Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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Financial reporting objectives state that financial statements should be
comprehensible to:
a. | Financial analysts with requisite training and experience. | b. | Those with a
reasonable understanding of business and a diligence to study the information. | c. | The informed
investor. | d. | The average investor with average communication skills and average training and
experience. |
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2.
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Recognizing expected losses immediately, but deferring expected gains, is an
example of:
a. | Materiality. | b. | Conservatism. | c. | Cost
effectiveness. | d. | Timeliness. |
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3.
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The overriding criterion by which accounting information can be judged is that
of
a. | usefulness for decision making. | b. | freedom from bias. | c. | timeliness. | d. | comparability. |
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4.
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Which of the following serves as the justification for the periodic recording of
depreciation expense?
a. | Association of efforts (expense) with accomplishments (revenue) | b. | Systematic and
rational allocation of cost over the periods benefited | c. | Immediate recognition of an
expense | d. | Minimization of income tax liability |
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5.
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The issuance of quarterly financial statements by a company is an example of
which of the following concepts?
a. | going concern | b. | accrual accounting | c. | periodic
measurement | d. | transformation process |
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6.
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Postulates are:
a. | Assumptions that can be directly verified. | b. | Essential to
development of any intellectual discipline. | c. | fundamental truths that are not susceptible to
challenge | d. | often inconsistent with one another |
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7.
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FASB Concepts Statements
a. | affect accounting practice directly | b. | require changes in generally accepted
accounting principles | c. | are used to amend existing accounting
procedures | d. | affects practice through its influence in the development of new accounting
standards. |
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8.
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The two primary qualities that make accounting
information useful for decision making are
a. | comparability and
consistency. | b. | materiality and
timeliness. | c. | relevance and
reliability. | d. | reliability and
comparability. |
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9.
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The expense recognization principle of associating cause and effect is used to
recognize and
report:
cost of R and
D
goods sold
expense
a. |
yes
yes | b. |
no
no | c. |
no
yes | d. |
yes
no |
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10.
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Which of the following statements is false:
a. | Objective evidence refers to mesurements based on verifiable
evidence. | b. | Objectivity means the expression of facts without distortion from personal
bias. | c. | Factual materials can never be determined with complete and conclusive
objectivity. | d. | Verifiable, objective evidence is not necessary to supply dependable
information. |
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