Intermediate Accounting 1 Quiz 1 Chapter 1 10 Points Name_Riia Carisn Multiple C

Question

Intermediate Accounting 1 Quiz 1 Chapter 1 10 Points Name_Riia Carisn Multiple Choice Questions(2 Points each) Select the BEST answer! 1) Which of the following is not one of the four basic financial statements? A) balance sheet general-purpose financial statement C) cash flows statement D) statement of comprehensive income Which organization is responsible for promulgating U.S. GAAP? Financial Accounting Standards Board B) Public Company Accounting Oversight Board C) International Accounting Standards Board D) Securities Exchange Commission 3) Which organization prepares and grades the Uniform CPA Examination? A) Financial Accounting Standards Board B) Public Company Accounting Oversight Board C) American Institute of Certified Public Accountants D) International Accounting Standards Board 4) Which user group is the group of individuals who are owners of a corporation? A) employees B) equity investors C) creditors D) suppliers and customers 5) Which party involved in the financial reporting process provides assurance that financial statements peparedb magement fairly present the financial position and performance of the company? A) standard setters B) regulators C) accounting preparers D) auditors

Explanation / Answer

Part 1)

Ans 1). b: General purpose finacial statements

Ans 2) d: Securities Exchange Commission

Ans 3) C; American Institute of Certified Public Accountants

Ans 4) d: equity investors

Ans 5) d Auditors

Part 2)

Ans 1: The objective of financial reporting is to track, analyze and report your business' income. The purpose of these reports is to examine resource usage, cash flow, business performance and the financial health of the business. This helps you and your investors make informed decisions about how to manage the business

Answer 2) The qualitative characteristics are:

a)understandability
b)comparability
c)verifiability
d)timeliness

Answer 3) Fundamental characteristics are:
a)relevance and
b)faithful representation

nswer 4) Elements of Relevance: Information should be relevant to the decision making needs of the user. Information is relevant if it helps users of the financial statements in predicting future trends of the business (Predictive Value) or confirming or correcting any past predictions they have made (Confirmatory Value). Same piece of information which assists users in confirming their past predictions may also be helpful in forming future forecasts.

Answer 5) Elements of Faithful representation: The faithful representation concept should extend to all parts of the financial statements, including the results of operations, financial position, and cash flows of the reporting entity. Financial statements that faithfully represent these aspects of a business should have the following three attributes:
a) Complete
b) Error free
c) Unbiased

Answer6) Relevance and faithful representation are categorized as the fundamental qualitative characteristics of financial reporting information. The enhancing qualitative characteristics on the other hand include understandability, comparability, verifiability and timeliness

Answer 7) Constraint of Financial Information are:-

a) Cost-benefit Relationship
b) Materiality
c) Industry Practices
d) Conservatism

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