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School
Texas A&M University, Commerce *
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Course
537
Subject
Accounting
Date
Apr 3, 2024
Type
Pages
34
Uploaded by GeneralExploration15673
MCQ-05197
According to the FASB and IASB conceptual frameworks, the quality of information that
helps users forecast future outcomes is:
A.
Confirming value.
B.
Predictive value.
C.
Representational faithfulness.
D.
Neutrality.
Explanation
Choice "B" is correct. The quality of information that helps users forecast future
outcomes is predictive value. Forecasting is predicting.
Choice "A" is incorrect. The quality of information that helps users forecast future
outcomes is called predictive value, not confirming value. Confirming value provides
feedback about evaluations previously made by users.
Choice "C" is incorrect. The quality of information that helps users forecast future
outcomes is called predictive value, not representational faithfulness. Representational
faithfulness means that financial information faithfully represents the reported economic
phenomena.
Choice "D" is incorrect. The quality of information that helps users forecast future
outcomes is called predictive value, not neutrality. Neutrality is the depiction of financial
information that is free from bias in selection or presentation.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-00105
Conceptually, interim financial statements can be described as emphasizing which of
the following enhancing qualitative characteristics?
A.
Timeliness
B.
Verifiability
C.
Relevance
D.
Faithful Representation
Explanation
Choice "A" is correct. Interim financial statements emphasize timeliness by providing
financial information based on actual performance to date and estimates prior to year
end. Choice "B" is incorrect. Interim financial statements do not emphasize verifiability. The
extensive use of estimates in interim financial statements means that they are less
verifiable. Interim financial statements emphasize timeliness over verifiability.
Choices "C" and "D" are incorrect. Relevance and faithful representation are primary
qualitative characteristics, not enhancing qualitative characteristics.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-00106
Interim financial reporting should be viewed primarily in which of the following ways?
A.
As useful only if activity is spread evenly throughout the year.
B.
As if the interim period were an annual accounting period.
C.
As reporting for an integral part of an annual period.
D.
As reporting under a comprehensive basis of accounting other than GAAP/IFRS.
Explanation
Choice "C" is correct. Interim financial reporting should be viewed as reporting for an
integral part of an annual period.
Choices "A", "B", and "D" are incorrect, per the above rule.
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MCQ-05740
The FASB amends the Accounting Standards Codification through the issuance of:
A.
Accounting Standards Updates.
B.
Statements of Financial Accounting Standards.
C.
Technical Bulletins.
D.
Staff Accounting Bulletins.
Explanation
Choice "A" is correct. The FASB updates the Accounting Standards Codification (ASC)
for new U.S. GAAP issued by the FASB, and for any changes to existing GAAP, with
Accounting Standards Updates.
Choice "B" is incorrect. Statements of Financial Accounting Standards are a pre-
codification term and were used to issue U.S. GAAP. All of the relevant rules issued
through these standards are now included in the ASC.
Choice "C" is incorrect. Technical Bulletins, a pre-codification term, were used to
provide FASB staff guidance on implementation and practice problems that would assist
in the application of GAAP. This information is now included in the ASC.
Choice "D" is incorrect. Staff Accounting Bulletins are issued by the Securities and
Exchange Commission and are a summarization of the views of the SEC's staff
regarding how GAAP are to be applied.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-05235
Which of the following statements best describes an operating procedure for issuing
FASB Accounting Standards Update?
A.
The emerging issues task force must approve a discussion memorandum before it
is disseminated to the public.
B.
The exposure draft is modified per public opinion before issuing the discussion
memorandum.
C.
An Accounting Standards Update is issued only after a majority vote by the
members of the FASB.
D.
A new Accounting Standards Update can be rescinded by a majority vote of the
AICPA membership.
Explanation
Choice "C" is correct. An Accounting Standards Update is issued only after a majority
vote of the members of the FASB.
Choice "A" is incorrect. There is no necessity for the EITF to approve a discussion
memorandum before it is disseminated to the public.
Choice "B" is incorrect. There is no necessity for an exposure draft to be modified per
public opinion before issuing the discussion memorandum (a question can be raised
here as to "what" discussion memorandum"). Exposure drafts are quite/most often
modified before they are issued as FASB statements, but they do not have to be.
Whether they are or are not modified is a function of whether the FASB thinks they
should be modified, partly due to the public comments that have been received.
Choice "D" is incorrect. There is no way to rescind a new Accounting Standards Update,
although, in reality, an ASU can be rescinded by the issuance of a new ASU on the
same subject.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-04770
According to the FASB and IASB conceptual frameworks, what does the concept of
faithful representation include?
A.
Effectiveness
B.
Certainty
C.
Materiality
D.
Neutrality
Explanation
Choice "D" is correct. The concept of faithful representation includes neutrality,
completeness, and freedom from error.
Choices "A", "B" and "C" are incorrect. Effectiveness, certainty, and materiality are not
included in the concept of faithful representation, which includes neutrality,
completeness, and freedom from error.
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MCQ-05287
Which of the following defines equity as it relates to a business entity?
A.
Net revenues.
B.
Total revenues less
total expenses.
C.
Total assets and liabilities.
D.
Total assets less
total liabilities.
Explanation
Choice "D" is correct. The basic accounting equation states that Assets = Liabilities +
Stockholders' Equity. This equation can be rearranged such that Stockholders' Equity =
Assets – Liabilities. By definition, equity is the residual interest in the assets of a
company that remains after deducting its liabilities.
Choice "A" is incorrect. Equity consists of contributed capital and earned capital
(retained earnings). Revenues are a component of the retained earnings of a company,
but do not represent the full value of equity.
Choice "B" is incorrect. Revenues less expenses contribute to the retained earnings
portion of equity, but equity also includes contributed capital (contributions by owners).
Choice "C" is incorrect. Liabilities are deducted from assets to calculate equity, not
added to assets.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-06061
According to the FASB and IASB conceptual frameworks, neutrality is an ingredient of:
A.
Relevance.
B.
Faithful representation.
C.
Comparability.
D.
Timeliness.
Explanation
Choice "B" is correct. Neutrality, which is freedom from bias in selection or presentation,
is an ingredient of faithful representation. Choice "A" is incorrect. Relevance is a fundamental qualitative characteristic along with
faithful representation, and not an ingredient.
Choice "C" is incorrect. Comparability is a characteristic that enhances the usefulness
of information that is both relevant and faithfully represented. It is not an ingredient of
relevance or faithful representation.
Choice "D" is incorrect. Timeliness is a characteristic that enhances the usefulness of
information that is both relevant and faithfully represented. It is not an ingredient of
relevance or faithful representation.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-06063
Which of the following is the most authoritative source of U.S. GAAP?
A.
International Financial Reporting Standards.
B.
FASB Statements of Financial Accounting Standards.
C.
FASB Statements of Financial Accounting Concepts.
D.
FASB Accounting Standards Codification.
Explanation
Choice "D" is correct. The FASB Accounting Standards Codification is the single source
of authoritative nongovernmental U.S. GAAP.
Choice "A" is incorrect. The International Financial Reporting Standards are not an
authoritative source of U.S. GAAP. Choice "B" is incorrect. FASB Statements of Financial Accounting Standards are
included in the Accounting Standards Codification.
Choice "C" is incorrect. Per the FASB, the Statements of Financial Accounting Concepts
are not GAAP.
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MCQ-08880
The objectives of financial reporting stem from which of the following sources?
A.
The need for conservatism.
B.
The needs of the external users of the information.
C.
Reporting on management's consistency.
D.
Reporting on management's stewardship.
Explanation
Choice "B" is correct. Per SFAC No. 8 (
Conceptual Framework for Financial Reporting
),
Chapter 1 (
The Objective of General Purpose Financial Reporting
), the objective of
financial reporting is to provide financial information that is useful to the primary users
of financial reports. The primary users are external users, such as creditors, lenders,
and investors.
Choice "A" is incorrect. Although conservatism is an underlying principle in financial
reporting, it does not speak to the objectives of financial reporting.
Choice "C" is incorrect. Management's consistency does not drive the objectives of
financial reporting.
Choice "D" is incorrect. Management's stewardship, although reflected in the financial
statements, does not drive the objectives of financial reporting.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-00189
According to the FASB and IASB conceptual frameworks, predictive value is an
ingredient of
Relevance
Faithful
Representation
A.
No
No
B.
No
Yes
C.
Yes
Yes
D.
Yes
No
Explanation
Choice "D" is correct. Yes - No. Predictive value is an ingredient of relevance, but not of
faithful representation.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-06591
According to the FASB and IASB conceptual frameworks, which of the following
correctly pairs a fundamental qualitative characteristic of useful information with one of
its components?
A.
Relevance and materiality.
B.
Relevance and timeliness.
C.
Faithful representation and verifiability.
D.
Faithful representation and predictive value.
Explanation
Choice "A" is correct. Under the FASB and IASB conceptual frameworks, relevance is a
fundamental qualitative characteristic, and materiality is a component of relevance. Choice "B" is incorrect. Relevance is a fundamental qualitative characteristic, but
timeliness is not a component of relevance. Timeliness is a characteristic that enhances
the usefulness of information that is relevant and faithfully represented. Choice "C" is incorrect. Faithful representation is a fundamental qualitative
characteristic, but verifiability is not a component of relevance. Verifiability is a
characteristic that enhances the usefulness of information that is relevant and faithfully
represented. Choice "D" is incorrect. Faithful representation is a fundamental qualitative
characteristic, but predictive value is not a component of faithful representation.
Predictive value is a component of relevance.
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MCQ-00193
According to the FASB conceptual framework, which of the following is an essential
characteristic of an asset?
A.
The claims to an asset's benefits are legally enforceable.
B.
An asset is tangible.
C.
An asset is obtained at a cost.
D.
An asset provides future benefits.
Explanation
Choice "D" is correct. An asset provides future benefits.
Rule:
According to the FASB conceptual framework, assets are probable future
economic benefits obtained or controlled by a particular entity as a result of past
transactions or events.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-00194
According to the FASB conceptual framework, an entity's revenue may result from:
A.
A decrease in an asset from primary operations.
B.
An increase in an asset from incidental transactions.
C.
An increase in a liability from incidental transactions.
D.
A decrease in a liability from primary operations.
Explanation
Rule:
Revenues are inflows or other enhancements of assets and/or settlements
(decreases) in liabilities resulting from the entity's ongoing major operations, not
from
"incidental" operations.
Choice "D" is correct. An entity's revenue may result from a decrease in a liability from
primary operations.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-05058
A U.S. public company needs guidance in accounting for and reporting a complex
derivative transaction that it entered into with a European subsidiary. This company is
most likely
to find the appropriate guidance in the:
A.
FASB Accounting Standards Codification.
B.
International Financial Reporting Standards.
C.
FASB Statements of Financial Accounting Standards.
D.
FASB Statements of Financial Accounting Concepts.
Explanation
Choice "A" is correct. The FASB Accounting Standards Codification is the single source
of U.S. GAAP. U.S. public companies are required to follow U.S. GAAP. Choice "B" is incorrect. The International Financial Reporting Standards cannot be used
by a U.S. public company as a source of U.S. GAAP. Choice "C" is incorrect. FASB Statements of Financial Accounting Standards are
included in the FASB Accounting Standards Codification, which is the single source of
U.S. GAAP.
Choice "D" is incorrect. The FASB Statements of Financial Accounting Concepts are not
GAAP.
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MCQ-05060
Users of financial statements frequently rely upon the data displayed in the financial
statements to predict future financial outcomes. Financial accounting concepts refer to
the characteristic of accounting information that provides predictive value to users as
the quality of:
A.
Relevance.
B.
Faithful representation.
C.
Comparability.
D.
Understandability.
Explanation
Choice "A" is correct. The fundamental qualitative characteristic of useful accounting
information described by the term "relevance" contemplates predictive value, confirming
value, and materiality.
Choice "B" is incorrect. The fundamental qualitative characteristic of useful accounting
information described by the term "faithful representation" contemplates completeness,
freedom from error, and neutrality.
Choice "C" is incorrect. Comparability is an enhancing qualitative characteristic that
relates to comparability of information about other entities and from other time periods.
Choice "D" is incorrect. Understandability is an enhancing qualitative characteristic.
Information is understandable if it is classified, characterized, and presented clearly and
concisely.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-05065
Which of the following is not
defined in FASB Statement of Financial Accounting
Concepts Number 7 as one of the five elements of present value (or economic value)
measurement used to establish the value of assets or liabilities using cash flow
information?
A.
Estimate of Future Cash Flow.
B.
Timing Variations of Future Cash Flows.
C.
Time Value of Money.
D.
Risk Tolerance of Management.
Explanation
Choice "D" is correct. The risk tolerance of management is not defined by SFAC #7 as
an element of present value measurement used to establish the value of assets or
liabilities using cash flows. SFAC defines the following elements of present value
measurement:
The Price for Bearing Uncertainty.
Expectations about Timing Variations of Future Cash Flows.
Other Factors (e.g., Liquidity Issues and Market Imperfections).
Time Value of Money (the Risk-free Rate of Interest).
Estimate of Future Cash Flow.
Choices "A", "B", and "C" are incorrect. All three choices are named as elements of
present value measurement in SFAC No. 7.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-05335
What is the primary objective of financial reporting?
A.
To provide economic information that is comprehensible to all users.
B.
To provide management with an accurate evaluation of their financial
performance.
C.
To provide forecasts for future cash flows and financial performance.
D.
To provide information that is useful for economic decision making.
Explanation
Choice "D" is correct. The objective of financial reporting is to provide financial
information about the reporting entity that is useful to the primary users of general-
purpose financial reports. This information will help the users make decisions about
providing resources to the reporting entity.
Choice "A" is incorrect. Financial reporting users are considered to have a reasonable
understanding of business and include those using the reports to make decisions.
Primary users include investors and creditors.
Choice "B" is incorrect. The focus of financial reporting is on external users, not internal
users such as management. Managerial accounting focuses on internal users.
Choice "C" is incorrect. Financial reporting information should be relevant and allow for
predictive value (an attribute of the fundamental qualitative characteristic relevance),
but this is not the primary objective of financial reporting.
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MCQ-00001
According to the FASB and IASB conceptual frameworks, the primary users of financial
reports include all of the following, except
:
A.
Investors.
B.
Creditors.
C.
Lenders.
D.
Regulators.
Explanation
Choice "D" is correct. The FASB and IASB conceptual frameworks indicates that
regulators are not considered to be primary users. Choice "A" is incorrect. Investors are primary users.
Choice "B" is incorrect. Creditors are primary users.
Choice "C" is incorrect. Lenders are primary users.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-00004
According to the FASB and IASB conceptual frameworks, useful information must
exhibit the fundamental qualitative characteristics of:
A.
Comparability and materiality.
B.
Faithful representation and relevance.
C.
Understandability and timeliness.
D.
Neutrality and verifiability.
Explanation
Choice "B" is correct. The fundamental qualitative characteristics of useful financial
information are relevance and faithful representation.
Choice "A" is incorrect. Comparability is an enhancing qualitative characteristic.
Materiality is a component of relevance, in addition to predictive value and confirming
value.
Choice "C" is incorrect. Understandability and timeliness are enhancing qualitative
characteristics of useful financial information. Choice "D" is incorrect. Verifiability is an enhancing qualitative characteristic. Neutrality
is a component of faithful representation.
20.01.2 © Becker Professional Education Corporation. All rights reserved.
MCQ-00010
According to the FASB and IASB conceptual frameworks, completeness is an ingredient
of:
Relevance
Faithful
Representation
A.
Yes
No
B.
No
Yes
C.
Yes
Yes
D.
No
No
Explanation
Choice "B" is correct. Completeness is an ingredient of faithful representation. Other
ingredients of faithful representation include neutrality and freedom from error. Choices "A", "C", and "D" are incorrect. Completeness is an ingredient of faithful
representation. Other ingredients of faithful representation include neutrality and
freedom from error. The ingredients of relevance are predictive value, confirming value,
and materiality.
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MCQ-00013
According to the FASB conceptual framework, the process of reporting an item in the
financial statements of an entity is:
A.
Allocation.
B.
Matching.
C.
Realization.
D.
Recognition.
Explanation
Choice "D" is correct. Recognition is the process of recording an item in the financial
statements of an entity. SFAC 5 para. 6
Choice "A" is incorrect. Allocation is the accounting process of assigning or distributing
an amount according to a plan or a formula. SFAC 6 para. 142
Choice "B" is incorrect. Matching of costs and revenues is simultaneous or combined
recognition of the revenues and expenses that result directly and jointly from the same
transactions or other events. SFAC 6 para. 146
Choice "C" is incorrect. Realization is the process of converting noncash resources and
rights into money. SFAC 6 para. 143
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MCQ-00015
Financial information provided in general purpose financial reports does not
include
information about:
A.
The resources of the entity.
B.
The claims against the entity.
C.
How effectively and efficiently the entity's shareholders' have discharged their
responsibility to use the entity's resources.
D.
How effectively and efficiently the entity's governing board has discharged its
responsibility to use the entity's resources.
Explanation
Choice "C" is correct. Shareholders do not have a responsibility (or a right) to use the
entity's resources. Choices "A", "B", and "D" are incorrect. Financial information provided in general
purpose financial reports should
include information about the resources of the entity,
the claims against the entity, and how effectively and efficiently the entity's management
and governing board have discharged their responsibilities to use the entity's resources.
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MCQ-05234
Which of the following assumptions means that money is the common denominator of
economic activity and provides an appropriate basis for accounting measurement and
analysis?
A.
Going concern.
B.
Periodicity.
C.
Monetary unit.
D.
Economic entity.
Explanation
Choice "C" is correct. The monetary unit assumption means that money is the common
denominator for economic activity and provides an appropriate basis for accounting
measurements and analysis.
Choice "A" is incorrect. The going concern assumption has nothing to do with money
per se. The going concern assumption presumes that an entity will continue to operate
in the foreseeable future.
Choice "B" is incorrect. The periodicity has nothing to do with money per se. The
periodicity assumption is that economic activity can be divided into meaningful time
periods.
Choice "D" is incorrect. The economic entity assumption has nothing to do with money
per se. The economic entity assumption is that economic activity can be accounted for
when considering an identifiable set of activities.
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MCQ-05907
According to the FASB and IASB conceptual frameworks, to be relevant, information
should have which of the following?
A.
Completeness.
B.
Predictive value.
C.
Verifiability.
D.
Neutrality.
Explanation
Choice "B" is correct. To be relevant, information should have predictive value and/or
confirming value, and must be material.
Choice "A" is incorrect. Completeness is a component of faithful representation.
Choice "C" is incorrect. Verifiability is a characteristic that enhances the usefulness of
information that is both relevant and faithfully represented. Choice "D" is incorrect. Neutrality is a component of faithful representation.
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MCQ-00020
On December 31, Brooks Co. decided to end operations and dispose of its assets within
three months. At December 31, the net realizable value of the equipment was below
historical cost. What is the appropriate measurement basis for equipment included in
Brooks' December 31 balance sheet?
A.
Historical cost.
B.
Current reproduction cost.
C.
Net realizable value.
D.
Current replacement cost.
Explanation
Choice "C" is correct. Net realizable value is the appropriate measurement basis for
equipment included in Brooks' Dec. 31 balance sheet, because of the decision to end
operations and quickly (3 months) dispose of its assets.
Choice "A" is incorrect. Historical cost is appropriate if operations were continuing.
Choice "B" is incorrect. Current reproduction cost (producing new and substantially
identical assets, at current prices, adjusted for depreciation to date) is appropriate in
optional supplemental price level financial statements.
Choice "D" is incorrect. Current replacement cost (acquiring new and substantially
equivalent property at current prices, adjusted for estimated depreciation since
acquisition) is appropriate in optional supplemental price level financial statements.
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MCQ-05652
Which of the following characteristics enhances relevance and faithful representation?
A.
Materiality.
B.
Predictive value.
C.
Neutrality.
D.
Timeliness.
Explanation
Choice "D" is correct. Timeliness is a characteristic that enhances the usefulness of
information that is relevant and faithfully represented. Choice "A" is incorrect. Materiality is a component of relevance.
Choice "B" is incorrect. Predictive value is a component of relevance.
Choice "C" is incorrect. Neutrality is a component of faithful representation.
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MCQ-08724
Each of the following statements is correct regarding the Financial Accounting
Standards Board, except
:
A.
It develops principles and attributes that allow organizations to understand the
necessary elements to ensure a robust system of internal control.
B.
It is recognized as authoritative by the United States Securities and Exchange
Commission and the American Institute of Certified Public Accountants.
C.
It establishes accounting concepts and standards for financial accounting and
reporting, and provides guidance on implementation of standards.
D.
It provides a conceptual framework that helps to increase understanding of, and
confidence in, financial information on the part of users of financial reports.
Explanation
Choice “A” is correct. The FASB has the authority to set accounting standards and is
responsible for issuing Accounting Standards Updates (ASUs) and Statements of
Financial Accounting Concepts (SFACs). The conceptual framework is a product of the
Statements of Financial Accounting Concepts. The FASB is not responsible for
prescribing standards related to internal control.
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MCQ-08726
Which of the following characteristics means that information is reasonably free from
error and bias?
A.
Faithful representation.
B.
Relevance.
C.
Consistency.
D.
Predictive value.
Explanation
Choice “A” is correct. Faithful representation requires the financial information to be
complete, neutral, and free from error.
Choice “B” is incorrect. For financial information to be relevant, it must have predictive
value and/or confirming value, and must be material.
Choice “C” is incorrect. Consistency is the use of the same method among periods or
among entities, and helps achieve comparability, which is an enhancing qualitative
characteristic.
Choice “D” is incorrect. Predictive value is a component of relevant information.
Information has predictive value if it can be used to predict future outcomes.
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MCQ-08471
Materiality and relevance are both defined by:
A.
What influences or makes a difference to a decision maker.
B.
Quantitative criteria set by the Financial Accounting Standards Board.
C.
The consistency in the application of methods over time.
D.
The perceived benefits to be denied that exceed the perceived costs associated
with it.
Explanation
Choice "A" is correct. The accountant's determination of materiality and relevance is
based on professional judgment and is affected by the needs of those who will be using
the financial statements to make decisions.
Choice "B" is incorrect. The Financial Accounting Standards Board does not establish
quantitative criteria that define materiality and relevance.
Choice "C" is incorrect. Materiality and relevance are not defined by consistency in the
application of methods over time. Consistency in the application of methods over time is
a quality needed for the overall accounting process.
Choice "D" is incorrect. The perceived benefits to be denied that exceed the perceived
costs associated with it does not define materiality and relevance. The perceived
benefits achieved that exceed the costs associated with them better describes the cost
constraint, which holds that the benefits of financial reporting must be greater than the
costs of obtaining and presenting the information.
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MCQ-00546
Under a royalty agreement with another company, Wand Co. will pay royalties for the
assignment of a patent for three years. The royalties paid should be reported as
expense:
A.
In the period paid.
B.
In the period incurred.
C.
At the date the royalty agreement began.
D.
At the date the royalty agreement expired.
Explanation
Choice "B" is correct. Royalties paid should be reported as expense in the period
incurred.
Choice "A" is incorrect. Reporting the royalties paid in the period in which they are paid
would be the correct treatment under the cash basis of accounting, not accrual.
Choices "C" and "D" are incorrect. Both of these answers do not necessarily match the
expense with the related revenue over an appropriate period.
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MCQ-08738
How are amendments incorporated into the FASB Accounting Standards Codification
?
A.
By issuing an exposure draft.
B.
By releasing an Accounting Standards Update.
C.
By producing a discussion paper.
D.
By publishing a statement of financial accounting standards.
Explanation
Choice “B” is correct. Any change to the Codification must be made through the
issuance of an Accounting Standards Update. This is required when a new accounting
standard is established or if there is a change to an existing accounting standard.
Choice “A” is incorrect. An exposure draft is a document used during the due process
system and presents the proposed accounting standard to the public for review. An
Accounting Standards Update is required to amend the Codification.
Choice “C” is incorrect. The FASB may issue discussion papers to solicit feedback on
particular accounting and reporting issues.
Choice “D” is incorrect. Prior to the Codification, the FASB issued new accounting
pronouncements through statements of financial accounting standards. After the
Codification was created, all updates are made through the issuance of Accounting
Standards Updates.
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MCQ-05420
Which of the following is true regarding the comparison of managerial to financial
accounting?
A.
Managerial accounting is generally more precise.
B.
Managerial accounting has a past focus and financial accounting has a future
focus.
C.
The emphasis on managerial accounting is relevance and the emphasis on
financial accounting is timeliness.
D.
Managerial accounting need not follow generally accepted accounting principles
(GAAP) while financial accounting must follow them.
Explanation
Choice "D" is correct. Public companies must follow GAAP for (external) financial
reporting purposes. GAAP need not be followed for (internal) managerial accounting
purposes.
Choice "A" is incorrect. Financial accounting is generally more precise.
Choice "B" is incorrect. Managerial accounting has a future focus, while financial
accounting focuses on reporting past results.
Choice "C" is incorrect. The emphasis of financial accounting is providing useful
information to financial statement users (including the characteristic of relevance), while
the emphasis of managerial accounting is providing timely information to management
decision makers.
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MCQ-05906
According to the FASB conceptual framework, certain assets are reported in financial
statements at the amount of cash or its equivalent that would have to be paid if the
same or equivalent assets were acquired currently. What is the name of the reporting
concept?
A.
Replacement cost.
B.
Current market value.
C.
Historical cost.
D.
Net realizable value.
Explanation
Choice "A" is correct. Replacement cost is defined as the amount of cash or its
equivalent that would be paid to acquire or replace an asset currently. Replacement
cost is an acquisition cost.
Choice "B" is incorrect. Current market value, or fair value, is the price to sell (not
acquire) an asset. Choice "C" is incorrect. Historical cost is the amount paid by a company to acquire an
asset.
Choice "D" is incorrect. Net realizable value is the selling price of an asset less any
disposal costs.
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