Question 1

Which of the following is $\underline{not}$ a possible outcome of postulate C-4, stability of the monetary unit?
A)If purchasing power of the monetary unit is not stable, some form of inflation accounting is appropriate.
B)If purchasing power of the monetary unit is not stable, historical cost is still justified.
C)If purchasing power of the monetary unit is stable, a system of current values is justified.
D)If purchasing power of the monetary unit is stable, retention of historical cost is justified.

Accepted Answer

Postulate C-4 states that the monetary unit must be stable in purchasing power. A possible outcome of the postulate is that if the purchasing power of the monetary unit is not stable, some form of inflation accounting (such as adjusting historical costs for inflation) is appropriate. Another possible outcome is that if the purchasing power of the monetary unit is stable, a system of current values (such as marking assets to their current market value) is justified. It is also possible that if the purchasing power of the monetary unit is stable, retention of historical cost is justified. However, the statement that historical cost is still justified if the purchasing power of the monetary unit is not stable contradicts postulate C-4. Therefore, option B is not a possible outcome.

Question 2

Preferred stockholders are residual equity holders.

Accepted Answer

Preferred stockholders have priority over common stockholders in terms of receiving dividends and liquidation proceeds. They are not residual equity holders.

Question 3

Which of the following is a true statement regarding Moonitz's approach to ARS 1?
A)He initially rejected an inductive type of approach.
B)He used symbolic terminology and formal methods.
C)He rejected a deductive approach rooted in reasoning alone.
D)He was unconcerned about the experiential and empirical aspects of accounting.

Accepted Answer

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

Question 4

Consistency refers to the degree of reliability users should find in financial statements when evaluating financial condition or the results of operations on an interfirm basis or predicting income or cash flows.

Accepted Answer

Consistency refers to the use of the same accounting principles and methods from period to period within a company, ensuring that financial statements are comparable across different periods. It does not directly relate to interfirm comparisons or predicting income or cash flows.

Question 5

Which of the following statements is true regarding ARS 3?
A)One of its principles states that revenue is earned by the entire process of operations of the firm rather than at the point of sale.
B)All of its principles were derived from the postulates of ARS 1.
C)The asset valuation measures prescribed are additive.
D)One of the main criticisms aimed at ARS 3 relates to its advocating the exit-value approach to asset valuation.

Accepted Answer

One of the principles of ARS 3 is that revenue is earned by the entire process of operations of the firm rather than at the point of sale. The other options are incorrect.

Question 6

The proprietary theory approach largely coincides with the components of income measurement as it is presently construed in historical cost-based systems.

Accepted Answer

The proprietary theory approach focuses on measuring the economic resources owned by the business, which aligns with the components of income measurement in historical cost-based systems. Both approaches prioritize tracking changes in assets, liabilities, and equity to determine income or profit.

Question 7

The balance sheet equation for entity theory is "Total Assets - Total Liabilities = Owners' Equities."

Accepted Answer

The correct balance sheet equation for entity theory is "Total Assets = Total Liabilities + Owners' Equities."

Question 8

Which of the following is the key group in Moonitz's set of postulates?
A)The Environmental group
B)The Imperatives
C)The Economic group
D)Postulates stemming from accounting itself

Accepted Answer

The Imperatives are the key group in Moonitz's set of postulates, serving as fundamental principles or necessities that guide the structure and interpretation of accounting.

Question 9

Which of the following is an accurate overall label for the terms postulates and principles?
A)Constraints
B)Concepts
C)Axioms
D)Conventions

Accepted Answer

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

Question 10

Which of the following is not a reason why ARS 1 and ARS 3 fell short of the goal of obtaining a framework for APB accounting opinions?
A)The authors refused to abandon historical cost.
B)The postulates were not complete and therefore could not exclude all value systems other than the one prescribed in the principles.
C)At least one of the principles was not derived from any of the postulates.
D)The question of whether valuations of various assets were additive became an issue.

Accepted Answer

The authors' refusal to abandon historical cost is not a reason why ARS 1 and ARS 3 fell short of the goal of obtaining a framework for APB accounting opinions. The other options listed are valid reasons why the goal was not achieved.

Question 11

Which of the following is not a true statement?
A)A principle is a statement of a true and generalized nature containing referents to the real world.
B)If a principle could be empirically tested and proven true, it would be capable of becoming a law.
C)The truth of a law or principle means that is should not be replaced by a newer system.
D)Principles are general statements that influence the way we view phenomena and the way we think about problems.

Accepted Answer

The truth of a law or principle does not necessarily mean that it should not be replaced by a newer system. Scientific progress involves the constant exploration and validation of new ideas and theories, which can lead to the replacement of older ideas with new ones. Therefore, the statement in choice C is not true.

Question 12

Which of the following are defined in the text as the result of the process of identifying, classifying, and interpreting various phenomena or precepts?
A)Concepts
B)Principles
C)Postulates
D)Axioms

Accepted Answer

The process of identifying, classifying, and interpreting various phenomena or precepts leads to the formation of concepts. Concepts are the building blocks of knowledge and understanding in any field. Principles, postulates, and axioms are also important in various fields, but they may not necessarily be a direct result of this particular process mentioned in the question.

Question 13

Which of the following are defined in the text as general approaches utilized in the recognition and measurement of accounting events?
A)Concepts
B)Principles
C)Postulates
D)Axioms

Accepted Answer

Principles are defined in accounting texts as general approaches utilized in the recognition and measurement of accounting events. Concepts, postulates, and axioms, while important in the theoretical framework of accounting, are not specifically defined as the general approaches for the recognition and measurement of accounting events in the same way principles are.

Question 14

Which of the following is a true statement?
A)A principle contains elements observable by empirical techniques.
B)The APB's Special Committee on Research Program defined both postulates and broad principles.
C)A principle is an analytical statement whose truth or falsity is self-contained by its internal logic.
D)Postulates are generally defined as basic assumptions that cannot be verified.

Accepted Answer

Postulates are generally defined as basic assumptions that cannot be verified.

Question 15

Which of the following is not a true statement regarding ARS 1 and ARS 3?
A)The authors were commissioned to find postulates and principles that would lead to a measure of true income.
B)The postulates were not complete and could not exclude all value systems other than the one prescribed in the principles.
C)The authors were able to identify a single concept of income that was superior to others.
D)Nothing is said about the users of accounting information and what their needs and abilities might be.

Accepted Answer

The statement that the authors were able to identify a single concept of income that was superior to others is not true. In fact, ARS 1 and ARS 3 recognized that different users may have different needs for accounting information and may therefore require different concepts of income.

Question 16

Under entity theory, creditors are considered equity holders.

Accepted Answer

The answer of Under entity theory, creditors are considered equity...

Question 17

Which of the following is $\underline{not}$ a criticism that has been aimed at ARS 1?
A)Some postulates appear to stem from one of the other postulate categories.
B)Self-evident postulates may not be sufficiently substantive to lead to a unique and meaningful set of accounting principles.
C)The postulates are necessary but not sufficient to lead to a viable outcome.
D)Postulates should have played a less passive role.

Accepted Answer

The other three criticisms have been mentioned in various discussions and critiques of ARS 1, but the idea that postulates should have played a less passive role is not among them.

Question 18

Proprietary theory assumes that the owners and the firm are virtually identical.

Accepted Answer

Proprietary theory states that the owners of a firm are the only ones who have a claim on the company's assets and that the company exists solely to maximize their wealth. Therefore, the theory assumes that the owners and the firm are virtually identical.

Question 19

Which of the following are defined in the text as basic assumptions concerning the business environment?
A)Concepts
B)Principles
C)Postulates
D)Axioms

Accepted Answer

Postulates are basic assumptions in the business environment that are accepted without proof and serve as a foundation for further reasoning or arguments.

Question 20

Which of the following is $\underline{not}$ true regarding the imperatives of ARS 1?
A)They are normative in nature.
B)They have developed within the context of accounting practice.
C)They are objectives that should be striven for.
D)The key imperative postulate appears to be consistency.

Accepted Answer

The key imperative postulate of ARS 1 is not consistency; rather, it focuses on the need for accounting principles to be normative and developed within the context of accounting practice.

Quiz 5: Postulates, Principles, and Concepts

Which of the following is not‾\underline{not}not​ a possible outcome of postulate C-4, stability of the monetary unit?

Preferred stockholders are residual equity holders.

Which of the following is a true statement regarding Moonitz's approach to ARS 1?

Consistency refers to the degree of reliability users should find in financial statements when evaluating financial condition or the results of operations on an interfirm basis or predicting income or cash flows.

Which of the following statements is true regarding ARS 3?

The proprietary theory approach largely coincides with the components of income measurement as it is presently construed in historical cost-based systems.

The balance sheet equation for entity theory is "Total Assets - Total Liabilities = Owners' Equities."

Which of the following is the key group in Moonitz's set of postulates?

Which of the following is an accurate overall label for the terms postulates and principles?

Which of the following is not a reason why ARS 1 and ARS 3 fell short of the goal of obtaining a framework for APB accounting opinions?

Which of the following is not a true statement?

Which of the following are defined in the text as the result of the process of identifying, classifying, and interpreting various phenomena or precepts?

Which of the following are defined in the text as general approaches utilized in the recognition and measurement of accounting events?

Which of the following is a true statement?

Which of the following is not a true statement regarding ARS 1 and ARS 3?

Under entity theory, creditors are considered equity holders.

Which of the following is not‾\underline{not}not​ a criticism that has been aimed at ARS 1?

Proprietary theory assumes that the owners and the firm are virtually identical.

Which of the following are defined in the text as basic assumptions concerning the business environment?

Which of the following is not‾\underline{not}not​ true regarding the imperatives of ARS 1?

Which of the following is $\underline{not}$ a possible outcome of postulate C-4, stability of the monetary unit?

Which of the following is $\underline{not}$ a criticism that has been aimed at ARS 1?

Which of the following is $\underline{not}$ true regarding the imperatives of ARS 1?