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20 Cards in this Set
- Front
- Back
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Young Textiles is preparing their first public stock offering. In order to do so, they must file an application and financial paperwork with the SEC. Although the out-of-pocket costs of the application are $5.6 million, they know that they will gain $70 million from the sale of their stock. This is an example of |
the cost-benefit relationship |
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Which of the following constraints requires the benefits of the information to outweigh the sacrifices to provide the information? |
Cost |
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How much information is enough for an accountant to comply with the full disclosure principle? |
Information that is of sufficient importance to influence the judgment and decisions of an informed user |
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The expense recognition principle is accurately represented by which of the following statements? |
Expenses are recognized when they make a contribution to revenue In recognizing expenses, accountants attempt to follow the approach of let the expense follow the revenue Costs can be charged to the current period as an expense simply because no connection with revenue can be determined |
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Despite objections, why is the historical cost principle still widely supported for financial reporting? |
It is an objectively determinable amount |
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Which of the following defines an economic entity in accounting? |
A business enterprise A division within a business enterprise An individual |
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Which of the following is represented by a continuation of an accounting entity in the absence of evidence to the contrary? |
Going concern |
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Which of the following statements BEST reflects the economic entity assumption in accounting? |
The activity of a business enterprise can be kept separate and distinct from its owners and any other business unit. |
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Assets, liabilities, and equity describe the amount of resources and claims to resources that a company has |
at a moment in time |
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Which of the following defines equity according to the FASB conceptual framework? |
Equity is the residual interest in the assets of an entity that remains after deducting its liabilities |
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Which of the following would NOT be included in comprehensive income? |
Changes in cash flow resulting from investments by or distribution to owners |
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Accounting information that is complete, free from error, and neutral is |
a faithful representation |
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The primary quality of relevance includes which of the following characteristics? |
Materiality |
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The fundamental quality of faithful representation is violated in which of the following situations? |
Financial statements included buildings with a carrying amount estimated by management. |
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How are financial statements related to the objective of financial reporting? |
Companies use financial statements to provide financial information to potential capital providers, and providing information to capital providers is the objective of financial reporting. |
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Michelle is preparing her company’s income statement and balance sheet. This information will be used by a bank to determine if they want to provide a loan to the company. By preparing these documents, Michelle is |
meeting the objective of financial reporting |
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What is needed in order to move from understanding the purpose of accounting to knowing how to implement accounting practices? |
Knowing the qualitative characteristics of accounting information and the elements of financial statements. |
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Madeline is recording revenues and expenses in her company’s general ledger. When doing this, she is following the guidance set forth in which of the following Statements of Financial Accounting Concepts? |
SFAC No. 6 |
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Mark was recording accounting transactions when he came across a non-standard transaction type. However, based on his knowledge of accounting practices, he was able to come up with a reasonable solution for recording the transaction. This is an example of using a(n) |
conceptual framework to solve new problems |
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The FASB Conceptual Framework Project does NOT provide which of the following benefits? |
Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply. |
