Question 1

Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?
A)Consistency.
B)Verifiability.
C)Timeliness.
D)Comparability.

Accepted Answer

Changing the method of inventory valuation is a change in accounting policy and should be reported under the qualitative characteristic of consistency, which requires that accounting policies and methods be applied consistently from period to period unless a change is justified.

Question 2

Which of the following is a fundamental quality of useful accounting information?
A)Comparability.
B)Relevance.
C)Neutrality.
D)Materiality.

Accepted Answer

Relevance is a fundamental quality of useful accounting information because it helps users make informed decisions by ensuring that the information is pertinent to their needs and can influence their decisions. Comparability, neutrality, and materiality are also important qualities, but they are not as fundamental as relevance.

Question 3

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.

Accepted Answer

The primary purpose of accounting information is to assist decision-makers in making informed choices. Therefore, the usefulness of accounting information is the most important criterion. Factors such as comparability, timeliness, and freedom from bias are important, but they are secondary to usefulness.

Question 4

Accounting information is considered to be relevant when it
A)can be depended on to represent the economic conditions and events that it is intended to represent.
B)is capable of making a difference in a decision.
C)is understandable by reasonably informed users of accounting information.
D)is verifiable and neutral.

Accepted Answer

Relevant information is information that is capable of making a difference in a decision. Therefore, option B is the correct choice. Options A, C, and D describe other characteristics of useful accounting information, but they do not define relevance.

Question 5

Which of the following is an ingredient of relevance?
A)Verifiability.
B)Timeliness.
C)Predictive value.
D)Neutrality.

Accepted Answer

The answer of Which of the following is an ingredient...

Question 6

What is the quality of information that is capable of making a difference in a decision?
A)Faithful representation.
B)Materiality.
C)Timeliness.
D)Relevance.

Accepted Answer

The quality of information that is capable of making a difference in a decision is relevance. Information needs to be directly related to the decision at hand in order for it to be useful and make a difference. While faithful representation, materiality, and timeliness are all important qualities of information, they do not necessarily guarantee that the information will be relevant to the decision-making process.

Question 7

Which of the following is an ingredient of faithful representation?
A)Predictive value.
B)Materiality.
C)Neutrality.
D)Confirmatory value.

Accepted Answer

Neutrality is an essential ingredient of faithful representation. It means information is free from bias, and there is no attempt to influence the reader or user. Predictive and confirmatory value are characteristics of relevant information, while materiality considers the significance of information in making decisions.

Question 8

An implicit assumption of the International Accounting Standards Board's (IASB's) Conceptual Framework is that
A)Information must be decision-useful to all potential users of financial reporting.
B)General-purpose financial reporting is the primary source of information for users of financial reporting.
C)Users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements.
D)All of the choices are correct.

Accepted Answer

The answer of An implicit assumption of the International Accounting...

Question 9

What is meant by consistency when discussing financial accounting information?
A)Information presented by a company that applies the same accounting treatment to similar events, from period to period.
B)Information is timely.
C)Information that is classified, characterized, and presented clearly and concisely.
D)Information is verifiable.

Accepted Answer

Consistency in financial accounting information means that the company applies the same accounting treatment to similar events, from period to period. This ensures comparative analysis of financial data is accurate and reliable.

Question 10

Neutrality is an ingredient of which fundamental quality of information?
A)Faithful representation.
B)Comparability.
C)Relevance.
D)Understandability.

Accepted Answer

Neutrality is closely linked to faithful representation. Faithful representation means that information is complete, accurate, and unbiased. Neutrality is important in achieving accurate and unbiased information.

Question 11

What is meant by comparability when discussing financial accounting information?
A)Information has predictive or feedback value.
B)Information is reasonably free from error.
C)Information that is measured and reported in a similar fashion across companies.
D)Information is timely.

Accepted Answer

Comparability refers to the extent to which financial information can be measured and reported in a similar fashion across different companies. This allows for better analysis and decision-making by users of financial statements.

Question 12

Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information.Consequently, for information to be useful there must be a linkage between these users and the decisions they make.This link is
A)relevance.
B)faithful representation.
C)understandability.
D)materiality.

Accepted Answer

The answer of Decision makers vary widely in the types...

Question 13

The quality of information that means the numbers and descriptions match what really existed or happened is
A)relevance.
B)faithful representation.
C)completeness.
D)neutrality.

Accepted Answer

Faithful representation means that the information is accurate and reliable, and matches what really existed or happened.

Question 14

Which of the following is a fundamental quality of useful accounting information?
A)Conservatism.
B)Comparability.
C)Faithful representation.
D)Consistency.

Accepted Answer

The answer of Which of the following is a fundamental...

Question 15

When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristic of
A)relevance.
B)faithful representation.
C)consistency.
D)none of these.

Accepted Answer

The answer of When information about two different enterprises has...

Question 16

The two fundamental qualities that make accounting information useful for decision making are
A)comparability and timeliness.
B)materiality and neutrality.
C)relevance and faithful representation.
D)faithful representation and comparability.

Accepted Answer

The two fundamental qualities that make accounting information useful for decision making are relevance and faithful representation. Relevance means that the information is capable of influencing the economic decisions of users by helping them evaluate past, present, or future events, or confirming or correcting their past evaluations. Faithful representation means that the information accurately represents the economic substance of what it purports to represent, so that the information is a reliable basis for users' decisions.

Question 17

The second level of the International Accounting Standards Board's (IASB's) Conceptual Framework
A)provides conceptual building blocks that explain the qualitative characteristics of accounting information.
B)defines the elements of financial statements.
C)serves as a bridge between the "why" of accounting and the "how" of accounting.
D)all of the choices are correct.

Accepted Answer

The second level of the IASB's Conceptual Framework indeed encompasses all the mentioned aspects: it outlines the qualitative characteristics of accounting information, defines the elements of financial statements, and acts as a bridge between the theoretical underpinnings of accounting and its practical application.

Question 18

Financial information does not demonstrate consistency when
A)firms in the same industry use different accounting methods to account for the same type of transaction.
B)a company changes its estimate of the salvage value of a fixed asset.
C)a company fails to adjust its financial statements for changes in the value of the measuring unit.
D)none of these.

Accepted Answer

The answer of Financial information does not demonstrate consistency when
A)firms...

Question 19

Company A issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?
A)Comparability.
B)Timeliness.
C)Understandability.
D)Verifiability.

Accepted Answer

Timeliness refers to the information being available to users in a timely manner. By issuing its annual financial reports within one month of the end of the year, Company A is providing information to users in a timely manner, enhancing the quality of the accounting information.

Question 20

The objective of financial reporting in the International Accounting Standards Board's (IASB's) Conceptual Framework
A)Is the foundation for the Framework.
B)Includes the qualitative characteristics that make accounting information useful.
C)Is found on the third level of the Framework.
D)All of the choices are correct regarding the objective of financial reporting.

Accepted Answer

The answer of The objective of financial reporting in the...

Quiz 2: Conceptual Framework for Financial Reporting

Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?

Which of the following is a fundamental quality of useful accounting information?

The overriding criterion by which accounting information can be judged is that of

Accounting information is considered to be relevant when it

Which of the following is an ingredient of relevance?

What is the quality of information that is capable of making a difference in a decision?

Which of the following is an ingredient of faithful representation?

An implicit assumption of the International Accounting Standards Board's (IASB's) Conceptual Framework is that

What is meant by consistency when discussing financial accounting information?

Neutrality is an ingredient of which fundamental quality of information?

What is meant by comparability when discussing financial accounting information?

The quality of information that means the numbers and descriptions match what really existed or happened is

Which of the following is a fundamental quality of useful accounting information?

When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristic of

The two fundamental qualities that make accounting information useful for decision making are

The second level of the International Accounting Standards Board's (IASB's) Conceptual Framework

Financial information does not demonstrate consistency when

Company A issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?

The objective of financial reporting in the International Accounting Standards Board's (IASB's) Conceptual Framework