Chapter 1

Question 1

Obligation to transfer cash or resources as a result of a past transaction.

Financial Statement Element

Answer 1

Liability

Question 2

Dividends paid by a corporation to its shareholders

Financial Statement Element

Answer 2

Distribution to owners

Question 3

Inflow of an asset from providing a good or service

Financial Statement Element

Answer 3

Revenue

Question 4

The financial position of a company

Financial Statement Element

Answer 4

Assets, liabilities, and equity

Question 5

Increase in equity during a period from nonowner transactions

Financial Statement Element

Answer 5

Comprehensive Income

Question 6

Increase in equity from peripheral or incidental transaction

Financial Statement Element

Answer 6

Gain

Question 7

Sale of an asset used in the operation of a business for less than the asset’s book value

Financial Statement Element

Answer 7

Loss

Question 8

The owners’ residual interest in the assets of a company.

Financial Statement Element

Answer 8

Equity

Question 9

An item owned by the company representing probably future benefits

Financial Statement Element

Answer 9

Asset

Question 10

Revenues plus gains less expenses and losses

Financial Statement Element

Answer 10

Net income

Question 11

An owner’s contribution of cash to a corporation in exchange for ownership shares of stock

Financial Statement Element

Answer 11

Investment by owner

Question 12

Outflow of an asset related to the production of revenue

Financial Statement Element

Answer 12

Expense

Question 13

Predictive Value

Qualitative Characteristic - Relevance

Answer 13

Information is useful in predicting the future

Question 14

Relevance

Fundamental Quality

Answer 14

Pertinent to decision at hand

Question 15

Timeliness

Qualitative Characteristic - Enhancing Qualities

Answer 15

Information is avialable prior to the decsion

Question 17

Distribution to owners

Financial Statement Element

Answer 17

Decreases in equity resulting from transfer to owners

Question 18

Confirmatory value

Fundamental Quality - Relevance

Answer 18

Information confirms expecations

Question 19

Understandability

Qualitative Characteristics - Enhancing Qualities

Answer 19

Users understand the information in the context of the decision being made

Question 20

Faithful Representation

Qualitative Representation

Answer 20

Agreement between a meaure and the phenomenon it purports to represent

Question 21

Materiality

Qualatative Characteristic - Relevance

Answer 21

Concerns the relative size of an item and its effect on decisions

Question 22

Comparability

Enhancing Qualities

Answer 22

Important for making interfirm comparisons

Question 23

Neutrality

Qualitative Characteristics - Faithful Representation

Answer 23

The absense of bias

Question 24

Recognition

Principiles

Answer 24

The process of admitting information into financial statements

Question 25

Consistency ## Footnote Qualitative Characteristics - Enhancing Qualities

Answer 25

Applying the same accounting practices over time

Question 26

Cost Effectiveness

Answer 26

Requires consideration of the costs and value of information

Question 27

Verifiability ## Footnote Qualitative Characteristics - Enhancing Qualities

Answer 27

Implies consensus among different measurers

Question 28

Expense Recognition

Answer 28

Record expenses in the period the related revenue is recognized

Question 29

Periodicity Assumption

Answer 29

The life of an enterprise can be divided into artificial time periods

Question 30

Historical Cost Principal

Answer 30

The original transaction's value upon acquisition

Question 31

Revenue Recognition

Answer 31

Must recognize revenue in the accounting period in which obligation is satisfied

Question 32

Monetary Unit Assumption

Answer 32

Assumes money is the appropriate basis to measure economic activity

Question 33

Economic Entity Assumption

Answer 33

The enterprise is separate from its owners and other entities

Question 34

Full Discloure Principal

Answer 34

All information that could affect decisions should be reported

Question 35

Inflation violates this assumpiton

Answer 35

Monetary Unit Assumption

Question 36

Relates to the qualitative characteristic of timeliness

Answer 36

Periodicity Assumption

Question 37

All economic events can be identified with a particular entity

Answer 37

Economic Entity Assumption

Question 38

The benefits of providing acconting info should exceed the cost of doing so

Answer 38

Cost Effectiveness

Question 39

Consertvatism

Answer 39

To require greater verification before recognizing good news than bad news

Question 40

The objective of financial accounting

Answer 40

Be useful to capital providers

Question 41

Statements of Financial Accounting Concepts issues by FASB

Answer 41

Identify the conceptual framework in which accounting standards are developed

Question 42

Revenue is recognized when

Answer 42

A good or service has been delivered to a customer

Question 43

When depreciating an asset, accountants are most concerned with

Answer 43

Recognizing expense in the appropriate period.

Question 44

Primary objective of expense recognition is to

Answer 44

Record expenses in the period that related revenues are recognized