Multiple Choice Questions
1. Accruing net losses on non-cancelable purchase commitments for inventory is an example of the accounting concept of
a. Conservatism
b. Realization
c. Consistency
d. Materiality
2. The information provided by financial reporting pertains to
a. Individual companies, rather than to industries or the economy as a whole or to members of society as consumers.
b. Individual companies and industries, rather than to the economy as a whole or to members of society as consumers.
c. Individual companies and the economy as a whole, rather than to industries or to members of society as consumers.
d. Individual companies, industries, and the economy as a whole, rather than to members of society as consumers.
3. According to Statement of Financial Accounting Concepts No. 2, an interim earnings report is expected to have which of the following?
Predictive value Feedback value
a. No ......... No
b. Yes ......... Yes
c. Yes ......... No
d. No ......... Yes
4. A patent, purchased in 2004 and being amortized over a 10-year life, was determined to be worthless in 2007. The write-off of the asset in 2007 is an example of which of the following principles?
a. Associating cause and effect
b. Immediate recognition
c. Systematic and rational allocation
d. Objectivity
5. An accrued expense is an expense
a. Incurred but not paid
b. Incurred and paid
c. Paid but not incurred
d. Not reasonably estimable
6. Which of the following accounting concepts states that an accounting transaction should be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar measures and conclusions?
a. Matching
b. Verifiability
c. Periodicity
d. Stable monetary unit
7. Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 2?
a. Benefits/costs
b. Conservatism
c. Timeliness
d. Verifiability
8. The valuation of a promise to receive cash in the future at present value on the financial statements of a company is valid because of the accounting concept of
a. Entity
b. Materiality
c. Going concern
d. Neutrality
9. Under Statements of Financial Accounting Concepts No. 2, which of the following relates to both relevance and reliability?
a. Timeliness
b. Neutrality
c. Feedback value
d. Consistency
10. Under Statement of Financial Accounting Concepts No. 6, which of the following, in the most precise sense, means the process of converting noncash resources and rights into cash or claims to cash?
a. Allocation
b. Recordation
c. Recognition
d. Realization