ACG 3131 TEST 1 STUDY GUIDE (UCF) UPDATED
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
1. Deferrals
Answer:
-Expenses or revenues that are recognized at a date later than the point when
cash was originally exchanged.
-If a company does not make an adjustment, the asset and liability are overstated,
and the related expense and revenue are understated
Question:
2. Accruals
Answer:
-Revenues earned or expenses incurred before cash has been exchanged
-Without this adjustment, the revenue account (and the related asset account) or
the expense account (and the related liability account) are understated.
Question:
3. Importance of conceptual framework
Answer:
(1) build on and relate to an established body of concepts and objectives, (2)
provide a framework for solving new and emerging practical problems, (3)
increase financial statement users' understanding of and confidence in financial
reporting, and (4) enhance comparability among companies' financial statements.
Question:
4. conceptual framework
Answer:
establishes the concepts that underlie financial reporting.
,Question:
5. (Level 1 Conceptual Framework) Objective of financial
reporting
Answer:
is to provide financial information about the reporting entity that is useful to
present and potential equity investors, lenders, and other creditors in making
decisions about providing resources to the entity.
Question:
6. Decision-usefulness
Answer:
-investors are interested in assessing (1) the company's ability to generate cash
inflows and (2) management's ability to protect and enhance capital provider's
investments
-which alternative provides the most useful information for decision-making
purposes
-This method is how companies determine what accounting method to use, the
amount and types of information to disclose, and the format in which to present it.
Question:
7. qualitative characteristics
Answer:
distinguish better (more useful) information from inferior (less useful) information
for decision-making purposes.
Question:
8. Relevance (Fundamental Quality)
Answer:
information that is capable of making a difference in a decision.
Comprised of:
-Predictive Value
-Confirmatory Value
-Materiality
Question:
9. Faithful Representation (fundamental quality)
Answer:
means that the numbers and descriptions match what really existed or happened.
Comprised of:
-Completeness
-Neutrality
-Free from error
, Question:
10. Predictive value (relevance)
Answer:
meaning the information can help users form expectations about the future.
Question:
11. Confirmatory Value (Relevance)
Answer:
meaning the information validates or refutes expectations based on previous
evaluations
Question:
12. Materiality (relevance)
Answer:
meaning information is material if omitting it or misstating it could influence
decisions that users make on the basis of the reported financial information
Question:
13. Completeness (Faithful Representation)
Answer:
means that all the information that is necessary for faithful representation is
provided.
Question:
14. Neutrality (Faithful Representation)
Answer:
-means that a company cannot select information to favor one set of interested
parties over another
-The information is unbiased
Question:
15. Free from Error (Faithful Representation)
Answer:
meaning the information is accurate
Question:
16. Comparability (Enhancing Quality)
Answer:
companies record and report information in a similar manner
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
1. Deferrals
Answer:
-Expenses or revenues that are recognized at a date later than the point when
cash was originally exchanged.
-If a company does not make an adjustment, the asset and liability are overstated,
and the related expense and revenue are understated
Question:
2. Accruals
Answer:
-Revenues earned or expenses incurred before cash has been exchanged
-Without this adjustment, the revenue account (and the related asset account) or
the expense account (and the related liability account) are understated.
Question:
3. Importance of conceptual framework
Answer:
(1) build on and relate to an established body of concepts and objectives, (2)
provide a framework for solving new and emerging practical problems, (3)
increase financial statement users' understanding of and confidence in financial
reporting, and (4) enhance comparability among companies' financial statements.
Question:
4. conceptual framework
Answer:
establishes the concepts that underlie financial reporting.
,Question:
5. (Level 1 Conceptual Framework) Objective of financial
reporting
Answer:
is to provide financial information about the reporting entity that is useful to
present and potential equity investors, lenders, and other creditors in making
decisions about providing resources to the entity.
Question:
6. Decision-usefulness
Answer:
-investors are interested in assessing (1) the company's ability to generate cash
inflows and (2) management's ability to protect and enhance capital provider's
investments
-which alternative provides the most useful information for decision-making
purposes
-This method is how companies determine what accounting method to use, the
amount and types of information to disclose, and the format in which to present it.
Question:
7. qualitative characteristics
Answer:
distinguish better (more useful) information from inferior (less useful) information
for decision-making purposes.
Question:
8. Relevance (Fundamental Quality)
Answer:
information that is capable of making a difference in a decision.
Comprised of:
-Predictive Value
-Confirmatory Value
-Materiality
Question:
9. Faithful Representation (fundamental quality)
Answer:
means that the numbers and descriptions match what really existed or happened.
Comprised of:
-Completeness
-Neutrality
-Free from error
, Question:
10. Predictive value (relevance)
Answer:
meaning the information can help users form expectations about the future.
Question:
11. Confirmatory Value (Relevance)
Answer:
meaning the information validates or refutes expectations based on previous
evaluations
Question:
12. Materiality (relevance)
Answer:
meaning information is material if omitting it or misstating it could influence
decisions that users make on the basis of the reported financial information
Question:
13. Completeness (Faithful Representation)
Answer:
means that all the information that is necessary for faithful representation is
provided.
Question:
14. Neutrality (Faithful Representation)
Answer:
-means that a company cannot select information to favor one set of interested
parties over another
-The information is unbiased
Question:
15. Free from Error (Faithful Representation)
Answer:
meaning the information is accurate
Question:
16. Comparability (Enhancing Quality)
Answer:
companies record and report information in a similar manner
