FARAP Day 1 Quiz 1

The International Accounting Standards Board was formed

• To enforce IFRS in foreign countries

• To develop a single set of high quality IFRS

• To establish accounting standards for multinational entities

• To develop accounting standards for countries that do not have their own standard-setting bodies

Once an accounting standard has been established

• The standard is continually reviewed to see if modification is necessary. 

• The standard is not reviewed.

• The task of reviewing the standard is given to a national organization of CPAs.

• No revisions should be made to the standard.

The primary focus of financial reporting has been on meeting the needs of which of the following groups?

• Management

• Existing and potential investors, lenders, and other creditors

• National and local existing authorities

• Independent CPAs

The usefulness of providing information in financial statements is subject to the constraint of

• Consistency 

• Cost-benefit

• Reliability

• Representational faithfulness

The first step in the accounting cycle is to

• Record transaction in a journal.

• Analyze transactions from source documents. 

• Post journal entries to general ledger accounts. 

• Adjust the general ledger accounts.

Inflation is ignored in accounting due to

• Economic entity assumption

• Going concern assumption

• Monetary unit assumption

• Periodicity assumption

Generally accepted accounting principles

• Are accounting principles based on law. 

• Derive their credibility and authority from law.

• Derive their authority from regulatory authority.

• Derive their credibility and authority from recognition and acceptance by the accountancy profession.

What are qualitative characteristics of financial statements?

• Qualitative characteristics of financial statements are the attributes that make the information provided in the financial statements useful to users. 

• Qualitative characteristics are broad classes of financial effects of transactions and other events. 

• Qualitative characteristics are nonqualitative aspects of financial position and financial performance. 

• Qualitative characteristics measure the extent to which an entity has complied with all relevant standards and interpretations.

For information to be useful, the linkage between the users and the decisions made is

• Relevance

• Faithful representation

• Understandability 

• Verifiability

In recording transactions

• The word “debit” means increase and the word “credit” means decrease. 

• Assets, expenses, and drawing accounts are credited for increase.

• Liabilities, revenue, and capital accounts are credited for increases. 

• Assets, expenses, and capital accounts are debited for increases.