ACCT 3366 Exam 1 Practice

Materiality

• The significance of financial information to decision makers
• The cost of production

• The time it takes to produce

• The complexity of financial information

Neutrality

• The information should not favor any particular user or interest group and should not be influenced by the objectives of those providing the information.

• The information should favor the company's management.

• The information should favor the company's shareholders.

• The information should favor the company's creditors.

Consistency in accounting

• The ability to reproduce the same results in different periods

• The ability to change accounting methods frequently

• The ability to manipulate financial statements

• The ability to ignore accounting standards

Timeliness in accounting

• The principle that financial information is recorded and presented in the latest possible time
• The principle that financial information is recorded and presented in the earliest possible time
• The principle that financial information is recorded and presented in real-time
• The principle that financial information is recorded and presented in a random time

Predicted Value

• The estimated future cost of a product
• The estimated future value of a product
• The current market value of a product
• The historical cost of a product

Faithful Representation in accounting

• A method to manipulate financial statements
• A principle that ensures all financial transactions are recorded
• A concept that financial statements should accurately reflect the economic reality
• A strategy to avoid taxes

Comparability

• The ability to compare the financial statements of a company over time
• The ability to compare the financial statements of different companies
• The ability to compare the financial statements of a company with its budget
• All of the above

Cost Effectiveness

• The ratio of costs to profits
• when the greatest benefit is gained for a comparatively low price

• when there is nothing gained for a comparatively low price

• when the compony brakes even

The Economic Entity Assumption

• Assumes that all economic events can be identified with a particular economic entity.

• Assumes that the business will remain in operation indefinitely
• Assumes that the business's financial statements are prepared in a specific currency
• Assumes that the business's transactions are recorded at their original cost

The Periodicity Assumption

• Assumes that the economic life of a business can be divided into time periods
• Assumes that all transactions must be recorded in the period they occur
• Assumes that a business will remain in operation indefinitely
• Assumes that financial statements are prepared annually