FA2 Problem: Conceptual Framework – MCQ

FA2 Problem: Conceptual Framework – MCQ

1.

Identify at least three major users of corporate financial information and indicate how theymight use the information in the financial statements.

2. Shareholders often find income statement information useful in:a.

Developing estimates of future cash flows for the entity. b.

Determining the amount of long-term debt that has been assumed during the period.c.

Cash receipts and disbursements for the period.d.

Determining the amount of shares issued during the period.3. Accounting information is useful if:a.

It is timely. b.

It helps the user understand and evaluate past activities of the entity.c.

It helps the user predict future cash flows and profitability.d.

All of the above.4. Which of the following items would not appear in an income statement?a.

Revenues. b.

Losses.c.

Expenses.d.

Investments by owners.5. Which of the following is not a qualitative characteristic of accounting information?a.

Relevance b.

Understandabilityc.

Liquidityd.

Comparability6. Reliable information has the following characteristics:a.

Representational faithfulness and neutrality. b.

Relevance and materiality.c.

Cost benefit and materiality.d.

Timeliness and conservatism.7. The concept of consistency means that:a.

Companies should report similar information over time in the same way. b.

All companies should report information in the same way.c.

All companies within the same industry should report information in the same way.d.

Companies should report dissimilar information in the same way

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162 8. In preparing a balance sheet, the valuation of most assets is based on:a.

Current cost. b.

Historical cost.c.

 Net realizable value.d.

Market value.9. Materiality means:a. Expenses are recognized in the same period as the revenues they helped to generate. b. An asset is of value to the company.c. An amount is significant enough to affect decision-making.d. The cost of producing information should be less than the benefits of producing it.e. All of the above.10. The going-concern assumption means:a.

The company can sell its assets at their recorded book value. b.

The company will continue in business for at least five years.c.

The company will continue in business indefinitely.d.

The company will use liquidation accounting.11. What factors make the AcSB an effective standard-setting body