What ignores the economic consequences of a standard or rule?
Quality of information that confirms users’ earlier expectations. Imperative for providing comparisons of a company from period to period. Ignores the economic consequences of a standard or rule. Neutrality is an ingredient of this primary quality of accounting information.
Which of the following qualitative characteristics best deals with an item not being reported because its impact on income would not change a decision?
An item is not recorded because its effect on income would not change a decision. Neutrality is an ingredient of this primary quality of accounting information.
What are two fundamental qualities that make accounting information useful for decision making?
Relevance and reliability are the two primary qualities that make accounting information useful for decision making.
What qualitative characteristic being employed when companies in the same industry are using the same accounting principles?
Chapters 1,2 and 3
| Question | Answer |
|---|---|
| Qualitative characteristics being employed when companies in the same industry are using the same accounting principles | comparability |
| quality of information that confirms users’ earlier expectations | confirmatory value |
What does comparability mean in accounting?
Comparability is the level of standardization of accounting information that allows the financial statements of multiple organizations to be compared to each other. This is a fundamental requirement of financial reporting that is needed by the users of financial statements.
What is confirmatory value?
Confirmatory value enables users to check and confirm earlier predictions or evaluations. For example, in the decision to replace an equipment that has been used for the past six years, the original cost of the equipment does not have relevance.
Is the rationale for why plant assets are not reported at liquidation value?
The cost principle requires that plant assets be reported at amounts that are not greater than cost. Cost is an objective and verifiable amount. Since it is assumed that the company is not liquidating, the liquidation value of the plant assets is not relevant.
What is the concept that supports the issuance of interim reports?
What is the underlying concept that supports estimating a fixed asset impairment charge? What is the concept that supports the issuance of interim reports? Expl: FASB’s conceptual framework explains both financial and physical capital maintenance concepts.
Which of the following basic accounting assumptions is threatened by the existence?
Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy? monetary unit assumption.
Why is it important for accounting information to be neutral?
Neutrality requires that management prepare completely unbiased financial statements. For example, a company with information about a probable lawsuit must report it on their financial statement notes. Withholding this information would make the financial statements unreliable to outside investors and creditors.
Is to useful standard measuring unit for business transactions?
: Stable dollar assumption, Useful standard measuring unit for business transactions. unearned revenue: revenues received in cash and recorded as a liability before they are earned.
Why did APB cap fail?
Why did the CAP and APB fail? How has the FASB avoided failure? -The CAP failed to provide a well-defined, structured body of accounting principles. -The APB failed to act promptly to correct accounting abuses and was often met with opposition from CPA and industry firms when handling accounting issues.