MSA ASSESSMENT QUESTIONS AND ANSWERS
FASB conceptual framework - Answers - A body of interrelated objectives and
fundamentals.
-Objectives identify goals and purpose of financial reporting and the fundamentals are
the underlying concepts that help achieve those objectives
Basic Financial Accounting Assumptions & Principles - Answers - third level - the "how"
implementation of conceptual framework
1. cost principle
2. full disclosure principle
3. matching principle
4. revenue recognition principle
5. economic entity assumption
6. monetary unit assumption
7. time period assumption
8. going concern assumption
9. materiality
10. conservatism
Financial Assumptions - Answers - third level
1. economic entity assumption
2. going concern assumption
3. monetary unit assumption
4. time period assumption / periodicity
Financial Constraints - Answers - third level
1. cost
2. industry practice
Financial Principles - Answers - third level
1. measurement
2. revenue recognition
3. expense recognition
4. full disclosure
Economic Entity Assumption - Answers - The accountant keeps all of the business
transactions of a sole proprietorship separate from the business owner's personal
transactions
Monetary Unit Assumption - Answers - it is assumed that the dollar's purchasing power
has not changed over time and ignore the effect of inflation on recorded amounts
, Time Period Assumption - Answers - assumes that it is possible to report the complex
and ongoing activities of a business in relatively short, distinct time intervals
Cost Principle - Answers - the amounts shown on financial statements are referred to as
historical cost amounts.
-does NOT reflect market value of assets sold
Full Disclosure Principle - Answers - information should be disclosed within the
statement or in the notes to the statement for investors using the financial statements
Going Concern Principle - Answers - This accounting principle assumes that a company
will continue to exist long enough to carry out its objectives and commitments and will
not liquidate in the foreseeable future
-must be disclosed
Matching Principle - Answers - -use accrual basis of accounting that requires that
expenses be matched with revenues
-revenues reported when sales are made and expenses reported in the week an
employee works
-can NOT measure future economic benefit
Revenue recognition principle - Answers - -accrual basis: revenues are recognized as
soon as a product has been sold or service has been performed
Materiality - Answers - an accountant might be allowed to violate another accounting
principle if an amount is insignificant using professional judgment
Conservatism - Answers - If a situation arises where there are two acceptable
alternatives for reporting an item, conservatism directs the accountant to choose the
alternative that will result in less net income and/or less asset amount
Basic Financial Statement Elements and Presentation - Answers - Second level of
conceptual framework
1. assets
2. liabilities
3. equity
4. investments by owners
5. distributions to owner
6. revenues
7. expenses
8. gains
9. losses
10. comprehensive income
assets - Answers - probable future economic benefits obtained or controlled by a
particular entity as a result of past transactions or events.
FASB conceptual framework - Answers - A body of interrelated objectives and
fundamentals.
-Objectives identify goals and purpose of financial reporting and the fundamentals are
the underlying concepts that help achieve those objectives
Basic Financial Accounting Assumptions & Principles - Answers - third level - the "how"
implementation of conceptual framework
1. cost principle
2. full disclosure principle
3. matching principle
4. revenue recognition principle
5. economic entity assumption
6. monetary unit assumption
7. time period assumption
8. going concern assumption
9. materiality
10. conservatism
Financial Assumptions - Answers - third level
1. economic entity assumption
2. going concern assumption
3. monetary unit assumption
4. time period assumption / periodicity
Financial Constraints - Answers - third level
1. cost
2. industry practice
Financial Principles - Answers - third level
1. measurement
2. revenue recognition
3. expense recognition
4. full disclosure
Economic Entity Assumption - Answers - The accountant keeps all of the business
transactions of a sole proprietorship separate from the business owner's personal
transactions
Monetary Unit Assumption - Answers - it is assumed that the dollar's purchasing power
has not changed over time and ignore the effect of inflation on recorded amounts
, Time Period Assumption - Answers - assumes that it is possible to report the complex
and ongoing activities of a business in relatively short, distinct time intervals
Cost Principle - Answers - the amounts shown on financial statements are referred to as
historical cost amounts.
-does NOT reflect market value of assets sold
Full Disclosure Principle - Answers - information should be disclosed within the
statement or in the notes to the statement for investors using the financial statements
Going Concern Principle - Answers - This accounting principle assumes that a company
will continue to exist long enough to carry out its objectives and commitments and will
not liquidate in the foreseeable future
-must be disclosed
Matching Principle - Answers - -use accrual basis of accounting that requires that
expenses be matched with revenues
-revenues reported when sales are made and expenses reported in the week an
employee works
-can NOT measure future economic benefit
Revenue recognition principle - Answers - -accrual basis: revenues are recognized as
soon as a product has been sold or service has been performed
Materiality - Answers - an accountant might be allowed to violate another accounting
principle if an amount is insignificant using professional judgment
Conservatism - Answers - If a situation arises where there are two acceptable
alternatives for reporting an item, conservatism directs the accountant to choose the
alternative that will result in less net income and/or less asset amount
Basic Financial Statement Elements and Presentation - Answers - Second level of
conceptual framework
1. assets
2. liabilities
3. equity
4. investments by owners
5. distributions to owner
6. revenues
7. expenses
8. gains
9. losses
10. comprehensive income
assets - Answers - probable future economic benefits obtained or controlled by a
particular entity as a result of past transactions or events.
