BUS-A 311 - INTERMEDIATE ACCOUNTING I | EXAM QUESTIONS AND
CORRECT ANSWERS | VERIFIED INTERMEDIATE FINANCIAL
ACCOUNTING LATEST VERSION 2026/2027
BUS-A 311 INTERMEDIATE ACCOUNTING I (3 CR.)
1. According to the FASB conceptual framework, the primary objective of
general-purpose financial reporting is to provide information that is useful
to
A. existing and potential investors, lenders, and other creditors in making
resource-allocation decisions
B. the Securities and Exchange Commission in enforcing securities laws
C. management in evaluating internal departmental performance
D. the Internal Revenue Service in computing taxable income
ANSWER : A. existing and potential investors, lenders, and other
creditors in making resource-allocation decisions
Explanation: The framework is aimed at capital providers. The SEC,
management, and tax authorities can demand special-purpose reports and
are not the primary audience.
2. The two fundamental qualitative characteristics of useful financial
information are
A. comparability and consistency
B. timeliness and verifiability
C. understandability and materiality
D. relevance and faithful representation
ANSWER : D. relevance and faithful representation
Explanation: Relevance and faithful representation are the fundamental
characteristics. Comparability, consistency, timeliness, verifiability, and
understandability are enhancing characteristics, and materiality is an
entity-specific aspect of relevance.
BUS-A 311 Intermediate Accounting I | Page 1
,3. Which of the following is an enhancing qualitative characteristic of
accounting information?
A. Relevance
B. Faithful representation
C. Comparability
D. Materiality
ANSWER : C. Comparability
Explanation: Comparability enhances usefulness of information that is
already relevant and faithfully represented. The other three are
fundamental characteristics or aspects of relevance.
4. Information that helps users form expectations about future outcomes
and confirms or corrects earlier expectations has which quality?
A. Verifiability
B. Relevance
C. Consistency
D. Neutrality
ANSWER : B. Relevance
Explanation: Predictive value and confirmatory value are the two
components of relevance. Verifiability, consistency, and neutrality do not
describe an influence on user decisions in this way.
5. For financial information to be a faithful representation, it must be
A. timely, comparable, and understandable
B. conservative, consistent, and verifiable
C. complete, neutral, and free from material error
D. predictive, confirmatory, and material
ANSWER : C. complete, neutral, and free from material error
Explanation: Completeness, neutrality, and freedom from error define
faithful representation. The other groupings mix in enhancing
characteristics or components of relevance.
BUS-A 311 Intermediate Accounting I | Page 2
,6. The pervasive cost constraint in the conceptual framework means that
A. the benefits of reporting information should justify the costs of
providing it
B. all information requested by any user must be provided
C. only information that is free to produce may be reported
D. companies may omit any information that is expensive to gather
ANSWER : A. the benefits of reporting information should justify the
costs of providing it
Explanation: Reporting is only worthwhile when the benefit to users
exceeds the cost of preparing it. The other answers are too absolute or
misstate the constraint.
7. The going concern assumption states that
A. the entity will be liquidated within the next year
B. the entity will continue operating long enough to meet its
commitments and carry out its plans
C. assets must be reported at their liquidation values
D. the entity's life can be divided into artificial time periods
ANSWER : B. the entity will continue operating long enough to meet
its commitments and carry out its plans
Explanation: Without evidence to the contrary, accountants assume the
business continues, which supports reporting assets at historical cost.
Liquidation values apply only when liquidation is imminent, and dividing
life into periods is the periodicity assumption.
8. The owner of a small business pays a personal vacation with the business
checking account. Which assumption requires this be recorded as an owner
withdrawal rather than a business expense?
A. Going concern assumption
B. Periodicity assumption
C. Monetary unit assumption
D. Economic entity assumption
ANSWER : D. Economic entity assumption
Explanation: The economic entity assumption keeps the activities of the
business separate from those of its owner. The other assumptions
concern continuity, time periods, and the unit of measure.
BUS-A 311 Intermediate Accounting I | Page 3
, 9. Preparing quarterly and annual financial statements is a direct result of
which assumption?
A. Economic entity
B. Going concern
C. Monetary unit
D. Periodicity
ANSWER : D. Periodicity
Explanation: Periodicity divides the life of an entity into artificial time
segments so information can be reported at regular intervals.
10. The monetary unit assumption states that
A. money is the common denominator of economic activity and its
purchasing power is assumed stable
B. all assets must be measured at current market value
C. only cash transactions may be recorded
D. the entity must use the currency of its owners
ANSWER : A. money is the common denominator of economic
activity and its purchasing power is assumed stable
Explanation: Accountants measure and report in a stable monetary unit
and ordinarily ignore inflation. Cash-only recording and market-value
measurement are not what the assumption requires.
11. A company purchased land several years ago for $100,000. Its appraised
value is now $180,000. Under the historical cost principle the land is
reported at
A. $180,000
B. $140,000
C. $100,000
D. $80,000
ANSWER : C. $100,000
Explanation: Historical cost is the exchange price at acquisition and is not
adjusted upward for appraisals. Averaging or reporting the increase are
not permitted.
BUS-A 311 Intermediate Accounting I | Page 4
CORRECT ANSWERS | VERIFIED INTERMEDIATE FINANCIAL
ACCOUNTING LATEST VERSION 2026/2027
BUS-A 311 INTERMEDIATE ACCOUNTING I (3 CR.)
1. According to the FASB conceptual framework, the primary objective of
general-purpose financial reporting is to provide information that is useful
to
A. existing and potential investors, lenders, and other creditors in making
resource-allocation decisions
B. the Securities and Exchange Commission in enforcing securities laws
C. management in evaluating internal departmental performance
D. the Internal Revenue Service in computing taxable income
ANSWER : A. existing and potential investors, lenders, and other
creditors in making resource-allocation decisions
Explanation: The framework is aimed at capital providers. The SEC,
management, and tax authorities can demand special-purpose reports and
are not the primary audience.
2. The two fundamental qualitative characteristics of useful financial
information are
A. comparability and consistency
B. timeliness and verifiability
C. understandability and materiality
D. relevance and faithful representation
ANSWER : D. relevance and faithful representation
Explanation: Relevance and faithful representation are the fundamental
characteristics. Comparability, consistency, timeliness, verifiability, and
understandability are enhancing characteristics, and materiality is an
entity-specific aspect of relevance.
BUS-A 311 Intermediate Accounting I | Page 1
,3. Which of the following is an enhancing qualitative characteristic of
accounting information?
A. Relevance
B. Faithful representation
C. Comparability
D. Materiality
ANSWER : C. Comparability
Explanation: Comparability enhances usefulness of information that is
already relevant and faithfully represented. The other three are
fundamental characteristics or aspects of relevance.
4. Information that helps users form expectations about future outcomes
and confirms or corrects earlier expectations has which quality?
A. Verifiability
B. Relevance
C. Consistency
D. Neutrality
ANSWER : B. Relevance
Explanation: Predictive value and confirmatory value are the two
components of relevance. Verifiability, consistency, and neutrality do not
describe an influence on user decisions in this way.
5. For financial information to be a faithful representation, it must be
A. timely, comparable, and understandable
B. conservative, consistent, and verifiable
C. complete, neutral, and free from material error
D. predictive, confirmatory, and material
ANSWER : C. complete, neutral, and free from material error
Explanation: Completeness, neutrality, and freedom from error define
faithful representation. The other groupings mix in enhancing
characteristics or components of relevance.
BUS-A 311 Intermediate Accounting I | Page 2
,6. The pervasive cost constraint in the conceptual framework means that
A. the benefits of reporting information should justify the costs of
providing it
B. all information requested by any user must be provided
C. only information that is free to produce may be reported
D. companies may omit any information that is expensive to gather
ANSWER : A. the benefits of reporting information should justify the
costs of providing it
Explanation: Reporting is only worthwhile when the benefit to users
exceeds the cost of preparing it. The other answers are too absolute or
misstate the constraint.
7. The going concern assumption states that
A. the entity will be liquidated within the next year
B. the entity will continue operating long enough to meet its
commitments and carry out its plans
C. assets must be reported at their liquidation values
D. the entity's life can be divided into artificial time periods
ANSWER : B. the entity will continue operating long enough to meet
its commitments and carry out its plans
Explanation: Without evidence to the contrary, accountants assume the
business continues, which supports reporting assets at historical cost.
Liquidation values apply only when liquidation is imminent, and dividing
life into periods is the periodicity assumption.
8. The owner of a small business pays a personal vacation with the business
checking account. Which assumption requires this be recorded as an owner
withdrawal rather than a business expense?
A. Going concern assumption
B. Periodicity assumption
C. Monetary unit assumption
D. Economic entity assumption
ANSWER : D. Economic entity assumption
Explanation: The economic entity assumption keeps the activities of the
business separate from those of its owner. The other assumptions
concern continuity, time periods, and the unit of measure.
BUS-A 311 Intermediate Accounting I | Page 3
, 9. Preparing quarterly and annual financial statements is a direct result of
which assumption?
A. Economic entity
B. Going concern
C. Monetary unit
D. Periodicity
ANSWER : D. Periodicity
Explanation: Periodicity divides the life of an entity into artificial time
segments so information can be reported at regular intervals.
10. The monetary unit assumption states that
A. money is the common denominator of economic activity and its
purchasing power is assumed stable
B. all assets must be measured at current market value
C. only cash transactions may be recorded
D. the entity must use the currency of its owners
ANSWER : A. money is the common denominator of economic
activity and its purchasing power is assumed stable
Explanation: Accountants measure and report in a stable monetary unit
and ordinarily ignore inflation. Cash-only recording and market-value
measurement are not what the assumption requires.
11. A company purchased land several years ago for $100,000. Its appraised
value is now $180,000. Under the historical cost principle the land is
reported at
A. $180,000
B. $140,000
C. $100,000
D. $80,000
ANSWER : C. $100,000
Explanation: Historical cost is the exchange price at acquisition and is not
adjusted upward for appraisals. Averaging or reporting the increase are
not permitted.
BUS-A 311 Intermediate Accounting I | Page 4
