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Accounting principles and assumptions: GAAP concepts
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Questions in this quiz (62)
1Charging off equipment that cost less than $20 would be an example of the application of:
- Aa. going concern.
b. cost.
c. matching.
d. materiality.
e. realization. - Bd. materiality.
- Aa. going concern.
2The going concern assumption:
- Aa. is applicable to all financial statements.
b. primarily involves periodic income measurement.
c. allows for the statements to be prepared under generally accepted accounting principles.
d. requires that accounting procedures be the same from period to period.
e. none of the answers are correct. - Bc. allows for the statements to be prepared under generally accepted accounting principles.
- Aa. is applicable to all financial statements.
3Understating assets and revenues is justified based on:
- Aa. realization assumption.
b. matching.
c. consistency.
d. realization.
e. None of the answers are correct. - Be. None of the answers are correct.
- Aa. realization assumption.
4The assumption that enables us to prepare periodic statements between the time that a business commences operations and the time it goes out of business is:
- Aa. time period.
b. business entity.
c. historical cost.
d. transaction.
e. None of the answers are correct. - Ba. time period.
- Aa. time period.
5Valuing assets at their liquidation values is not consistent with:
- Aa. conservatism.
b. materiality.
c. going concern.
d. time period.
e. None of the answers are correct. - Bc. going concern.
- Aa. conservatism.
6The business being separate and distinct from the owners is an integral part of the:
- Aa. time period assumption.
b. going concern assumption.
c. business entity assumption.
d. realization assumption.
e. None of the answers are correct. - Bc. business entity assumption.
- Aa. time period assumption.
7The principle that assumes the reader of the financial statements is not interested in the liquidation values is:
- Aa. conservatism.
b. matching.
c. time period.
d. realization.
e. None of the answers are correct. - Be. None of the answers are correct.
- Aa. conservatism.
8An accounting period that ends when operations are at a low ebb is:
- Aa. a calendar year.
b. a fiscal year.
c. the natural business year.
d. an operating year.
e. None of the answers are correct. - Bc. the natural business year.
- Aa. a calendar year.
9The accounting principle that assumes that inflation will not take place or will be immaterial is:
- Aa. monetary unit.
b. historical cost.
c. realization.
d. going concern.
e. None of the answers are correct. - Ba. monetary unit.
- Aa. monetary unit.
10Valuing inventory at the lower of cost or market is an application of the:
- Aa. monetary unit.
b. historical cost.
c. realization.
d. going concern.
e. None of the answers are correct. - Bd. conservatism principle.
- Aa. monetary unit.
11The realization principle leads accountants to usually recognize revenue at:
- Aa. the end of production.
b. during production.
c. the receipt of cash.
d. the point of sale.
e. None of the answers are correct. - Bd. the point of sale.
- Aa. the end of production.
12The comment that "items that are not material may be recorded in the financial statements in the most economical and expedient manner possible" is representative of:
- Aa. matching.
b. conservatism.
c. realization.
d. materiality.
e. None of the answers are correct. - Bd. materiality.
- Aa. matching.
13The Financial Accounting Standards Board has issued statements between:
- Aa. 1960-1973.
b. 1939-1959.
c. 1973-present.
d. 1966-1976.
e. None of the answers are correct. - Bc. 1973-present.
- Aa. 1960-1973.
14Accountants face a problem of when to recognize revenue. Which of the following methods of recognizing revenue is not used in practice?
- Aa. Point of sale
b. Point of order acceptance
c. End of production
d. Receipt of cash
e. Revenue recognized during production - Bb. Point of order acceptance
- Aa. Point of sale
15The organization that has by federal law the responsibility to adopt auditing standards is the:
- Aa. New York Stock Exchange.
b. Public Company Accounting Oversight Board.
c. Accounting Principles Board.
d. Financial Accounting Standards Board.
e. AICPA Committee on Accounting Procedure. - Bb. Public Company Accounting Oversight Board.
- Aa. New York Stock Exchange.
16By law, the setting of accounting standards is the responsibility of the:
- Aa. AICPA Committee on Accounting Procedure.
b. New York Stock Exchange.
c. Accounting Principles Board.
d. Securities and Exchange Commission.
e. Financial Accounting Standards Board. - Bd. Securities and Exchange Commission.
- Aa. AICPA Committee on Accounting Procedure.
17The assumption that allows accountants to accept some inaccuracy, because of incomplete information about the future, in exchange for more timely reporting is:
- Aa. conservatism.
b. time period.
c. business entity.
d. materiality.
e. realization. - Bb. time period.
- Aa. conservatism.
18Which of these measurement attributes is not currently used in practice?
- Aa. Historical cost
b. Relevant cost
c. Current market value
d. Current cost
e. Present value - Bb. Relevant cost
- Aa. Historical cost
19The following data relate to Swift Company for the year ended December 31, 2012. Swift Company uses the accrual basis.
Sales on credit $250,000
Cost of inventory sold on credit 170,000
Collections from customers 220,000
Purchase of inventory on credit 150,000
Payment for purchases 140,000
Selling expenses (accrual basis) 40,000
Payment for selling expenses 45,000
Which of the following amounts represents income for Swift Company for the year ended December 31, 2012?- Aa. $60,000
b. $50,000
c. $40,000
d. $35,000
e. $30,000 - Bc. $40,000
- Aa. $60,000
20The following data relate to Gorr Company for the year ended December 31, 2012. Gorr Company uses the accrual basis.
Sales for cash $200,000
Sales for credit 220,000
Cost of inventory sold 180,000
Collections from customers 300,000
Purchases of inventory on credit 190,000
Payment for purchases 180,000
Selling expenses (accrual basis) 50,000
Payment for selling expenses 60,000
Which of the following represents income for Gorr Company for the year ended December 31, 2010?- Aa. $180,000
b. $185,000
c. $190,000
d. $200,000
e. None of the answers are correct. - Bc. $190,000
- Aa. $180,000
21The following data relate to Falcon Company for the year ended December 31, 2012. Falcon Company uses the cash basis.
Sales for cash $180,000
Sales for credit 190,000
Cost of inventory sold 210,000
Collections from customers 350,000
Purchases of inventory on credit 200,000
Payment for purchases 220,000
Selling expenses (accrual basis) 60,000
Payment for selling expenses 70,000
Which of the following amounts represents income for Falcon Company for the year ended December 31, 2012?- Aa. $90,000
b. $80,000
c. $70,000
d. $60,000
e. None of the answers are correct. - Bd. $60,000
- Aa. $90,000
22In order to determine the economic success of a grocery store, we should view it as separate from the other resources that are owned by this individual.
- ATrue
- BFalse
23Many of our present financial statement figures would be misleading if it were not for the going concern assumption.
- ATrue
- BFalse
24The going concern assumption does not influence the classification of assets and liabilities.
- ATrue
- BFalse
25The most accurate way to account for the success or failure of an entity is to accumulate all transactions from the opening of business until the business eventually liquidates.
- ATrue
- BFalse
26An entity usually cannot reasonably account for the profits related to inventory until that inventory is sold in the normal course of business.
- ATrue
- BFalse
27To the extent that money does not remain stable, it loses its usefulness as the standard for measuring financial transactions.
- ATrue
- BFalse
28A loss in value of money is called inflation.
- ATrue
- BFalse
29At the time of originally recording a transaction, historical cost also represents the fair market value.
- ATrue
- BFalse
30It would always be conservative to value inventory at market.
- ATrue
- BFalse
31Accountants normally recognize revenue when cash is received.
- ATrue
- BFalse
32The 1933 and 1934 U.S. federal securities laws virtually gave the Securities and Exchange Commission (SEC) authority and responsibility for the development of generally accepted accounting principles.
- ATrue
- BFalse
33The Statements of Financial Accounting Concepts are intended to provide the Financial Accounting Standards Board with a common foundation and the basic underlying reasoning on which to consider the merits of various alternative accounting principles.
- ATrue
- BFalse
34Eventually, the Financial Accounting Standards Board intends to evaluate current principles in terms of the concepts established in the Financial Accounting Concepts.
- ATrue
- BFalse
35Financial Accounting Concepts establish generally accepted accounting principles.
- ATrue
- BFalse
36According to the second Financial Accounting Concept, those characteristics of information that make it a desirable commodity can be viewed as a hierarchy of qualities, with understandability and usefulness for decision making of most importance.
- ATrue
- BFalse
37Timeliness is a pervasive constraint imposed upon financial accounting information.
- ATrue
- BFalse
38Relevance and reliability are two primary qualities that make accounting information useful for decision making.
- ATrue
- BFalse
39Predictive value, feedback value, and timeliness are ingredients needed to ensure that the information is reliable.
- ATrue
- BFalse
40Decision usefulness is a pervasive constraint imposed upon financial accounting information.
- ATrue
- BFalse
41Relevance is a quality requiring that the information be timely and that it also have predictive value or feedback value or both.
- ATrue
- BFalse
42The SEC has the authority to determine generally accepted accounting principles and to regulate the accounting profession.
- ATrue
- BFalse
43Some industry practices lead to accounting reports that do not conform to the general theory that underlies accounting.
- ATrue
- BFalse
44All important events that influence the prospects for the entity are recorded and therefore are reflected in the financial statements.
- ATrue
- BFalse
45The accrual basis of accounting recognizes revenue when realized (realization concept) and expenses when incurred (matching concept).
- ATrue
- BFalse
46The cash basis recognizes revenue when cash is received and expenses when cash is paid.
- ATrue
- BFalse
47Among the many responsibilities of the PCAOB is to adopt accounting standards.
- ATrue
- BFalse
48For a public company, the SEC requires that a report be filed annually on its internal control systems.
- ATrue
- BFalse
49At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable. This entry is an application for which accounting principle?
- Aa. Full disclosure
b. Materiality
c. Matching
d. Going concern
e. Realization - Bc. Matching
- Aa. Full disclosure
50Who is responsible for the preparation and integrity of financial statements?
- Aa. A cost accountant
b. Management
c. An auditor
d. A bookkeeper
e. The FASB - Bb. Management
- Aa. A cost accountant
51Which of the following is not an objective of the SEC's integrated disclosure system?
- Aa. To coordinate the Form 10-K requirements with those of the annual report
b. To lessen the impact of the FASB
c. To expand the management discussion of liquidity, capital resources, and results of operations
d. To improve the quality of disclosure
e. To standardize information requirements - Bb. To lessen the impact of the FASB
- Aa. To coordinate the Form 10-K requirements with those of the annual report
52Which of the following is not a type of audit opinion?
- Aa. Unqualified opinion
b. Qualified opinion
c. Adverse opinion
d. Clean opinion
e. Disclaimer of opinion - Bd. Clean opinion
- Aa. Unqualified opinion
53Which of the following statements is not true?
- Aa. A qualified opinion or an adverse opinion may bring into question the reliability of the financial statements.
b. A disclaimer of opinion indicates that one should not look to the auditor's report as an indication of the reliability of the statements.
c. In some cases, outside accountants are associated with financial statements when they have performed less than an audit.
d. A review is substantially less in scope than an examination in accordance with generally accepted auditing statements.
e. The accountant's report expresses an opinion on reviewed financial statements. - Be. The accountant's report expresses an opinion on reviewed financial statements.
- Aa. A qualified opinion or an adverse opinion may bring into question the reliability of the financial statements.
54In addition to the balance sheet, the income statement, and the statement of cash flows, a complete set of financial statements must include:
- Aa. an auditor's opinion.
b. a ten-year summary of operations.
c. a note disclosure of such items as accounting policies.
d. historical common-size (percentage) summaries.
e. a list of corporate officers. - Bc. a note disclosure of such items as accounting policies.
- Aa. an auditor's opinion.
55Which of the following statements is not correct concerning summary annual reports?
- Aa. A summary annual report omits much of the financial information included in an annual report.
b. When a company issues a summary annual report, the proxy materials it sends to shareholders must include a set of fully audited statements and other required financial disclosures.
c. A summary annual report generally has more nonfinancial pages than financial pages.
d. A summary annual report is adequate for reasonable analysis.
e. The concept of a summary annual report was approved by the Securities and Exchange Commission. - Bd. A summary annual report is adequate for reasonable analysis.
- Aa. A summary annual report omits much of the financial information included in an annual report.
56Which of the following is not a true statement relating to the Treadway Commission?
- Aa. The Treadway Commission is the popular name for the National Commission on Fraudulent Reporting.
b. The Treadway Commission has released reports detailing internal control systems.
c. Management’s Report on Internal Control over Financial Reporting and the independent public accounting from report to the shareholders and board of directors often refer to criteria established on internal control by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
d. The Treadway Commission has issued a number of recommendations for the prevention of fraud on financial reports, ethics, and effective internal controls.
e. The Treadway Commission is a voluntary-sector organization formed to support the Sarbones-Oxley Act. - Be. The Treadway Commission is a voluntary-sector organization formed to support the Sarbones-Oxley Act.
- Aa. The Treadway Commission is the popular name for the National Commission on Fraudulent Reporting.
57Which of these statements is not true?
- Aa. Transactions must be recorded in a journal.
b. All transactions could be recorded in the general journal.
c. Companies use a number of special journals to record most transactions.
d. Special journals are designed to improve record- keeping efficiency.
e. The form of the journals are the same from industry to industry. - Be. The form of the journals are the same from industry to industry.
- Aa. Transactions must be recorded in a journal.
58Which of these statements is not true?
- Aa. Asset, liability, and stockholders' equity accounts are referred to as permanent accounts.
b. Revenue, expense, and dividend accounts are described as temporary accounts.
c. Temporary accounts are closed at the end of the period to retained earnings.
d. The balance sheet will not balance until the temporary accounts are closed to retained earnings.
e. With double-entry, each transaction is recorded twice. - Be. With double-entry, each transaction is recorded twice.
- Aa. Asset, liability, and stockholders' equity accounts are referred to as permanent accounts.
59Which of the following is a type of audit opinion that a firm would usually prefer?
- Aa. Uqualified opinion
b. Qualified opinion
c. Adverse opinion
d. Clear opinion
e. None of the answers are correct. - Ba. Uqualified opinion
- Aa. Uqualified opinion
60Which of the following is a permanent account?
- Aa. Dividends
b. Advertising expense
c. Building
d. Selling expense
e. Insurance expense - Bc. Building
- Aa. Dividends
61Which of the following is a temporary account?
- Aa. Advertising expense
b. Land
c. Building
d. Accounts payable
e. Bonds payable - Ba. Advertising expense
- Aa. Advertising expense
62In terms of debits and credits, which of the following accounts have the same normal balances?
- Aa. Accounts payable, accounts receivable, notes payable
b. Dividends, accounts receivable, notes payable
c. Advertising expense, selling expense, accounts receivable
d. Land, building, accounts payable
e. Common stock, notes payable, land - Bc. Advertising expense, selling expense, accounts receivable
- Aa. Accounts payable, accounts receivable, notes payable
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- Quiz on Untitled, created by wdepledge on 01/03/2015.
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