Direction: Select the best answer to the following d. Information that attracts new investors.

multiple-choice questions. Write your answer before

6. In measuring financial performance, accrual
each number. Goodluck!
accounting is used because
1. The Conceptual Framework is intended to establish
a. Cash flow is considered less important.
a. GAAP in financial reporting.
b. It provides a better indication of ability to generate
b. The meaning of “present fairly in accordance with cash flows than cash basis.
GAAP”
c. It recognizes revenue when cash is received.
c. The objectives and concepts for use in developing
d. It is one of the implicit assumptions.
standards of financial accounting and reporting.
7. The primary objective of financial reporting is to
d. The hierarchy of sources of GAAP.
provide useful information to
2. The primary users of financial information include.
a. Employee
a. Existing and potential investors.
b. Customer
b. Existing and potential lenders and other creditors.
c. Primary Users
c. User group such as employees, customers,
d. Secondary Users
government and their agencies, and the public.
8. The concept of accounting entity is applicable
d. Existing and potential investors, lenders, and other
creditors. a. Only to the legal aspects of business organizations
3. These users require information on risk and return b. Only
provided by their investment.
to the economic aspects of business organizations
a. Investors
c. Only to business organizations
b. Employees
d. Whenever accounting is involved
c. Lenders
9. Inflation is ignored in accounting due to
d. Customers
a. Economic entity assumption
4. The primary focus of financial reporting has been on
meeting the needs of which of the following groups? b. Going concern assumptions

a. Management c. Monetary unit assumption

b. Existing and potential investors, lenders and other d. Time period assumption
creditors 10. An accounting period which is a twelve-month period
c. National Taxing Authorities that ends in December 31.

d. Independent CPAs a. Calendar year

5. One of a specific objective of financial reporting is to b. Natural business year

provide ___ c. Calendar and Natural business year
a. Information about the investors in the entity. d. None of the above
b. Information about liquidation value.

c. Information that useful in assessing cash flow

prospects.