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CHAPTER 1
FINANCIAL ACCOUNTING AND
ACCOUNTING STANDARDS
1a. General-purpose financial statements are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.
2a. The financial statements most frequently provided include all of the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
3a. All the following are differences between financial and managerial accounting in how
accounting information is used except to
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
d. All the above.
3b. Which of the following represents a form of communication through financial reporting but
not through financial statements?
a. Balance sheet.
b. President's letter.
Pre-Quiz/Fin Acc1/Kieso IFRS, Ch. 1-2 ACC STANDARDS-CONCEPTUAL FRAMEWORK Page 2 of 6
c. Income statement.
d. Notes to financial statements.
7a. Which of the following is a general limitation of "general purpose financial statements"?
a. General purpose financial statements may not be the most informative for a specific
enterprise.
b. General purpose financial statements are comparable.
c. General purpose financial statements are assumed to present fairly the company's
financial operations.
d. None of the above.
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8a. What is NOT a reason that accounting standards may differ across countries?
a. Governments.
b. Language.
c. Culture.
d. Past Practice.
8b. What would be an advantage of having all countries adopt and follow the same
accounting standards?
a. Consistency.
b. Comparability.
c. Lower preparation costs.
d. b and c
9b. Which of these statements regarding the iGAAP and U.S. GAAP is correct?
a. U.S. GAAP is considered to be "principles-based" and more detailed than iGAAP.
b. U.S. GAAP is considered to be "rules-based" and less detailed than iGAAP.
c. iGAAP is considered to be "principles-based" and less detailed than U.S. GAAP
d. Both U.S. GAAP and iGAAP are considered to be "rules-based", but U.S. GAAP tends
to be more complex.
CHAPTER 2
CONCEPTUAL FRAMEWORK UNDERLYING
FINANCIAL ACCOUNTING
10a. A soundly developed conceptual framework of concepts and objectives should
a. increase financial statement users' understanding of and confidence in financial
reporting.
b. enhance comparability among companies' financial statements.
c. allow new and emerging practical problems to be more quickly solved.
d. all of these.
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10b. Which of the following (a-c) are not true concerning a conceptual framework in account-
ing?
a. It should be a basis for standard-setting.
b. It should allow practical problems to be solved more quickly by reference to it.
c. It should be based on fundamental truths that are derived from the laws of nature.
d. All of the above (a-c) are true.
11a. What is the objective of financial reporting as indicated in the conceptual framework?
a. provide information that is useful to those making investing and credit decisions.
b. provide information that is useful to management.
c. provide information about those investing in the entity.
d. All of the above.
12a. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes
all of the following except:
a. Objective of financial reporting.
b. Supplementary information
c. Elements of financial statements.
d. Qualitative characteristics of accounting information.
12b. The second level in the International Accounting Standards Board’s (IASB’s) Conceptual
Framework
a. Identifies the objective of financial reporting.
b. Identifies recognition, measurement, and disclosure concepts used in establishing and
applying accounting standards.
c. Provides the elements of financial statements.
d. Includes assumptions, principles, and constraints.
13a. 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.
15a. 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.
15b. Company A issuing its annual financial reports within one month of the end of the year is
an example of which ingredient of primary quality of accounting information?
a. Neutrality.
b. Timeliness.
c. Predictive value.
d. Representational faithfulness.
16a. What is the quality of information that enables users to better forecast future operations?
a. Reliability.
b. Materiality.
c. Comparability.
d. Relevance.
16b. Which of the following ingredients of fundamental qualities is part of faithful
representation?
a. Neutrality.
b. Productive value.
c. Confirmatory value.
d. Timeliness.
17a. 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.
20a. Which of the following statements regarding the IASB and FASB conceptual frameworks
is not correct?
a. The existing IASB and FASB conceptual frameworks are organized in similar ways.
b. The two assumptions of the IASB framework are that the financial statements are
prepared on an accrual basis and that the reporting entity is a going concern.
c. The FASB and IASB agree that the sole objective of financial reporting is to provide
users with information that is useful for decision-making.
d. The FASB conceptual framework discusses the concept of accrual basis accounting in
detail, but does not specifically identity it as an assumption.
20b. The issues which the FASB and IASB must address in developing a common conceptual
framework include all of the following except:
a. Should the common framework lead to standards that are principles-based or rules-
based?
b. Should the role of financial reporting focus on stewardship as well as providing
information to assist users in decision making?
c. Should the characteristic of reliability be traded-off in favor of information that is
verifiable?
d. Should a single measurement method such as historical cost be used?
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