CORRECT ANSWERS : "Generally accepted" in the phrase generally accepted accounting principles means that the principles

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1. "Generally accepted" in the phrase generally accepted accounting principles means that the principles
have substantial authoritative support.
have been approved by the Internal Revenue Service.
are proven theories of accounting.
have been approved for use by the managements of business firms.

Question 2
 The FASB concluded that the first level in developing the conceptual framework was to determine the
qualitative characteristics of accounting information.
elements of financial statements.
operating guidelines.
objectives of financial reporting.

Question 3
Qualitative characteristics include all of the following except
reliability.
relevance.
profitability.
comparability.

Question 4
An objective of financial reporting is to provide information that is mainly useful to
investors and creditors.
employees and labor unions.
internal and external auditors.
governmental taxing bodies.

Question 5
An overriding criterion in evaluating the accounting information to be presented is
management's goals.
legality.
decision usefulness.
fairness.

Question 6
Which one of the following is not a qualitative characteristic of useful accounting information?
Comparability
Reliability
Relevance
Conservatism

Question 7
Accounting information should be neutral in order to enhance
reliability.
predictive value.
feedback value.
relevancy.

Question 8
Qualitative characteristics associated with relevant accounting information are
going concern, cost principle, and materiality.
consistency, faithful representation, and timeliness.
predictive value, feedback value, and timeliness.
neutrality, predictive value, reliability.

Question 9
The economic entity assumption states that
it is assumed that the business will operate indefinitely.
economic events can be identified with a particular entity.
the economic life of a business can be divided into artificial time periods.
the accounting period should not exceed one year.

Question 10
The going concern principle may be inapplicable when
fair market values are higher than costs.
net realizable values cannot be obtained.
liquidation is assumed.
the business is just starting-up.

Question 11
The revenue recognition principle
requires that revenue be recognized in the accounting period when it is earned.
requires that events which make a difference to financial statement users be disclosed.
states that revenue should be recognized in the period when received.
states that expense recognition is tied to revenue recognition.

Question 12
Costs become expenses
when they are paid.
when they are charged against revenues.
when they are purchased.
at the end of the accounting period.

Question 13
The information provided in the notes that accompany financial statements is required because of the
full disclosure principle.
revenue recognition principle.
cost principle.
matching principle.

Question 14
Which of the following is a constraint in applying generally accepted accounting principles?
Time period
Cost
Conservatism
Consistency

Question 15
Return on common stockholders' equity is
net income divided by total stockholders' equity.
net income divided by total assets.
net income divided by common equity.
net income divided by the number of common shares outstanding.