Question 1

The periodicity basic assumptions of accounting (used by the International Accounting Standards Board) makes depreciation and amortization policies justifiable and appropriate.

Accepted Answer

The answer of The periodicity basic assumptions of accounting (used...

Question 2

Companies consider only quantitative factors in determining whether an item is material.

Accepted Answer

Companies should consider both quantitative and qualitative factors in determining whether an item is material. Qualitative factors include items such as reputational risk or legal risk, which can also have a significant impact on financial statements.

Question 3

Materiality is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).

Accepted Answer

Materiality is a fundamental accounting concept and qualitative characteristic that guides the preparation and presentation of financial statements, but it is not classified as a basic assumption under the framework of the International Accounting Standards Board (IASB). Basic assumptions include concepts like accrual basis and going concern, while materiality is considered when determining the relevance and presentation of financial information.

Question 4

Timeliness is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).

Accepted Answer

Timeliness is considered a qualitative characteristic of financial information according to the IASB's conceptual framework, not a basic assumption. The basic assumptions include going concern, accrual basis of accounting, and others, but not timeliness.

Question 5

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

Accepted Answer

The answer of The economic entity assumption means that economic...

Question 6

An enhancing quality as described by the International Accounting Standards Board's (IASB's) Conceptual Framework is comparability.

Accepted Answer

Comparability is one of the enhancing qualitative characteristics defined by the IASB's Conceptual Framework.

Question 7

In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative characteristics distinguish better information from inferior information for decision-making purposes.

Accepted Answer

The IASB's Conceptual Framework outlines two primary qualitative characteristics of useful financial information: relevance and faithful representation, both of which distinguish better information from inferior information.

Question 8

Moon, Inc.applies different accounting treatments to similar events from period to period.Moon, Inc.is violating verifiability as described by the International Accounting Standards Board's (IASB's) Conceptual Framework.

Accepted Answer

Moon, Inc. is violating the consistency principle, not verifiability. Consistency refers to applying the same accounting treatments to similar events from period to period, while verifiability means that different knowledgeable and independent observers can reach consensus, although not necessarily complete agreement, that a particular depiction is faithfully represented.

Question 9

To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, information must be confirmatory.

Accepted Answer

Information being confirmatory is not a requirement for faithful representation according to the IASB's Conceptual Framework. Faithful representation involves complete, neutral, and free from error information.

Question 10

The International Accounting Standards Board's (IASB) definition of retained earnings is "the residual interest in the assets of the entity after deducting all its liabilities."

Accepted Answer

The IASB's definition of retained earnings does not directly refer to "the residual interest in the assets of the entity after deducting all its liabilities." This description more accurately defines equity. Retained earnings specifically refer to the portion of net income left over for the business after it has paid out dividends to its shareholders.

Question 11

The IASB conceptual framework specifically identifies accrual basis accounting as one of its fundamental assumptions.

Accepted Answer

The IASB conceptual framework includes accrual basis accounting as a fundamental assumption. This assumption states that transactions and events are recognized and recorded when they occur, regardless of when the cash is received or paid. This allows for a more accurate representation of a company's financial position and performance.

Question 12

In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative characteristics are considered either relevant or prudent.

Accepted Answer

In the IASB's Conceptual Framework, qualitative characteristics are considered either relevant or faithful representation, not prudent. Prudence is a component considered under the enhancing qualitative characteristics, specifically in the context of exercising caution when making judgments under conditions of uncertainty.

Question 13

One of two assumptions made by the IASB conceptual framework is that the reporting entity is a going concern.

Accepted Answer

The IASB conceptual framework assumes that the reporting entity is a going concern, meaning that it will continue to operate for the foreseeable future. This assumption affects the way financial statements are prepared and presented.

Question 14

Revenues are realizable when assets received or held are readily convertible into cash or claims to cash.

Accepted Answer

Revenues are considered realizable when they are earned and the assets received or held can be easily converted into cash or claims to cash. This means that the company has completed the exchange with the customer and is able to collect payment for the goods or services provided.

Question 15

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

Accepted Answer

The historical cost principle assumes that assets are recorded at their original cost at the time of acquisition. However, if the going concern assumption is not present (i.e. if the company is expected to go out of business soon), then the value of the assets may not be accurately represented on the balance sheet. The going concern assumption assumes that the company will continue to operate for the foreseeable future, allowing for the historical cost principle to be relevant.

Question 16

Periodicity is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).

Accepted Answer

Periodicity is a basic assumption of accounting recognized by the IASB. It refers to the practice of reporting financial information at regular intervals, such as monthly, quarterly, or annually, to aid decision-making by stakeholders.

Question 17

In the International Accounting Standards Board's (IASB's) Conceptual Framework, an ingredient of a fundamental qualitative characteristic is understandability.

Accepted Answer

The answer of In the International Accounting Standards Board's (IASB's)...

Question 18

In the International Accounting Standards Board's (IASB's) Conceptual Framework, an enhancing qualitative characteristic is predictive value.

Accepted Answer

The answer of In the International Accounting Standards Board's (IASB's)...

Question 19

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

Accepted Answer

The expense recognition principle states that expenses should be recognized in the period in which they are incurred, regardless of when payment is made. It does not relate to the fundamental accounting equation of debits equaling credits in transactions.

Question 20

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

Accepted Answer

Supplementary information provides additional details or amounts that may not be present in the financial statements, therefore offering a different perspective on the information presented.

Quiz 2: Conceptual Framework Underlying Financial Accounting

The periodicity basic assumptions of accounting (used by the International Accounting Standards Board) makes depreciation and amortization policies justifiable and appropriate.

Companies consider only quantitative factors in determining whether an item is material.

Materiality is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).

Timeliness is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).

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

An enhancing quality as described by the International Accounting Standards Board's (IASB's) Conceptual Framework is comparability.

In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative characteristics distinguish better information from inferior information for decision-making purposes.

Moon, Inc.applies different accounting treatments to similar events from period to period.Moon, Inc.is violating verifiability as described by the International Accounting Standards Board's (IASB's) Conceptual Framework.

To be a faithful representation as described by the International Accounting Standards Board's (IASB's) Conceptual Framework, information must be confirmatory.

The International Accounting Standards Board's (IASB) definition of retained earnings is "the residual interest in the assets of the entity after deducting all its liabilities."

The IASB conceptual framework specifically identifies accrual basis accounting as one of its fundamental assumptions.

In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative characteristics are considered either relevant or prudent.

One of two assumptions made by the IASB conceptual framework is that the reporting entity is a going concern.

Revenues are realizable when assets received or held are readily convertible into cash or claims to cash.

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

Periodicity is one of the basic assumptions of accounting used by the International Accounting Standards Board (IASB).

In the International Accounting Standards Board's (IASB's) Conceptual Framework, an ingredient of a fundamental qualitative characteristic is understandability.

In the International Accounting Standards Board's (IASB's) Conceptual Framework, an enhancing qualitative characteristic is predictive value.

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

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