Question 1

Which qualitative characteristic of useful information is materiality an aspect of?

Accepted Answer

Materiality is an aspect of relevance. Information is material if its omission or misstatement would affect users' decisions. Therefore, material information is relevant because it can influence the economic decisions of users.

Question 2

Match the following terms with their correct definition.
-something that happens to the business that may or may not require a journal entry

Accepted Answer

An event in accounting refers to any occurrence that affects the company and may or may not necessitate a journal entry, depending on whether it has a financial impact that needs to be recorded in the accounting records.

Question 3

Which of the following statements describes an economic event from an accounting perspective?

Accepted Answer

An economic event from an accounting perspective refers to an exchange of goods or services between an entity and another entity outside the company. Therefore, option D correctly describes an external event that involves exchanges between entities outside the company. Option A refers to a specific type of external event, but not all external events are recorded in accounting records. Option B is not entirely accurate, as some events may not have a source document but can still be identified and recorded in accounting records. Option C is a general principle of accounting, but does not specifically describe an economic event.

Question 4

Match the following terms with their correct definition.
-consideration of an expenditure of $100 for a savings of $75

Accepted Answer

This is an example of a cost vs. benefit analysis, where the cost ($100) is weighed against the benefit ($75) to determine if the expenditure is justified.

Question 5

Which of the following organizations is primarily responsible for establishing elements of the conceptual framework,along with the U.S.Financial Accounting Standards Board (FASB)?

Accepted Answer

The International Accounting Standards Board (IASB) is primarily responsible for establishing elements of the conceptual framework, along with the U.S. Financial Accounting Standards Board (FASB). The SEC oversees the regulation of financial markets and has some influence on accounting standards but is not primarily responsible for establishing elements of the conceptual framework. The CMA is a professional certification organization for management accountants and does not have a role in establishing accounting standards. The CRA is the tax agency for Canada and is not involved in establishing accounting standards.

Question 6

Which of the following statements is characteristic of assets?

Accepted Answer

Assets are initially recorded using the historical cost principle, which states that assets should be recorded at their original cost at the time of acquisition. This is because it is objective and verifiable, whereas market value can be subjective and volatile.

Question 7

Which of the following is an assumption made when preparing the financial statements?

Accepted Answer

A) The assumption that financial statements are prepared for a specific entity distinct from its owners is known as the economic entity assumption. This is a fundamental principle in accounting, ensuring that the business's financial activities are separate from those of its owners or other businesses.

Question 8

Which of the following is the principle of conservatism concerned with?

Accepted Answer

The principle of conservatism is concerned with the avoidance of overstating assets or income in the preparation of financial statements. This means that accountants should be cautious and not report assets or income at a higher value than they are reasonably certain of. This ensures that financial statements are not misleading and that investors and other users can make informed decisions based on accurate information.

Question 9

Homevestors purchased land for $400,000 10 years ago.This year,an independent appraiser assessed the value of the land at $900,000.At what amount should the land be recorded on the company's current financial statements?

Accepted Answer

Under the historical cost principle in accounting, assets are recorded at their cost at the time of purchase. Therefore, the land should be recorded at its original purchase price of $400,000, regardless of its current market value.

Question 10

Match the following terms with their correct definition.
-a list of all active accounts and each account's debit or credit balance

Accepted Answer

HA trial balance is a list of all active accounts and each account's debit or credit balance, which is typically prepared at the end of an accounting period to ensure that debits equal credits. The general ledger is where all the accounting transactions of a business are recorded, including each account's debit or credit balance, making it closely related to the concept of a trial balance.

Question 11

What is the term for information if its omission or misstatement can influence a decision?

Accepted Answer

Materiality is a concept in accounting and finance that refers to the importance or significance of information. Information is considered material if its omission or misstatement can influence a decision. Therefore, the term for information whose omission or misstatement can influence a decision is "material."

Question 12

Match the following terms with their correct definition.
-a chronological record showing the debit and credit effects of transactions on a company

Accepted Answer

A journal is a chronological record showing the debit and credit effects of transactions on a company.

Question 13

For which of the following reasons is the time-period assumption necessary?

Accepted Answer

The time-period assumption is necessary because external users of financial statements want accurately reported net income for a specific fiscal year. It allows for meaningful financial comparisons between different periods and the ability to evaluate a company's performance over time. The other options do not explain the necessity of the time-period assumption.

Question 14

Which of the following characteristics must exist for accounting information to be useful in making informed decisions?

Accepted Answer

To be useful in making informed decisions, accounting information must be relevant and reliable. Relevant information must relate to the decision being made, while reliable information must be accurate and unbiased. While precision can be useful, it is not necessarily a crucial characteristic for accounting information to be useful. Internal information may be helpful in certain cases, but it is not a necessary characteristic for accounting information to be useful for decision-making. Therefore, option D is the correct answer.

Question 15

Match the following terms with their correct definition.
-term used to refer to the left side of an account

Accepted Answer

Debit refers to the left side of an account in accounting. It is used to record increases in assets and expenses and decreases in liabilities, equity, and income.

Question 16

Which of the following is a characteristic of the going-concern assumption?

Accepted Answer

The going-concern assumption assumes that the company will continue its operations long enough to carry out its existing obligations. This means that the financial statements are prepared under the assumption that the company will not go bankrupt or need to liquidate its assets in the near future.

Question 17

Match the following terms with their correct definition.
-term used to refer to the right side of an account

Accepted Answer

Credit refers to the right side of an account in accounting, where transactions are recorded to show an increase in liabilities, revenue, or equity accounts, or a decrease in assets or expense accounts.

Question 18

What is a simple,orderly process based on a series of steps and conventions used to record economic events called?

Accepted Answer

The process based on a series of steps and conventions used to record economic events is called the accounting cycle. This includes identifying and analyzing transactions, recording them in journal entries, posting them to the general ledger, preparing a trial balance, adjusting entries, preparing financial statements, closing the books, and preparing a final trial balance.

Question 19

Which of the following statements is NOT characteristic of the qualitative characteristics of useful accounting information?

Accepted Answer

While disclosure is an important aspect of accounting information, it is not necessary to disclose all external and internal events in the accounting system. Only material information that would make a difference to financial statement users needs to be disclosed in accordance with the full disclosure policy.

Question 20

Which of these underlying assumptions for the conceptual framework is the reason why the dollar is used when preparing financial statements?

Accepted Answer

The monetary unit assumption states that financial transactions should be recorded in a common monetary unit, and the dollar is commonly used in the United States. Therefore, the reason why the dollar is used when preparing financial statements is due to the monetary unit assumption.

Quiz 2: The Accounting Information System

Which qualitative characteristic of useful information is materiality an aspect of?

Match the following terms with their correct definition. -something that happens to the business that may or may not require a journal entry

Which of the following statements describes an economic event from an accounting perspective?

Match the following terms with their correct definition. -consideration of an expenditure of $100 for a savings of $75

Which of the following organizations is primarily responsible for establishing elements of the conceptual framework,along with the U.S.Financial Accounting Standards Board (FASB) ?