MMSU – CBEA ACC 100 – BS ACC 1 Quiz 1
Name: ______________________________________ Section: __ Date: ______Score: _______
Choose the best answer. Write the letter of your answer at the left side of each number. Use
capital letters.
1. What is the authoritative status of the conceptual framework?
A. The framework has the highest level of authority.
B. In the absence of a standard or an interpretation that specifically applies to a transaction,
the framework should be followed.
C. To provide the foundation for standards that brings transparency, accountability and
efficiency to financial markets around the world.
D. The framework applies only when the IASB develops a new or revised standard.
2. Which is not a purpose of the conceptual framework?
A. To assist the IASB to develop IFRS Standards that is based on consistent concepts.
B. To assist preparers to develop consistent accounting policies when no Standard applies to
a particular transaction or other event, or when a Standard allows a choice of accounting
policy.
C. To assist auditors in forming an opinion as to whether financial statements conform to
GAAP.
D. Assist all parties to understand and interpret standards.
3. What is the foundation of the conceptual framework?
A. Qualitative characteristics and the constraints on useful information
B. The objective of general purpose financial reporting
C. The reporting entity concept
D. The elements of financial statements
4. All of the following information about the economic resources and claims directly help the
users identify the reporting entity’s financial strengths and weaknesses, except
A. The entity’s needs for additional financing.
B. An entity’s liquidity and solvency.
C. Assessment of management’s stewardship.
D. How successful an entity to likely obtain future financing.
5. Changes in economic resources and claims result from
A. An entity’s financial performance only.
B. Issuing debt or equity instruments.
C. Both from the entity’s financial performance and issuance of debt or equity instruments.
D. Neither the entity’s financial performance nor issuance of debt or equity instruments.
6. What is the significance of qualitative characteristics in the framework
A. They distinguish information that is infallible versus information that is imperfect.
B. Provides a threshold for information to report and omit from the financial statements.
C. Identifies the types of information that are likely to be most useful to the users of the
financial statements.
D. Guidelines for qualities to recognize or derecognize elements of the financial statements.
7. In the Conceptual Framework, qualitative characteristics
A. Are considered either fundamental or enhancing.
B. Contribute to the decision-usefulness of financial reporting information.
C. Distinguish better information from inferior information for decision-making purposes.
D. All of the choices are correct.
8. Accounting information is considered relevant when it
A. Can be depended on to represent the economic conditions and events that it is intended to
represent
B. Is capable of making a difference in a decision
C. Is understandable by reasonably informed users of accounting information
D. Is verifiable and neutral
9. Which statement is incorrect concerning the qualitative characteristic of relevance?
A. The relevance of information is affected by its nature and materiality.
B. To be useful, information must be relevant to the decision-making needs of users.
C. Information about financial position and past performance is frequently used as basis for
predicting future financial position and performance and other matters such as dividend and
wage payments and ability of the entity to meet it financial commitments as they fall due.
D. The predictive and confirmatory roles of information are not interrelated.
10. Which of the following is not a characteristic of relevance?
A. Predictive value C. Neutrality
B. Confirmatory value D. Materiality
11. Which of the following statements about materiality is not correct?
A. Materiality is an entity specific aspect of relevance based on the nature or magnitude, or
both of the item in relation to the entity’s financial report.
B. Materiality is a matter of relative size or importance.
C. An item is material if the misstatement or omission would influence or change the
judgment of the primary user.
D. All of these are correct statements about materiality.
12. Predictive value (choose the incorrect one)
A. Can be used as an input to processes employed by users to predict future outcomes
B. Can often also have confirmatory value.
C. Is interrelated to confirmatory value
D. Provides feedback to previous evaluations.
13. For the economic phenomena to be faithfully represented, information must have all of the
following, except
A. Complete B. Free from error C. Confirmatory D. Neutral
14. What is the quality of information that gives assurance that it is reasonably free of error and
bias?
A. Relevance B. Verifiability C. Faithful representation D. Neutrality
15. This means that the financial reports should include all information necessary for a user to
understand the phenomenon being depicted including all necessary description and
explanations.
A. Completeness B. Free from error C. Neutrality D. Substance over form
16. Which of the following terms best describes information in financial statements that is neutral?
A. Understandable B. Reliable C. Relevant D. Unbiased
17. It is the inclusion of a degree of caution in the exercise of judgment needed in making
estimates required under conditions of uncertainty such as assets and income are not
overstated or liabilities and expenses are not understated.
A. Prudence (conservatism) B. Materiality C. Judgment D.
Neutrality
18. Free from error means that the depiction of the economic phenomena to be faithfully
represented
A. Must be accurate in all respects. C. Should not allow the use of estimates.
B. There are no errors or omissions. D. Complete in all respects
19. If information is to represent faithfully the transactions and other events that it purports to
represent, it is necessary that they are accounted for and presented in accordance with their
substance and economic reality and not merely their legal form.
A. Faithful representation B. Completeness
B. Neutrality D. Substance over form
20. Enhancing qualities include all of the following, except
A. Comparability B. Neutrality C. Understandability D. Verifiability
21. Comparability is unique compared to other qualitative characteristics because comparability
has to relate to
A. A single item only.
B. Requires at least two items
C. Requires at least three items.
D. Is only quantifiable and does not relate to other observable data.
22. Comparability of financial information depends on which of the following
A. Consistency of accounting policies
B. Regular reporting periods
C. Consistency of accounting policies and regular reporting periods
D. Neither consistency nor regular reporting periods
23. This enhancing qualitative characteristic is demonstrated when a high degree of consensus
can be secured among independent measurers using the same measurement method.
A. Comparability B. Understandability C. Verifiability D. Timeliness
24. An entity issuing the annual financial reports within one month after the end of the year is an
example of which enhancing quality of accounting information?
A. Neutrality C. Timeliness
B. Predictive value D. Representational faithfulness
25. Understandability means
A. Classifying, characterizing and presenting information clearly and concisely.
B. Excluding information that are too complex to understand.
C. Information that may be understood by any user regardless of their background in
business, accounting and finance.
D. Oversimplifying information to make it more understandable.
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