabilities are...
When is an item's cost and fair value equal
*Comprehensive income is...
What are enhancing qualities?
Term 7 of 69
Which basic elements of the financial statement does the FASB classify as period of time?
it will be a more accurate (faithful) representation of a financial item.
Investment by owners
Distribution to owners
Comprehensive Income
Revenues
Expenses
Gains
Losses
Yes, they are trying to come up with one great conceptual framework.
Says revenues should be recognized in the period the performance obligation is satisfied.
, Term 8 of 69
What are the financial statement elements in IFRS and the IASB conceptual framework?
a. Assets
b. Liabilities
c. Equity
d. Income
e. Expenses
i. REMEMBER US GAAP HAS 10
Measurement Principle
Revenue recognition principle
Expense recognition principle
Full disclosure principle
a. Cost basis
b. fair value
Let the expenses follow the revenue. Expenses should be reported in the same period the
revenue was recorded.
Term 9 of 69
Second level (includes 2) of the FASB's conceptual framework
To provide financial information about the reporting entity that is useful to equity investors
lenders and other creditors in making decisions about providing resources.
Qualitative Characteristics of Accounting Information and the Elements of Financial
Statements--the bridge between levels 1 and 3.
Measurement Principle
Revenue recognition principle
Expense recognition principle
Full disclosure principle
Qualitative characteristics that are complementary to the fundamental qualitative
characteristics. These distinguish more useful information from less useful information.
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