intermediate I: Ch2

1. Which of the following is a fundamental quality of useful accounting information?

• Conservatism.

• Comparability.

• Faithful representation

• Consistency

What is meant by comparability when discussing financial accounting information?

• Information has predictive or feedback value

• Information is reasonably free from error

• Information that is measured and reported in a similar fashion across companies

• Information is timely

What is meant by consistency when discussing financial accounting information?

• Information presented by a company that applies the same accounting treatment to similar events, from period to period.

• Information is timely

• Information that is classified, characterized, and presented clearly and concisely

• Information is verifiable

Which of the following is an ingredient of relevance?

• Verifiability

• Timeliness

• Predictive value

• Neutrality

Which of the following is an ingredient of faithful representation?

• Predictive value.

• Materiality.

• Neutrality.

• Confirmatory value.

Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information. Consequently, for information to be useful there must be a linkage between these users and the decisions they make. This link is

• relevance

• faithful representation

• understandability

• materiality

The two fundamental qualities that make accounting information useful for decision making are

• comparability and timeliness

• materiality and neutrality

• relevance and faithful representation.

• faithful representation and comparability

Accounting information is considered to be relevant when it

• can be depended on to represent the economic conditions and events that it is intended to represent.

• is capable of making a difference in a decision

• is understandable by reasonably informed users of accounting information

• is verifiable and neutral

The quality of information that means the numbers and descriptions match what really existed or happened is

• relevance

• faithful representation

• completeness

• neutrality

Financial information does not demonstrate consistency when

• firms in the same industry use different accounting methods to account for the same type of transaction.

• a company changes its estimate of the salvage value of a fixed asset.

• a company fails to adjust its financial statements for changes in the value of the measuring unit.

• none of these.