Question 1

The US term stock means the same as the UK term inventory

Accepted Answer

In the US, stock refers to ownership in a company or shares of a company, while inventory refers to the goods and materials a company holds in stock for sale or production. In the UK, inventory is the commonly used term for stock.

Question 2

The concept of materiality is applied because;&#10;A)it makes the accounts more user-friendly if the numbers are rounded up&#10;B)it is difficult for those who are using the accounts to read the small numbers&#10;C)it is easier and is good enough for information purposes&#10;D)it makes stock taking easier by allowing people to make estimates.

Accepted Answer

The concept of materiality is applied in financial reporting to ensure that only material information is included in the financial statements. Material information is information that can influence the economic decisions of users of the financial statements. Including immaterial information in the financial statements can lead to clutter and confusion, and it can also be costly and time-consuming to prepare. Therefore, the principle of materiality allows for the exclusion of small amounts and insignificant details to simplify and clarify the financial information presented.

Question 3

Prudence is not considered to be an accounting convention

Accepted Answer

Prudence is considered an accounting convention, emphasizing the importance of caution when making judgments under conditions of uncertainty, ensuring that assets or income are not overstated and liabilities or expenses are not understated.

Question 4

Financial reporting is only concerned with providing information for internal stakeholders.

Accepted Answer

Financial reporting is concerned with providing information to both internal and external stakeholders, such as investors, creditors, government agencies, and the general public. It is important for decision-making, ensuring transparency, and accountability.

Question 5

The concept of 'going concern' means that we assume that;&#10;A)the business will continue to exist into the indefinite future&#10;B)the ownership of the business will not change in the foreseeable future&#10;C)the nature of the business will not change in the foreseeable future.&#10;D)the business will continue to be profitable for the foreseeable future.

Accepted Answer

The concept of 'going concern' assumes that a business will continue to exist into the indefinite future, regardless of changes in ownership, nature of business, or profitability. It is a fundamental concept in accounting that allows for accurate financial statements to be prepared.

Question 6

There is a conflict between prudence and objectivity because;&#10;A)prudence implies judgement and can never be completely objective&#10;B)prudence cannot be exercised because accounting information is not open to interpretation&#10;C)as accounting information is numeric there can be no doubt about the accuracy&#10;D)numbers can be manipulated so it is impossible to be objective

Accepted Answer

Prudence involves making judgement calls, which by nature cannot be completely objective. Prudence requires making conservative estimates and recognizing potential losses, which may not always be supported by hard data. Therefore, a conflict exists between prudence and objectivity, which requires the presentation of accurate, unbiased information.

Question 7

Timeliness is a characteristic of useful information.

Accepted Answer

Timeliness means that the information is current and relevant to the present situation. This makes it more useful as it can provide up-to-date insights and help in making informed decisions.

Question 8

Which of the following is NOT a characteristic of useful information;&#10;A)relevance&#10;B)flexibility&#10;C)completeness&#10;D)objectivity

Accepted Answer

Flexibility is not a characteristic of useful information. The other three (relevance, completeness, and objectivity) are important characteristics of useful information.

Question 9

The government are not users of the financial reports produced by companies.

Accepted Answer

This statement is false. The government may use financial reports produced by companies for various purposes, such as regulating industries, monitoring tax compliance, and making policy decisions.

Question 10

The acronym IASB stands for;&#10;A)Internal Accounting Standards Bureau&#10;B)International Accounting Settlements Board&#10;C)International Accounting Standards Bureau&#10;D)International Accounting Standards Board

Accepted Answer

The acronym IASB stands for International Accounting Standards Board. This organization is responsible for developing and publishing International Financial Reporting Standards (IFRS) that are used by companies all over the world.

Deck 1: Basics of Financial Reporting