The concept of materiality (indicate all correct answers):a. Requires that financial statements be accurate to thenearest dollar, but need not show cents.b. Is based upon what users of financial statements arethought to consider important.c. Permits accountants to ignore generally acceptedaccounting principles in certain situations. d. Permits accountants to use the easiest and most conve-nient means of accounting for events that are immaterial.

The concept of materiality (indicate all correct answers):a. Requires that financial statements be accurate to thenearest dollar, but need not show cents.b. Is based upon what users of financial statements arethought to consider important.c. Permits accountants to ignore generally acceptedaccounting principles in certain situations. d. Permits accountants to use the easiest and most conve-nient means of accounting for events that are immaterial.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 1MCQ: Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a...

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Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
Which of the following action shall explain the prudence concept in the most appropriate way? a. An accountant has to account for expenses even if the exact amount payable is uncertain. b. In a situation of uncertainty, the accounting staff shall maintain a degree of caution while preparing accounts of an entity. c. An accountant should not account income until it is realized in cash d. An accountant can understate profit rather than overstating it
Which of the following statements is incorrect? A. The accrual method, which builds directly on the revenue and matching principles, ignores the timing of cash receipts or payments determining when to revenue or expenses. when recognize B. In accordance with the going concern assumption, the life of the business is presumed to be indefinite. C. Expenses are matched with revenues, not the reverse. D. In accordance with the unit of measure assumption, accountants normally revise the amounts to reflect the changing purchasing power of money due to inflation or deflation.
Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false. 1. The objective of financial statements emphasizes a stewardship approach for reporting financial information. 2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners’ or stockholders’ equity. 3. Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards. 4. The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.
Which of the following statements relating to the role ofprofessional judgment in the financial reporting process is(are) true?a. Different accountants may evaluate similar situationsdifferently.b. The determination of which items should be disclosedin notes to fi nancial statements requires professionaljudgment.c. Once a complete list of generally accepted accountingprinciples is prepared, judgment by accountants will nolonger enter into the fi nancial reporting process.d. The possibility exists that professional judgment latermay prove to have been incorrect.
Which one of the following statements is not correct regarding financial accounting and management accounting ? a . None of the given answers b. Financial accounting information emphasize supporting decisions that affect the future unlike management accounting information , which focus on the consequences of past activities of the organization . c. Financial accounting needs to follow specific set of rules called accounting standards unlike Management accounting d. Both financial accounting and management accounting involve the use of accounting information . e. Financial accounting reports need to be audited to verify their accuracy unlike management accounting reports which do not need to be audited .
The board of directors of the Sebal Manufacturing Company had just received the company's financial statements. While reading them, one director asked, "What are the precise meanings of the terms 'cost,' 'expense,' and 'loss'? These terms sometimes seem to identify similar items and other times dissimilar items." Required: (1) An explanation of the meanings of the terms (a) "cost," (b) "expense," and (c) "loss" as used for financial reporting in conformity with generally accepted accounting principles. The explanation should indicate distinguishing characteristics of the terms, their similarities, and interrelationships.
1) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position. (a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. (b) Relevant information has predictive value, confirmatory value, or both. (c) Conservatism, a prudent reaction to uncertainty, is considered a constraint of financial reporting. (d) Information that is a faithful representation is characterized as having predictive or confirmatory value. (e) Comparability pertains only to the reporting of information in a similar manner for different companies. (f) Verifiability is solely an enhancing characteristic for faithful representation. (g) In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities
Which is a correct statement below? A. An example of an obscured material information is the information is scattered throughout the financial statements.B. Potential investors are not considered as primary users of financial information.C. An information is immaterial if it will affect the decision of the primary users of the financial statements.D. Going concern assumption means that the accounting entity is viewed as continuing in operation definitely.
Most of the professional accountants support Historical cost accounting over the Current cost accounting. As per the statements given evaluate their agreement in support of historical cost accounting I) The amounts are reliable, they can always be verified, and they exist on invoices and documents. II) The amounts in the statement of financial position can be matched perfectly with the amounts in the statement of cash flows. III) In times of rising prices, the conventional system of accounts based on historical cost does not give a true and fair view of the business enterprise IV) Historical cost is basically verifiable; this minimizes the risk of manipulation of figures by the managers. a. Statements I, III and IV b. Statement I, II and IV c. Statements I, II, III and IV d. Statements I, II and III
Which of the following statements is correct? Options: • Going concern principle assume that in preparing the financial statements only properties, liabilities, income and expenses of a particular business are reported therein • The total value of debits in most cases is higher than the total value of credits • All accounting information must be free from error to be reliable • There is no effect in the amount of the accounting equation if an asset is changed into another form of asset
Choose the incorrect statement:a.) The objective of the external financial statements is to communicate the economic effects of completed transactions and other events on the entity.b.) The practice of accounting requires considerable professional judgment.c.) Security analysis use information form financial statements and other sources to projects future earnings.d.) The assessment of earning quality has become an exact science.