Chapter 1 Quiz

The process of providing financial information to external decision makers is referred to as:
A) Public accounting.
B) Government accounting.
C) Financial accounting.
D) Managerial accounting.

Financial accounting

Financial statements generally include all of the following except:
A) Income statement.
B) Federal income tax return.
C) Balance sheet.
D) Statement of cash flows.

Federal income tax return.

The primary objective of financial reporting is to provide information:
A) About a firm's financing and investing activities.
B) About a firm's management team.
C) About a firm's product lines.
D) Useful in decision making.

Useful in decision making.

GAAP includes which of the following pronouncements:
A) Statements of Financial Accounting Standards.
B) Accounting Research Bulletins.
C) Accounting Principles Board Opinions.
D) All of the above.

All of the above.

The SEC exerts a continuing influence on the establishment of accounting standards. It does so primarily by:
A) Monitoring the development of GAAP within the accounting profession and using its stature to influence that development.
B) Exercising its stat

Exercising its statutory authority to prescribe external financial reporting requirements.

The documents that set forth fundamental concepts on which financial accounting and reporting standards will be based are:
A) Statements of Financial Accounting Standards.
B) Statements of Financial Accounting Concepts.
C) Accounting Principles Board Opin

Statements of Financial Accounting Concepts.

The two primary decision-specific qualities that make accounting information useful are:
A) Verifiability and representational faithfulness.
B) Predictive value and feedback value.
C) Cost effectiveness and materiality.
D) Relevance and faithful represent

Relevance and faithful representation.

Relevance requires that information possess predictive and/or:
A) Neutrality.
B) Completeness.
C) Confirmatory value.
D) Freedom from error.

Confirmatory value.

The qualitative characteristic that means there is agreement between a measure and a real-world phenomenon is:
A) Verifiability.
B) Representational faithfulness.
C) Neutrality.
D) Materiality.

Representational faithfulness.

Which of the following is considered a practical constraint on the qualitative characteristics:
A) Verifiability.
B) Conservatism.
C) Cost effectiveness
D) Timeliness.

Cost effectiveness

Which of the following characteristics does not describe an asset?
A) Probable future economic benefits.
B) Controlled by an entity.
C) Requires the receipt of cash.
D) Result of a past transaction.

Requires the receipt of cash; Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

Which of the following characteristics does not describe a liability?
A) Result of a past transaction.
B) Probable future sacrifices.
C) Present obligation.
D) Must be legally enforceable.

Must be legally enforceable; Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or

The underlying assumption that presumes a company will continue indefinitely is:
A) Periodicity.
B) Going concern.
C) Economic entity.
D) Monetary unit.

Going concern.

The underlying assumption that assumes that the life of a company can be divided into artificial time periods is:
A) Periodicity.
B) Going concern.
C) Economic entity.
D) Monetary unit.

Periodicity.

In general, revenue is recognized when the earnings process is virtually complete and:
A) Collection of the sales price is reasonably assured.
B) A purchase order is received.
C) Cash is collected.
D) Production is completed.

Collection of the sales price is reasonably assured.

The primary objective of matching is to:
A) Provide timely information to external decision-makers.
B) Provide full disclosure.
C) Recognize expenses in the same period as the related revenue.
D) All of the above.

Recognize expenses in the same period as the related revenue.

The main objective of the IASB is to:
A) Set accounting standards for all European Union countries.
B) Develop a single set of global accounting standards.
C) Regulate financial information for all companies around the world.
D) None of the above.

Develop a single set of global accounting standards.