Question 1

The principle that assumes the reader of the financial statements is not interested in the liquidation values is:
A)conservatism.
B)matching.
C)time period.
D)realization.
E)None of the answers are correct.

Accepted Answer

The principle that assumes the reader of the financial statements is not interested in the liquidation values is not explicitly mentioned among the options provided. The principles listed (conservatism, matching, time period, realization) relate to other accounting concepts and do not directly address the assumption about the reader's interest in liquidation values.

Question 2

The Accounting Principles Board issued Opinions between:
A)1959-1973.
B)1939-1959.
C)1973-present.
D)1966-1976.
E)None of the answers are correct.

Accepted Answer

The Accounting Principles Board issued Opinions between the years 1959-1973.

Question 3

The accounting principle that assumes that inflation will not take place or will be immaterial is:
A)monetary unit.
B)historical cost.
C)realization.
D)going concern.
E)None of the answers are correct.

Accepted Answer

The monetary unit principle assumes that transactions and events are recorded in terms of a currency that remains stable in terms of purchasing power, and that inflation will not take place or will be immaterial. This is because financial statements are prepared at a specific point in time and therefore the effects of inflation beyond that point are not reflected in the financial statements.

Question 4

The going concern assumption:
A)is applicable to all financial statements.
B)primarily involves periodic income measurement.
C)allows for the statements to be prepared under generally accepted accounting principles.
D)requires that accounting procedures be the same from period to period.
E)none of the answers are correct.

Accepted Answer

The answer of The going concern assumption:
A)is applicable to all...

Question 5

Valuing inventory at the lower of cost or market is an application of the:
A)time period assumption.
B)realization principle.
C)going concern principle.
D)conservatism principle.
E)None of the answers are correct.

Accepted Answer

Valuing inventory at the lower of cost or market is an application of the conservatism principle, which requires companies to be cautious in recognizing potential losses and contingencies. This principle ensures that companies report inventory at its lower value to avoid overstatement of net income and assets.

Question 6

The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is:
A)matching.
B)going concern.
C)consistency.
D)materiality.
E)None of the answers are correct.

Accepted Answer

The assumption of matching deals specifically with when to recognize the costs associated with revenue recognition. The other options are accounting assumptions but do not directly relate to this specific issue.

Question 7

The Financial Accounting Standards Board has issued statements between:
A)1960-1973.
B)1939-1959.
C)1973-present.
D)1966-1976.
E)None of the answers are correct.

Accepted Answer

According to the Financial Accounting Standards Board's website, the FASB has issued statements from 1973 to present.

Question 8

An accounting period that ends when operations are at a low ebb is:
A)a calendar year.
B)a fiscal year.
C)the natural business year.
D)an operating year.
E)None of the answers are correct.

Accepted Answer

The natural business year is based on the fluctuations of the business operations and ends when the activity is at a low point, making it the best option among the choices given. A calendar year and fiscal year are predetermined time periods that do not necessarily align with the business's natural cycle. An operating year is not a commonly used accounting term.

Question 9

The business being separate and distinct from the owners is an integral part of the:
A)time period assumption.
B)going concern assumption.
C)business entity assumption.
D)realization assumption.
E)None of the answers are correct.

Accepted Answer

The business entity assumption states that the business is separate and distinct from the owners. This means that the financial transactions and statements of the business should be kept separate from those of the owners, and the business should be viewed as its own entity in terms of legal and financial obligations.

Question 10

The most significant current source of generally accepted accounting principles is the:
A)New York Stock Exchange.
B)Accounting Principles Board.
C)Accounting Research Studies.
D)AICPA committee on Accounting Procedure.
E)Financial Accounting Standards Board.

Accepted Answer

The Financial Accounting Standards Board (FASB) is the most significant current source of generally accepted accounting principles (GAAP) in the United States. It is a private organization that is responsible for developing and updating GAAP. The other answer choices are either outdated or not directly involved in the development of GAAP.

Question 11

The realization principle leads accountants to usually recognize revenue at:
A)the end of production.
B)during production.
C)the receipt of cash.
D)the point of sale.
E)None of the answers are correct.

Accepted Answer

The realization principle states that revenue should be recognized when it is earned and realized, which typically occurs at the point of sale. Therefore, the best choice is D, the point of sale.

Question 12

By law, the setting of accounting standards is the responsibility of the:
A)AICPA Committee on Accounting Procedure.
B)New York Stock Exchange.
C)Accounting Principles Board.
D)Securities and Exchange Commission.
E)Financial Accounting Standards Board.

Accepted Answer

The Securities and Exchange Commission (SEC) is responsible for setting accounting standards for publicly traded companies in the United States. Although other organizations, such as the Financial Accounting Standards Board (FASB), play a significant role in developing accounting standards, they do so under the oversight and approval of the SEC.

Question 13

Charging off equipment that cost less than $20 would be an example of the application of:
A)going concern.
B)cost.
C)matching.
D)materiality.
E)realization.

Accepted Answer

Materiality refers to the level of significance of an item or transaction on the financial statements. Charging off equipment that cost less than $20 would not have a significant impact on the financial statements, and therefore can be considered immaterial. As a result, it would be appropriate to apply the concept of materiality in this case.

Question 14

All but one of the following statements indicates a difference between the Financial Accounting Standards Board (FASB) and prior approaches.Select the one that is not a difference.
A)The FASB is independent of the AICPA.
B)The size of the board is much smaller.
C)The FASB has broader representation.
D)The FASB is the primary board for the development of generally accepted accounting principles.
E)Members of the FASB serve on a full-time basis.

Accepted Answer

This is not a difference as the FASB has always been the primary board for the development of generally accepted accounting principles, since its inception in 1973.

Question 15

The comment that "items that are not material may be recorded in the financial statements in the most economical and expedient manner possible" is representative of:
A)matching.
B)conservatism.
C)realization.
D)materiality.
E)None of the answers are correct.

Accepted Answer

This comment reflects the concept of materiality, which states that items should only be recorded in the financial statements if they are material enough to influence the decisions of financial statement users. Non-material items can be recorded in a simplified and expedient manner, consistent with the principle of cost-benefit analysis.

Question 16

The organization that has by federal law the responsibility to adopt auditing standards is the:
A)New York Stock Exchange.
B)Public Company Accounting Oversight Board.
C)Accounting Principles Board.
D)Financial Accounting Standards Board.
E)AICPA Committee on Accounting Procedure.

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) is the organization that has by federal law the responsibility to adopt auditing standards for all public companies and broker-dealers. The other options are not responsible for auditing standards adoption by federal law.

Question 17

Understating assets and revenues is justified based on:
A)realization assumption.
B)matching.
C)consistency.
D)realization.
E)None of the answers are correct.

Accepted Answer

Understating assets and revenues is not justified under any accounting principles or assumptions. The realization assumption (or principle) and the matching principle are both aimed at accurately reporting financial transactions when they occur and matching revenues with expenses in the period they are incurred, respectively. Consistency refers to using the same accounting methods from period to period, and does not justify understating assets or revenues.

Question 18

The assumption that enables us to prepare periodic statements between the time that a business commences operations and the time it goes out of business is:
A)time period.
B)business entity.
C)historical cost.
D)transaction.
E)None of the answers are correct.

Accepted Answer

The assumption of time period allows us to divide the life of a business into specific time intervals, such as months or years, and prepare periodic financial statements even if the business has not yet reached the end of its life. This enables investors and managers to analyze the financial performance of the business over time and make decisions based on that analysis.

Question 19

Accountants face a problem of when to recognize revenue.Which of the following methods of recognizing revenue is not used in practice?
A)Point of sale
B)Point of order acceptance
C)End of production
D)Receipt of cash
E)Revenue recognized during production

Accepted Answer

Point of order acceptance is not used in practice as it is not a reliable indicator of when revenue should be recognized. The other methods listed are commonly used in accounting for revenue recognition.

Question 20

Valuing assets at their liquidation values is not consistent with:
A)conservatism.
B)materiality.
C)going concern.
D)time period.
E)None of the answers are correct.

Accepted Answer

Valuing assets at their liquidation values assumes that the company is not a going concern and will cease operations. This is inconsistent with the going concern assumption, which assumes that the company will continue to operate into the foreseeable future. Therefore, choice C is the best answer.

Quiz 1: Introduction to Financial Reporting

The principle that assumes the reader of the financial statements is not interested in the liquidation values is:

The Accounting Principles Board issued Opinions between:

The accounting principle that assumes that inflation will not take place or will be immaterial is:

The going concern assumption:

Valuing inventory at the lower of cost or market is an application of the:

The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is:

The Financial Accounting Standards Board has issued statements between:

An accounting period that ends when operations are at a low ebb is:

The business being separate and distinct from the owners is an integral part of the:

The most significant current source of generally accepted accounting principles is the:

The realization principle leads accountants to usually recognize revenue at:

By law, the setting of accounting standards is the responsibility of the:

Charging off equipment that cost less than $20 would be an example of the application of:

All but one of the following statements indicates a difference between the Financial Accounting Standards Board (FASB) and prior approaches.Select the one that is not a difference.

The comment that "items that are not material may be recorded in the financial statements in the most economical and expedient manner possible" is representative of:

The organization that has by federal law the responsibility to adopt auditing standards is the:

Understating assets and revenues is justified based on:

The assumption that enables us to prepare periodic statements between the time that a business commences operations and the time it goes out of business is:

Accountants face a problem of when to recognize revenue.Which of the following methods of recognizing revenue is not used in practice?

Valuing assets at their liquidation values is not consistent with: