Chapter 1 Flashcards
(15 cards)
What are the Statements of Financial Accounting Concepts intended to establish?
The objectives and concepts for use in developing standards of financial accounting and reporting.
The resource providers of not-for-profit entities have which of the following as their primary concerns?
Services rendered by the not-for-profit entity & The continuing ability of the not-for-profit entity to render services
Which of the following objectives of financial reporting is applicable to governmental entities?
Provide information For assessing service efforts and accomplishments.
Which of the following is not a characteristic of the governmental reporting environment
Balance sheet equity. State and local governments report net position or fund balances, not equity.
According to the FASB conceptual framework, which of the following correctly pairs a fundamental qualitative characteristic of useful financial information with one of its aspects?
Relevance and materiality.
Materiality and relevance are both defined by
What influences or makes a difference to a decision maker.
According to the FASB’s conceptual framework, which of the following is an essential characteristic of an asset?
An asset provides future benefits.
The FASB’s conceptual framework classifies gains and losses based on whether they are related to an entity’s major ongoing or central operations. These gains or losses may be classified as:
Operating & Non-Operating.
According to the FASB’s conceptual framework, limitations of the statement of financial position include all of the following except
Inclusion of information on capital maintenance. The basic financial statements are prepared using the concept of financial capital maintenance. A return on financial capital results only if the financial (money) amount of net assets at the end of the period exceeds the amount at the beginning. Thus, inclusion of information on capital maintenance is a fundamental approach to financial reporting, not a limitation.
According to the FASB’s conceptual framework, comprehensive income includes which of the following?
Loss of discontinued operations.
On December 31, Year 1, Brook Co. decided to end operations and dispose of its assets within 3 months. At December 31, Year 1, the net realizable value of the equipment was below historical cost. What is the appropriate measurement basis for equipment included in Brook’s December 31, Year 1, balance sheet?
Assets should be restated in accordance with the liquidation basis of accounting (at the amount of expected cash proceeds)
For $50 a month, Rawl Co. visits its customers’ premises and performs insect control services. If customers experience problems between regularly scheduled visits, Rawl makes service calls at no additional charge. Instead of paying monthly, customers may pay an annual fee of $540 in advance. For a customer who pays the annual fee in advance, Rawl should recognize the related revenue:
Evenly over the contract year as the services are performed.
According to the FASB’s conceptual framework, the expense recognition principle of associating cause and effect is best exemplified by:
Estimating bad debt expense on the basis of net credit sales, which involves matching the bad debt expense with the credit sales.
Which of the following is not a theoretical basis for the allocation of expenses?
Profit maximization.
The objective of present value when used to determine an accounting measurement for initial recognition purposes is to:
Estimate fair value.
