Ch 2 Practice MCQs

1)Which of the following best describes why a conceptual framework is necessary?

    a) to build all standards and rules upon a common foundation and increase financial statement users’ understanding and confidence

2. to make financial statement preparation an automated process requiring no human intervention
3. to completely eliminate the potential for companies to exercise professional judgement in preparation of financial information
4. to decrease the comparability of different companies’ financial statements

2.  Accounting information is considered to be relevant when it

1. can be depended on to represent the economic conditions and events that it is intended to represent.
2. is capable of making a difference in a decision.
3. is understandable by reasonably informed users of accounting information.
4. is verifiable and neutral.

3. The overriding criterion by which accounting information can be judged is that of

 a) usefulness for decision making.

2. freedom from bias.
3. timeliness.
4. comparability.

4. You want to improve the qualitative characteristics of your firm's financial statements. Which of the following options would most likely improve the timeliness of your company's financial statements?

1. increasing the number of disclosures
2. changing the timing of when revenues are recognized
3. increasing the frequency of statements from annually to quarterly
4. decreasing the useful life of property, plant, and equipment from ten years to five

5. Under IFRS, “other comprehensive income” does NOT include

1. unrealized holding gains and losses on certain securities.
2. gains and losses on disposal of property, plant, and equipment.
3. gains and losses related to certain types of hedges.
4. certain gains and losses related to foreign exchange transactions.

6. Generally, under ASPE, revenue from sales should be recognized at a point when

1. management decides it is appropriate to do so.
2. the product is available for sale.
3. an exchange has taken place and the earnings process is substantially complete.
4. the entire amount receivable has been collected from the customer and there remains no further warranty liability.

7. During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with the

a) full disclosure principle.

b) periodicity assumption.

3. going concern assumption.
4. economic entity assumption.

8. Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of

a) the economic entity assumption.

2. the matching principle.
3. comparability.
4. reliability.

9. Financial reporting is

1. independent of the environment in which it operates.