Which of the following statements concerning the cost-benefit relationship is not true

A soundly developed conceptual framework enables the FASB to issue more useful and consistent pronouncements over time.

A conceptual framework is a coherent system of concepts that flow from an objective.

The first level of the conceptual framework identifies the recognition, measurement, and disclosure concepts used in establishing accounting standards.

The IASB has issued a conceptual framework and has agreed to develop a common conceptual framework with the FASB.

Although the FASB has developed a conceptual framework, no Statements of Financial Accounting Concepts have been issued to date.

The objective of financial reporting is the foundation of the conceptual framework.

Users of financial statements are assumed to need no knowledge of business and financial accounting matters to understand information contained in financial statements.

Relevance and faithful representation are the two primary qualities that make accounting information useful for decision making.

The idea of consistency does not mean that companies cannot switch from one accounting method to another.

Timeliness and neutrality are two ingredients of relevance.

Verifiability and predictive value are two ingredients of faithful representation.

Revenues, gains, and distributions to owners all increase equity.

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.   

The historical cost principle would be of limited usefulness if not for the going concern assumption.   

The economic entity assumption means that economic activity can be identified with a particular legal entity.

The expense recognition principle states that debits must equal credits in each transaction.

Revenues are recognized in the accounting period in which the performance obligation is satisfied.

Supplementary information may include details or amounts that present a different perspective from that adopted in the financial statements.

In order to justify requiring a particular measurement or disclosure, the benefits to be derived from it must equal the costs associated with it.

Prudence or conservatism means when in doubt, choose the solution that will be least likely to overstate liabilities or expenses.

Generally accepted accounting principles

derive their credibility and authority from general recognition and acceptance by the accounting profession.

A soundly developed conceptual framework of concepts and objectives should

All of these answer choices are correct. (

increase financial statement users' understanding of and confidence in financial reporting. enhance comparability among companies' financial statements. allow new and emerging practical problems to be more quickly solved.)

Which of the following is not true concerning a conceptual framework in accounting?

It should be based on fundamental truths that are derived from the laws of nature.

What is a purpose of having a conceptual framework?

To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

Which of the following is not a benefit associated with the FASB Conceptual Framework Project?

Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.

In the conceptual framework for financial reporting, what provides "the why"--the purpose of accounting?

Objective of financial reporting

The underlying theme of the conceptual framework is

The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except

All of these answers are correct. ( potential equity investors. potential lenders. present investors.)

What is the primary objective of financial reporting as indicated in the conceptual framework?

Provide information that is useful to those making investing and credit decisions

If the LIFO inventory method was used last period, it should be used for the current and following periods because of

What is the following is a characteristic describing the primary quality of relevance?

Which of the following is a fundamental quality of useful accounting information?

Which of the following is a primary quality of useful accounting information?

What is meant by comparability when discussing financial accounting information?

Information that is measured and reported in a similar fashion across companies

What is meant by consistency when discussing financial accounting information?

Information that is measured and reported in a similar fashion across points in time.

Which of the following is an ingredient of relevance?   

Which of the following is an ingredient of faithful representation?

Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?   

Company A issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?

What is the quality of information that is capable of making a difference in a decision?

Neutrality is an ingredient of which fundamental quality of information?

If the FIFO inventory method was used last period, it should be used for the current and following periods because of

The pervasive criterion by which accounting information can be judged is that of

The two fundamental qualities that make accounting information useful for decision making are

relevance and faithful representation

Accounting information is considered to be relevant when it

s capable of making a difference in a decision.

The quality of information that means the numbers and descriptions match what really existed or happened is

Which of the following does not relate to relevance?   

All of these answer choices relate to relevance (Materiality, Predictive value, Confirmatory value)

According to Statement of Financial Accounting Concepts No. 2, materiality is an ingredient of the fundamental quality of

Yes (Relevance) No (Faithful Rep)

According to Statement of Financial Accounting Concepts No. 2, completeness is an ingredient of the fundamental quality of 

No (Relevance)       Yes (Faithful Rep)

According to Statement of Financial Accounting Concepts No. 2, neutrality is an ingredient of the fundamental quality of

No (Relevance)       Yes (Faithful Rep)

Neutrality means that information

cannot favor one set of interested parties over another

The characteristic that is demonstrated when a high degree of consensus can be secured among independent measurers using the same measurement methods is

According to Statement of Financial Accounting Concepts No. 2, predictive value is an ingredient of the fundamental quality of

Yes (Relevance) No (Faithful Rep)

Under Statement of Financial Accounting Concepts No. 2, free from error is an ingredient of the fundamental quality of

Yes (Relevance) No (Faithful Rep)

Financial information demonstrates consistency when

None of these answer choices are correct

Financial information exhibits the characteristic of consistency when

a company applies the same accounting treatment to similar events, from period to period.

Information about different companies and about different periods of the same company can be prepared and presented in a similar manner. Comparability and consistency are related to which of these objectives?

Companies (Compar)     Periods (Consistency)

When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristic of

None of these answer choices are correct.

The elements of financial statements include investments by owners. These are increases in an entity's net assets resulting from owners'

All of these answer choices are correct. (transfers of assets to the entity. rendering services to the entity. satisfaction of liabilities of the entity.)

In classifying the elements of financial statements, the primary distinction between revenues and gains is

the nature of the activities that gave rise to the transactions involved

A decrease in net assets arising from peripheral or incidental transactions is called a(n)

One of the elements of financial statements is comprehensive income. As described in Statement of Financial Accounting Concepts No. 6, "Elements of Financial Statements," comprehensive income is equal to

None of these answer choices are correct.

Which of the following elements of financial statements is not a component of comprehensive income?

The calculation of comprehensive income includes which of the following?

Yes (Operating Income)                         No (Distribution to owners)

According to the FASB conceptual framework, which of the following elements describes transactions or events that affect a company during a period of time?

ccording to the FASB Conceptual Framework, the elements¾assets, liabilities, and equity¾describe amounts of resources and claims to resources at/during a

Yes (Moment in time)     No (Period of time)

Which of the following is not a basic element of financial statements?

Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement?

Issuance of common stock for cash affects which basic element of financial statements?

Which basic element of financial statements arises from peripheral or incidental transactions?

Which of the following is not a basic assumption underlying the financial accounting structure?

Historical cost assumption.

Which basic assumption is illustrated when a firm reports financial results on an annual basis?

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?

Which accounting assumption or principle is being violated if a company provides financial reports only when it introduces a new product?

Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?

During the lifetime of an entity accountants produce financial statements at artificial points in time in accordance with the concept of

No (Relevance)       Yes (Periodicity)

Under current GAAP, inflation is ignored in accounting due to the

monetary unit assumption.

The economic entity assumption

is applicable to all forms of business organizations.   

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

economic entity assumption

During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept?

What accounting concept justifies the usage of depreciation and amortization policies?

The assumption that a company will not be sold or liquidated in the near future is known as the

None of these answer choices are correct.

Which of the following is an implication of the going concern assumption?

All of these. ( The historical cost principle is credible. Depreciation and amortization policies are justifiable and appropriate. The current-noncurrent classification of assets and liabilities is justifiable and significant.)

Proponents of historical cost ordinarily maintain that in comparison with all other valuation alternatives for general purpose financial reporting, statements prepared using historical costs are more

Valuing assets at their liquidation values rather than their cost is inconsistent with the

historical cost principle

Revenue is recognized in the accounting period in which the performance obligation is satisfied. This statement describes the

revenue recognition principle

Generally, revenue from sales should be recognized at a point when

None of these answer choices are correct.

Revenue generally should be recognized

when the performance obligation is satisfied.

The measurement principle includes the

historical cost principle and the fair value principle.   

Which of the following is commonly referred to as the matching principle?

Expense recognition principle

Product costs include each of the following except   

The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the

expense recognition principle

The accounting principle of expense recognition is best demonstrated by

associating effort (expense) with accomplishment (revenue).

Which of the following serves as the justification for the periodic recording of depreciation expense?

Systematic and rational allocation of cost over the periods benefited

Application of the full disclosure principle

is demonstrated by the use of supplementary information explaining the effects of financing arrangements.

Which of the following is an argument against using historical cost in accounting?

Fair values are more relevant.

When is revenue generally recognized?

When the company satisfies the performance obligation.

Which of the following is a component of the revenue recognition principle?

Cash is realized or realizable and production is complete.

A company has a performance obligation when it agrees to

perform a service or sell a product to a customer.

Which of the following is not a required component of financial statements prepared in accordance with generally accepted accounting principles? 

President's letter to shareholders

What is the general approach as to when product costs are recognized as expenses?

In the period when the related revenue is recognized

Not adjusting the amounts reported in the financial statements for inflation is an example of which basic principle of accounting? 

Recognition of expense related to amortization of an intangible asset illustrates which principle of accounting?

When should an expenditure be recorded as an asset rather than an expense?

When future benefit exists.

Which accounting assumption or principle is being violated if a company reports its corporate headquarter building at its fair value on the balance sheet?

Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company's stock price?

Which assumption or principle requires that all information significant enough to affect a decision of reasonably informed users should be reported in the financial statements?

A company has a factory building that originally cost the company $250,000. The current fair value of the factory building is $3 million. The president would like to report the difference as a gain. The write-up would represent a violation of which accounting assumption or principle?

Which of the following is a constraint in presenting financial information?

Cost-benefit relationship.

All of the following represent costs of providing financial information except

Which of the following is a benefit of providing financial information?

Improved allocation of resources.

Where is materiality not used in providing financial information?

Applying the going concern assumption.

What is prudence or conservatism?

When in doubt, recognizing the option that is least likely to overstate assets and income

Expensing the cost of copy paper when the paper is acquired is an example

Which of the following statements concerning the cost-benefit relationship is not true?

If needed by financial statement users, management should gather information not included in the financial statements that         would not otherwise be gathered for internal use

Which of the following relates to both relevance and faithful representation?

Charging off the cost of a wastebasket with an estimated useful life of 10 years as an expense of the period when purchased is an example of the application of the

Which of the following statements about materiality is correct?

All of these answers are correct. (

Which of the following statements about materiality is correct?

a.  An item must make a difference or it need not be disclosed. Materiality is a matter of relative size or importance. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.)

Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 8?

The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as

The second level of the conceptual framework includes each of the following except

Trade-offs between the characteristics that make information useful may be necessary or beneficial. Issuance of interim financial statements is an example of a trade-off between

relevance and faithful representation

Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between

timeliness and verifiability.

In matters of doubt and great uncertainty, accounting issues should be resolved by choosing the alternative that has the least favorable effect on net income, assets, and owners' equity. This guidance comes from

According to the FASB's conceptual framework, predictive value is an ingredient of

Yes (Relevance)     No (Faithful)

According to the FASB's conceptual framework, which of the following relates to both relevance and faithful representation?

The FASB's conceptual framework classifies gains and losses based on whether they are related to an entity's major ongoing or central operations. These gains or losses may be classified as

Yes( Non)     Yes (Operating)

According to the FASB's conceptual framework, earnings

excludes certain gains and losses that are included in comprehensive income.

According to the FASB's conceptual framework, comprehensive income includes which of the following? 

According to the FASB's conceptual framework, the calculation of comprehensive income includes which of the following?

According to the FASB's conceptual framework, comprehensive income includes which of the following?

Under Statements of Financial Accounting Concepts, comprehensive income includes which of the following?

Which of the following is an application of the principle of rational and systematic allocation?

Amortization of intangible assets.

Which of the following is the benefit of providing financial information?

Which of these statements regarding the IFRS and GAAP is correct?

Which of the following is not an objective of financial statements?

Which of the following is not a basic element of financial statements?