Midterm

Select the Best Answer: Name (in Arabic): …………………………………….

1. General-purpose financial statements are the product of

a. financial accounting.

b. managerial accounting.

c. both financial and managerial accounting.

d. neither financial nor managerial accounting.

2. Users of financial reports include all of the following except

a. creditors.

b. government agencies.

c. unions.

d. All of these are users.

3. The financial statements most frequently provided include all of the following except the

a. balance sheet.

b. income statement.

c. statement of cash flows.

d. statement of retained earnings.

4. The information provided by financial reporting pertains to

a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.

b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.

c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers.

d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

5. All the following are differences between financial and managerial accounting in how accounting information is used except to

a. plan and control company's operations.

b. decide whether to invest in the company.

c. evaluate borrowing capacity to determine the extent of a loan to grant.

d. All the above.

6. Which of the following represents a form of communication through financial reporting but not through financial statements?

a. Balance sheet.

b. President's letter.

c. Income statement.

d. Notes to financial statements.

7. The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations is called

a. financial accounting.

b. managerial accounting.

c. tax accounting.

d. auditing.

8. How does accounting help the capital allocation process attract investment capital?

a. Provides timely, relevant information.

b. Encourages innovation.

c. Promotes productivity.

d. a and b above.

9. Whether a business is successful and thrives is determined by

a. markets.

b. free enterprise.

c. competition.

d. all of these.

10. An effective capital allocation process

a. promotes productivity.

b. encourages innovation.

c. provides an efficient market for buying and selling securities.

d. all of these.

11. Financial statements in the early 2000s provide information related to

a. nonfinancial measurements.

b. forward-looking data.

c. hard assets (inventory and plant assets).

d. none of these.

12. Which of the following is not a major challenge facing the accounting profession?

a. Nonfinancial measurements.

b. Timeliness.

c. Accounting for hard assets.

d. Forward-looking information.

13. What is a major objective of financial reporting?

a. Provide information that is useful to management in making decisions.

b. Provide information that clearly portray nonfinancial transactions.

c. Provide information that is useful to assess the amounts, timing, and uncertainty of perspective cash receipts.

d. Provide information that excludes claims to the resources.

14. What is a major objective of financial reporting?

a. Provide information that is useful to the Internal Revenue Service in determining the amount of federal income taxes payable.

b. Provide information that is useful in assessing the amounts and timing of revenue.

c. Provide information that is comprehensible only by sophisticated investors.

d. Provide information that clearly portrays the economic resources of an enterprise.

15. Which of the following statements is not an objective of financial reporting?

a. Provide information that is useful in investment and credit decisions.

b. Provide information about enterprise resources, claims to those resources, and changes to them.

c. Provide information on the liquidation value of an enterprise.

d. Provide information that is useful in assessing cash flow prospects.

16. Generally accepted accounting principles

a. are fundamental truths or axioms that can be derived from laws of nature.

b. derive their authority from legal court proceedings.

c. derive their credibility and authority from general recognition and acceptance by the accounting profession.

d. have been specified in detail in the FASB conceptual framework.

17. A soundly developed conceptual framework of concepts and objectives should

a. increase financial statement users' understanding of and confidence in financial reporting.

b. enhance comparability among companies' financial statements.

c. allow new and emerging practical problems to be more quickly solved.

d. all of these.

18. Which of the following (a-c) are not true concerning a conceptual framework in account-ing?

a. It should be a basis for standard-setting.

b. It should allow practical problems to be solved more quickly by reference to it.

c. It should be based on fundamental truths that are derived from the laws of nature.

d. All of the above (a-c) are true.

19. What is a purpose of having a conceptual framework?

a. To enable the profession to more quickly solve emerging practical problems.

b. To provide a foundation from which to build more useful standards.

c. Neither a nor b.

d. Both a and b.

20. Which of the following is not a benefit associated with the FASB Conceptual Framework Project?

a. A conceptual framework should increase financial statement users' understanding of and confidence in financial reporting.

b. Practical problems should be more quickly solvable by reference to an existing conceptual framework.

c. A coherent set of accounting standards and rules should result.

d. Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.

21. In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting?

a. Measurement and recognition concepts such as assumptions, principles, and constraints

b. Qualitative characteristics of accounting information

c. Elements of financial statements

d. Objectives of financial reporting

22. The underlying theme of the conceptual framework is

a. decision usefulness.

b. understandability.

c. reliability.

d. comparability.

23. Which of the following is not an objective of financial reporting?

a. To provide information about economic resources, the claims to those resources, and the changes in them.

b. To provide information that is helpful to investors and creditors and other users in assessing the amounts, timing, and uncertainty of future cash flows.

c. To provide information that is useful to those making investment and credit decisions.

d. All of these are objectives of financial reporting.

24. The objectives of financial reporting include all of the following except to provide information that

a. is useful to the Internal Revenue Service in allocating the tax burden to the business community.

b. is useful to those making investment and credit decisions.

c. is helpful in assessing future cash flows.

d. identifies the economic resources (assets), the claims to those resources (liabilities), and the changes in those resources and claims.

25. What is a primary objective of financial reporting as indicated in the conceptual framework?

a. provide information that is useful to those making investing and credit decisions.

b. provide information that is useful to management.

c. provide information about those investing in the entity.

d. All of the above.

26. What is a primary objective of financial reporting as indicated in the conceptual framework?

a. Provide information that is helpful to present and potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.

b. Provide information that is helpful to present investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.

c. Provide information that is helpful to potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.

d. None of the above.

27. Which of the following is a primary characteristic of useful accounting information?

a. Comparability.

b. Relevance.

c. Consistency.

d. Materiality.

28. Which of the following is a primary characteristic of useful accounting information?

a. Conservatism.

b. Comparability.

c. Reliability.

d. Consistency.

29. What is meant by comparability when discussing financial accounting information?

a. Information has predictive or feedback value.

b. Information is reasonably free from error.

c. Information that is measured and reported in a similar fashion across companies.

d. Information is timely.

30. What is meant by consistency when discussing financial accounting information?

a. Information that is measured and reported in a similar fashion across points in time.

b. Information is timely.

c. Information is measured similarly across the industry.

d. Information is verifiable.

Good Luck