Quiz 1 Answers Acccob 2 - Quiz 1 Practice Materials

Quiz 1 Answers Acccob 2 - Quiz 1 Practice Materials TRUE 1. The objective of general-purpose financial reporting 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. TRUE 2. Financial information has predictive value if it has value as an input to predictive processes used by investors to form their own expectations about the future. TRUE 3. Information is material if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information. TRUE 4. Neutrality means that a company cannot select information to favor one set of interested parties over another. TRUE 5. Timeliness means having information available to decision-makers before it loses its capacity to influence decisions. FALSE 6. The economic entity assumption means that economic activity cannot be identified with a particular unit of accountability. In other words, a company cannot keep its activity separate and distinct from its owners and any other business unit. Economic Entity means the owner must maintain separate accounting records and bank accounts for each entity, and not intermix with them the assets and liabilities of its owners or business partners. FALSE 7. The revenue recognition principle therefore requires that companies recognize revenue in the accounting period when cash is received. The revenue recognition principle states that one should only record revenue when it has been earned, not when the related cash is collected. FALSE 10. PAS 1 prescribes the format of the statement of financial position. Assets are presented current then non-current, or vice versa, and liabilities and equity can be presented current then non-current then equity separating current and non-current, or vice versa. Equity cannot be presented as current and non-current. FALSE 11. The consultant requests a detailed summary of what cash was available to the company and how it was spent. The most helpful documents are the statement of financial position and supplementary schedules. Cash flow statement provides the information of sources and utilization of cash. FALSE 12. A statement of financial position provides a basis determining profitability and assessing past performance. Statement of Comprehensive Income provides the profitability. TRUE 13. Companies use financial statements to provide financial information to potential capital providers, and providing information to capital providers is the objective of financial reporting. FALSE 14. The Conceptual Framework contains detailed requirements on how the financial statements should be prepared. No particular presentation requirements are discussed in the Framework. FALSE 15. To meet the enhancing qualitative characteristics of understandability, information about complex matters must be excluded in the financial statements and in the notes thereto, because such may not be understandable to the users. Understandability is not an excuse to omit complex information in the financial statements. TRUE 16. Relevant information provides both confirmatory and predictive value.