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63 Cards in this Set
- Front
- Back
Quality of information that assures users that information represents the economic phenomena that it purports to represent. |
Faithful Representation
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Information about an economic phenomenon that changes past or present expectations based on previous evaluations. |
Confirmatory Value
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The extent to which information is accurate in representing the economic substance of a transaction. |
Free From Error
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Includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent. |
Completeness
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Quality of information that allows users to comprehend its meaning. |
Understandability
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The annual reports of Best Buy Co. are audited by certified public accountants. |
Verifiability |
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Black & Decker and Cannondale Corporation both use the FIFO cost flow assumption.
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Comparability |
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Starbucks Corporation has used straight-line depreciation since it began operations.
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Comparability |
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Motorola issues its quarterly reports immediately after each quarter ends.
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Timeliness |
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The economic activities of FedEx Corporation are divided into 12-month periods for the purpose of issuing annual reports.
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Periodicity |
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Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation.
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Monetary Unit |
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Walgreen Co. reports current and noncurrent classifications in its balance sheet.
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Going Concern |
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The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes.
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Economic Entity |
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The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. TF
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False |
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Relevant information only has predictive value, confirmatory value, or both. TF
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False |
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Information that is a faithful representation is characterized as having predictive or confirmatory value. TF
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False |
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Comparability pertains only to the reporting of information in a similar manner for different companies. TF
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False |
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Verifiability is solely an enhancing characteristic for faithful representation. TF
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False |
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In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities. TF
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True |
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What is the quality of information that enables users to confirm or correct prior expectations?
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Confirmatory Value |
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Identify the pervasive constraint developed in the conceptual framework.
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Cost/Benefit |
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The chairman of the SEC at one time noted, “If it becomes accepted or expected that accounting principles are determined or modified in order to secure purposes other than economic measurement, we assume a grave risk that confidence in the credibility of our financial information system will be undermined.” Which qualitative characteristic of accounting information should ensure that such a situation will not occur?
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Neutrality |
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Muruyama Corp. switches from FIFO to average-cost to FIFO over a 2-year period. Which qualitative characteristic of accounting information is not followed?
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Comparability |
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Assume that the profession permits the savings and loan industry to defer losses on investments it sells because immediate recognition of the loss may have adverse economic consequences on the industry. Which qualitative characteristic of accounting information is not followed?
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Neutraility |
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What are the two fundamental qualities that make accounting information useful for decision-making?
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Relevance and Faithful Representation |
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Watteau Inc. does not issue its first-quarter report until after the second quarter’s results are reported. Which qualitative characteristic of accounting is not followed?
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Timeliness |
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Predictive value is an ingredient of which of the two fundamental qualities that make accounting information useful for decision-making purposes?
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Relevance |
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Duggan, Inc. is the only company in its industry to depreciate its plant assets on a straight-line basis. Which qualitative characteristic of accounting information may not be followed?
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Comparability |
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Roddick Company has attempted to determine the replacement cost of its inventory. Three different appraisers arrive at substantially different amounts for this value. The president, nevertheless, decides to report the middle value for external reporting purposes. Which qualitative characteristic of information is lacking in these data?
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Verifiability |
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Qualitative characteristic being employed when companies in the same industry are using the same accounting principles.
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Comparability |
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Quality of information that confirms users’ earlier expectations.
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Confirmatory Value |
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Imperative for providing comparisons of a company from period to period.
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Consistency |
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Ignores the economic consequences of a standard or rule.
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Neutrality |
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Requires a high degree of consensus among individuals on a given measurement.
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Verifiability |
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Predictive value is an ingredient of this fundamental quality of information.
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Relevance |
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Four qualitative characteristics that are related to both relevance and faithful representation.
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Comaparability, Verifiability, Timeliness, And Understability |
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An item is not recorded because its effect on income would not change a decision.
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Materiality |
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Neutrality is an ingredient of this fundamental quality of accounting information.
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Faithful Representation |
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Two fundamental qualities that make accounting information useful for decision-making purposes.
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Relevance and Faithful Representation |
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Issuance of interim reports is an example of what enhancing quality of relevance?
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Timeliness |
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Arises from peripheral or incidental transactions.
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Gains, Loses |
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Obligation to transfer resources arising from a past transaction.
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Liabilities |
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Increases ownership interest.
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Investments by Owners, Comprehensive Income |
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Declares and pays cash dividends to owners.
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Distributions to Owners |
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Increases in net assets in a period from nonowner sources.
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Comprehensive Income |
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Items characterized by service potential or future economic benefit.
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Assets |
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Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners.
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Comprehensive Income |
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Allocates expenses to revenues in the proper period.
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Expense Recognition Principle |
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Indicates that fair value changes subsequent to purchase are not recorded in the accounts.
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Measurement Principle(Historical Cost) |
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Ensures that all relevant financial information is reported.
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Full Disclosure Principle |
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Rationale why plant assets are not reported at liquidation value.
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Going Concern Assumption |
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Indicates that personal and business record keeping should be separately maintained.
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Economic Entity Assumption |
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Separates financial information into time periods for reporting purposes.
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Periodicity Assumption |
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Assumes that the dollar is the “measuring stick” used to report on financial performance.
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Monetary Unit Assumption |
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Fair value changes are not recognized in the accounting records.
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Measurement Principle( Historical Cost) |
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Financial information is presented so that investors will not be misled.
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Full Disclosure Principle |
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Intangible assets are capitalized and amortized over periods benefited.
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Expense Recognition Principle |
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Agricultural companies use fair value for purposes of valuing crops.
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Measurement Principle (Fair Value) |
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Each enterprise is kept as a unit distinct from its owner or owners.
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Economic Entity Assumption |
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All significant post-balance-sheet events are reported.
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Full Disclosure Principle |
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Revenue is recorded at point of sale.
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Revenue Recognition Principle |
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All important aspects of bond indentures are presented in financial statements.
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Full Disclosure Principle |
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Rationale for accrual accounting.
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Expense recognition and revenue recognition Principles |