Financial Reporting 1 Wood TCU Exam 1 Review –
Questions With Solutions
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financial statements are in conformity with GAAP
Choose an answer
1 Unqualified Opinion 2 Monetary Unit Assumption
3 Disclosure 4 Periodicity Assumption
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, Terms in this set (32)
Monetary Unit Assumption -financial statement elements should be measured
in a particular monetary unit (ex. USD)
-inflation causes a violation of this
Full-disclosure Principle -requires that any information useful to decision
makers be provided in the financial statements,
subject to the cost effectiveness constraint
Expense Recognition Recognizing expenses in the period they were
incurred to produce revenue
Historical Cost Principle Bases measurements on the amount given or
received in the original exchange transaction
(original transaction value)
basis for measurement of many assets and liabilities
Periodicity Assumption allows the life of a company to be divided into
artificial time periods to provide timely information
relates to the qualitative characteristic of timeliness
Economic Entity Assumption economic events can be identified with a particular
economic entity
Cost Effectiveness The benefits of providing accounting information
should exceed the cost of doing so
Materiality -Information has an effect on decisions
-A consequence is that GAAP need not be followed
in all situations
--Threshold for materiality left to the subjective
judgement of company preparing statements and its
auditors
Conservatism Accountants require greater verification before
recognizing good news than bad news
Questions With Solutions
Add to calendar
Play your way to mastery with fun games
Match Blocks Charms NEW
Practice questions for this set
Learn 1 /7 Study with Learn
financial statements are in conformity with GAAP
Choose an answer
1 Unqualified Opinion 2 Monetary Unit Assumption
3 Disclosure 4 Periodicity Assumption
Don't know?
, Terms in this set (32)
Monetary Unit Assumption -financial statement elements should be measured
in a particular monetary unit (ex. USD)
-inflation causes a violation of this
Full-disclosure Principle -requires that any information useful to decision
makers be provided in the financial statements,
subject to the cost effectiveness constraint
Expense Recognition Recognizing expenses in the period they were
incurred to produce revenue
Historical Cost Principle Bases measurements on the amount given or
received in the original exchange transaction
(original transaction value)
basis for measurement of many assets and liabilities
Periodicity Assumption allows the life of a company to be divided into
artificial time periods to provide timely information
relates to the qualitative characteristic of timeliness
Economic Entity Assumption economic events can be identified with a particular
economic entity
Cost Effectiveness The benefits of providing accounting information
should exceed the cost of doing so
Materiality -Information has an effect on decisions
-A consequence is that GAAP need not be followed
in all situations
--Threshold for materiality left to the subjective
judgement of company preparing statements and its
auditors
Conservatism Accountants require greater verification before
recognizing good news than bad news
