Bridgeport High School

Accounting unit 1

Conceptual Framework of Accounting

1. The conceptual framework of accounting has:

a. Four levels

b. Three levels

c. Two levels

d. Six stages

2. Which of the following is not a level of the conceptual framework:

a. Objectives of financial reporting

b. Recognition and measurement concepts

c. Due process

d. Elements of financial statement

3. An objective of financial reporting as stated as stated in the IASB Conceptual Framework is:

a. To provide easily understandable information to all users

b. To ensure that all business comply with international accounting standards

c. To provide information about a business that is useful to those making investment and credit

decisions

d. To report any fraud and errors occurring in the business

4. Which of the following is NOT a reason for having a conceptual framework of accounting?

a. To provide a basis for setting new accounting standards

b. To allow for comparison of financial reports

c. To allow for the detecting of fraud

d. Help to reduce errors in financial statements

5. Which of the following is not a feature of relevance?

a. Feedback value

b. Timeliness

c. Reliability

d. Predictive value
6. The information presented in the financial statement is relevant when

a. It is a faithful and true presentation of the business transaction

b. It has the ability to influence decisions

c. It is free of material error

d. It is certified by a Certified Public Accountant

7. Which of the following is not a feature of reliability?

a. Verifiable

b. Faithful

c. Neutral

d. Comparable

8. Information that can be traced to its source documents is:

a. Consistent

b. Relevant

c. Verifiable

d. Comparable

9. Independent auditing of financial statements makes it

a. Relevant

b. Consistent

c. Reliable

d. Comparable

10. Neutrality as a qualitative characteristic of accounting information means

a. An accountant from outside the business prepared the information

b. The external auditors have expressed an opinion of the information

c. It is free from bias so as to ensure that there is no statement in favour of any particular

group

d. It was prepared to show management’s skill in the best possible manner

11. Information that is free from bias and error is

a. Predictive
b. Neutral

c. Consistent

d. Understandable

12. Comparability as a qualitative characteristic of accounting information means

a. Similarities and differences with preious years and other business can be discerned and

evaluated.

b. When compared with information produced by similar types of business, it is of better

quality

c. Certain items are highlighted for easy comparison with other businesses

d. It includes information from other businesses in the same industry for comparison

13. Understandability as a qualitative characteristic of accounting information is

a. Anyone who reads accounting information should be able to understand

b. Only persons with accounting qualifications will be able to understand

c. Readers who have reasonable knowledge about business will be able to understand

d. Readers who have no knowledge of business should be able to understand

14. Accounting information is timely if it is prepared

a. Before the financial year end

b. One year after the financial year ends

c. As soon as possible after the financial year begins

d. Before the deadline for tax payment

15. Information that can be used to confirm or correct previous decisions is said to have

a. Predictive value

b. Consistency

c. Comparability

d. Feedback value

16. An accountant may decide not to include potentially useful information from the financial

statements because

a. The cost of inclusion is greater than the potential benefit

c. Its inclusion will clutter up the financial statement

d. It portrays management in a bad light

17. The qualitative characteristics of information will help to decide if a particular piece of

information is potentially useful. However to make a final decision we have consider whether

the information is:

a. Verifiable

b. Comparable

c. Reliable

d. Material

18. The monetary unit assumption states we should include in the accounting records

a. Only transactions that can be expressed in monetary terms

b. Non monetary items are expressed in monetary terms

c. Non monetary items should be estimated in monetary terms

d. Only monetary items are used by the business in its operations

19. The historical cost principles states that businesses should

a. Value inventories at selling price

b. Record assets at their historical cost

c. Record assets at their market value

d. Record assets at their book value

20. Activities of a business entity are to be kept separate and distinct from those of its owner is the

a. Cost principle

b. Monetary unit principle

c. Business entity principle

d. Consistency principle

21. The accounting concept that an entity will continue to operate indefinitely

a. Continuity

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b. Going concern

c. Consistency

d. Business entity

22. A term used to describe sources on inflows of assets received in exchange for sale of goods and

services

a. Receipts

b. Revenue

c. Capital

d. Profit

23. These permit an entity to modify generally accepted accounting principles without reducing the

usefulness of the reported information

a. Constraint

b. Assumption

c. Principles

d. Provision

24. Which accounting principle justifies the use of accrued and prepaid expenses?

a. Going concern

b. Materiality

c. Consistency

d. Stable monetary unit

25. The time period assumption states that

a. Revenue should be recognized in the accounting period in which it was earned

b. Expenses should be matched with related revenues in the same period

c. The economic life of a business can be divided into artificial time periods

d. The financial year should correspond with the fiscal year

1. Reliability a. Capability to provide feedback_______

2. Comparability b. Users are able to comprehend the information_______

4. Understandability d. Same methods and principles and used annually________

5. Consistency e. Comparison with similar entities________

f. Capable of making a difference in decision______

g. Can be verified__________

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1. Cost benefit a. Accounting policies used differently in a particular industry____

2. Materiality b. Influences accounting choices made by an entity_______

3. Conservatism c. Does not influence decision making process in an organization_

4. Industry Peculiarities d. Used when there is an uncertainty of the accounting choice to be

used______

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