Question 11

The primary focus of financial reporting has been on meeting the needs of which of the following groups?
Management
Existing and potential investors, lenders and other creditors
National and local taxing authorities
Independent CPAs
Question 12
In case of doubt, record any loss and do not record any gain
Neutrality
Prudence
Conservatism
Free from error

Question 13
There are no errors or omissions in the description of the phenomenon or transaction.
Neutrality
Prudence
Conservatism
Free from error

Question 14
Which of the following terms best describes information that influences the economic decisions of users?
Reliable
Prospective
Relevant
Understandable

Question 15
Which statement about materiality is true?
An item must make a difference or it need not be disclosed
Materiality is a matter of relative size
An item is material if the inclusion or omission would influence or change the judgment of a
reasonable person
All of these statements are true about materiality

Question 16
The Conceptual Framework includes which of the following constraints?
Prudence
Substance over form
Cost
All of the choices are constraints

Question 17
Conservatism is best described as selecting an accounting alternative that
Understates assets and net income
Has the least favorable impact on equity
Overstates liabilities
Is least likely to mislead users of financial information

Question 18
When information about two different entities engaged in the same industry has been prepared and
presented in similar manner, the information exhibits the enhancing qualitative characteristic of Relevance
Relevance
Faithful representation
 Consistency
Comparability

Question 19
Which underlying assumption serves as the basis for preparing financial statements at regular arbitrary or
artificial points in time?
Accounting entity
Going concern
Periodicity
Stable monetary Unit

Question 20
Which is not an important characteristic of the financial statements that accountants currently prepare?
The information in financial statements is expressed in units of money adjusted for
changing purchasing power
Financial statements articulate with one another because measuring financial position is related
to measuring changes in financial position
The information in financial statements is summarized and classified to help meet users’ needs
Financial statements can be justified only if the benefits exceed the costs.