FIN. ACCT.-TOOLS FOR BUS.DEC.MAKING-CODE
9th Edition
ISBN: 9781119595724
Author: Kimmel
Publisher: WILEY C
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What is probably the greatest single reason conventional financial statements are inadequate for analysis?
a. Accrual accounting
b. Historical cost
c. Matching rule
d. Going concern concept
Presented below are the assumptions, principles, and constraint used in this chapter.
1. Economic entity assumption
2. Going concern assumption
3. Monetary unit assumption
4. Periodicity assumption
5. Measurement principle (historical cost)
6. Measurement principle (fair value)
7. Expense recognition principle
8. Full disclosure principle
9. Cost constraint
10. Revenue recognition principle
Instructions
Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once.
a. Allocates expenses to revenues in the proper period.
b. Indicates that fair value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle.)
c. Ensures that all relevant financial information is reported.
d. Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle.)
e. Indicates that personal and…
Listed below are several information characteristics and accounting principles and assumptions. Match
the letter of each with the appropriate phrase that states its application. (Items a through k may be used
more than once.)
a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Periodicity assumption
e. Historical cost principle
f. Revenue recognition principle
g. Matching principle
h. Full disclosure principle
i. Relevance characteristic
j. Reliability characteristic.
k. Consistency characteristic
1. Stable-dollar assumption (do not use historical cost principle).
2. Earning process completed and realized or realizable.
3. Presentation of error-free information with representational faithfulness.
4. Yearly financial reports.
5. Accruals and deferrals in adjusting and closing process. (Do not use going concern.)
6. Useful standard measuring unit for business transactions.
7. Notes as part of necessary information to a fair presentation.
8. Affairs of…
Knowledge Booster
Similar questions
- Which of the following does not accurately represent the accounting equation? A. B. C. D.arrow_forwardWhich concept states that any policies adopted for accounting should not change frequently unless it is the demand of the changing circumstances Oa. Cost Concept O b. Money Measurement Concept Oc. Consistency Concept O d. Going Concern Conceptarrow_forwardQuestions ? 1. What assumptions are made in financial reporting 2. What are characteristics that make financial statements useful to its users ? 3. What are the constraints faced in providing useful information ?arrow_forward
- MULTIPLE CHOICE. Choose the best answer among the following choices. 6. The financial statements should be stated in terms of a common financial denominator. A. Accrual B. Going Concern C. Time Period D. Stable Monetary Unit 7. The principle of objectivity includes the concept of A. Summarization B. Verifiability C. Classification D. Conservatism 8. The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users. A. Completeness B. Verifiability C. Relevance D. Neutrality 9. The attribute of relevance include ALL EXCEPT: A. Predictive value B. Feedback value C. Materiality D. Neutrality 10. The assumption that an entity will continue to operate for the foreseeable future is called A. Accrual basis B. Comparability C. Going concern D. Cash basisarrow_forward.What is the conceptual framework of Accounting ? 2.Identify the characteristics that make financial statements useful to its users 3.What are the constraints faced in providing useful information ? 4.What assumptions are made in financial reporting ?arrow_forwardA recognition test assists with deciding whether items should be included in the financial statements. Which characteristic of a financial statement does this refer to? O A. Reliable O B. Complete OC. Material O D. Neutral Type here to searcharrow_forward
- The following characteristics refer to financial accounting, excepta, Provides information to external usersb. Emphasizes on objective datac. Has no externally imposed standardsd. Generates general purpose financial statements.arrow_forwardDiscuss the four basic Assumptions that underline the financial Accounting Structures with example. b) Match the qualitative characteristics below with the following statements. I. Relevance VI. Comparability II.Faithful representation VII.Completeness III. Predictive value VIII.Neutrality IV.Confirmatory value IX.Timeliness V. Free from error X. Understandability (i) Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena. (ii) Having information available to users before it loses its capacity to influence decisions. (iii) Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future.arrow_forward. MULTIPLE CHOICE. Choose the best answer among the following choices. Time Dor SLUIC Monetary Unit 7. The principle of objectivity includes the concept of A. Summarization B. Verifiability C. Classification D. Conservatism 8. The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users. A. Completeness B. Verifiability C. Relevance D. Neutrality 9. The attribute of relevance include ALL EXCEPT: minator. A. Predictive value B. Feedback value C. Materiality D. Neutrality 10. The assumption that an entity will continue to operate for the foreseeable future is called A. Accrual basis B. Comparability C. Going concern D. Cash basisarrow_forward
- Which of the following is a major challenge facing the accounting profession? O A. Accounting for hard assets O B. Backward-looking information O. Financial measurements O D. Timelinessarrow_forward1.2 Consider the following short descriptions. Indicate whether each description more closely relates to a major feature of financial accounting (use FA) or management accounting (use MA) a. Behavioral impact is secondary b. Is constrained by generally accepted accounting principles C. Has a future orientation d. Is characterized by detailed reports e. Field is more sharply defined f. Has less flexibility Onarrow_forwardWhich of the following is not an objective of the conceptual framework? O a. Provides guidance for transactions not addressed in existing accounting standards O b. Enables implementation of one universal set of accounting standards O c. Enables consistency of qualitative characteristics in financial reports O d. Addresses the common needs of users of financial reportsarrow_forward
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