Exam (elaborations)
INTERMEDIATE ACCOUNTING A MIDTERM 1 QUESTIONS WITH CORRECT ANSWERS
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INTERMEDIATE ACCOUNTING A MIDTERM 1 QUESTIONS WITH CORRECT ANSWERS
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INTERMEDIATE ACCOUNTING AMIDTERM 1 QUESTIONS WITH
CORRECT ANSWERS
Decision Usefulness: - Answer-the ability to be useful in decision making.
Understandability: - Answer-Users must understand the information within the context of
the decision being made.
Relevance and reliability: - Answer-Information must be both reliable and relevant.
Predictive value/feedback value: - Answer-If net income and its components confirm
investor expectations about future cash-generating ability, then net income has
feedback value for investors. Also, this confirmation can also be useful in predicting
future cash-generating ability as expectations are revised.
Timeliness: - Answer-Information is timely when it is available to users early enough to
allow its use in the decision process.
Reliability: - Answer-the extent to which information is verifiable, representationally
faithful, and neutral.
Verifiability: - Answer-implies a consensus among different measurers. For instance, the
historical cost of building reported on the balance sheet.
Representational faithfulness: - Answer-Agreement between a measure and the
phenomenon it purports to represent.
Neutrality: - Answer-information is neutral or unbiased with respect to the parties
potentially affected.
Comparability: - Answer-the ability to help users see similarities and differences
between events and conditions.
Consistency: - Answer-applying the same accounting practices over time
Cost effectiveness: - Answer-Requires consideration of the costs and value of
information.
Materiality: - Answer-Concerns the relative size of an item and its effect on decisions.
Conservatism: - Answer-practice to ensure that uncertainties and risks in a business are
disclosed to the public.
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