UL COLLEGE OF ACCOUNTANCY

ACC417/ACP: QUIZ ON CONCEPTUAL FRAMEWORK-PART 1

1. A soundly developed conceptual framework of concepts and objectives should a. increase

financial statement users’ understanding of and confidence in financial reporting.
b. enhance comparability among companies’ financial statements.
c. allow new and emerging practical problems to be more quickly solved.
d. all of these answers are correct.

2. Which of the following is not true concerning a conceptual framework in accounting?

a. It should be a basis for standard-setting.
b. It should allow practical problems to be solved more quickly by reference to it. c. It
should be based on fundamental truths that are derived from the laws of nature.
d. All of these answers are correct.

3. What is a purpose of having a conceptual framework?

a. To make sure that economic activity can be identified with a particular legal entity.
b. To segregate activities among competing companies.
c. To provide comparable information for different companies.
d. To enable the profession to more quickly solve emerging practical problems and
to provide a foundation from which to build more useful standards.

4. Which of the following is not a benefit associated with the Conceptual Framework? a. A
conceptual framework should increase financial statement users’ understanding of and
confidence in financial reporting.
b. Practical problems should be more quickly solvable by reference to an existing
conceptual framework.
c. A coherent set of accounting standards and rules should result.
d. Business entities will need far less assistance from accountants because the
financial reporting process will be quite easy to apply.

5. A soundly developed conceptual framework enables the International Accounting

Standards Board (IASB) to
I. Issue more useful and consistent pronouncements over time.
II. More quickly solve new and emerging practical problems by referencing basic
theory.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

6. In the conceptual framework for financial reporting, what provides “the why”–the purpose of
accounting?
a. Recognition, measurement, and disclosure concepts such as assumptions, principles,
and constraints
b. Qualitative characteristics of accounting information
c. Elements of financial statements
d. Objective of financial reporting

7. The underlying theme of the conceptual framework is

a. decision usefulness.
b. understandability.
c. faithful representation.
d. comparability.

8. What is the objective of general-purpose financial reporting?

a. to provide financial information about the reporting entity that is useful to
present and potential equity investors, lenders, and other creditors in making
decisions in their capacity as capital providers.
UL COLLEGE OF ACCOUNTANCY
ACC417/ACP: QUIZ ON CONCEPTUAL FRAMEWORK-PART 1

b. to provide companies with the option to select information that favors one set of
interested parties over another.
 c. to provide users with financial information that implies total freedom from error. d. to
provide a metric for financial information used to determine when the boundary between
two or more entities should be disregarded and the entities considered to be a licensing
arrangement.

9. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes

all of the following except:
a. Objective of financial reporting.
b. Supplementary information
c. Elements of financial statements.
d. Qualitative characteristics of accounting information.

10. An implicit assumption of the International Accounting Standards Board’s (IASB’s)

Conceptual Framework is that
a. Information must be decision-useful to all potential users of financial reporting. b.
General-purpose financial reporting is the primary source of information for users of
financial reporting.
c. Users need reasonable knowledge of business and financial accounting
matters to understand the information contained in financial statements. d.
All of the choices are correct.

11. The overriding criterion by which accounting information can be judged is that of
a. usefulness for decision making.
b. freedom from bias.
c. timeliness.
d. comparability.

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

Comparability.
b. Relevance.
c. Neutrality.
d. Materiality.

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

a. Conservatism.
b. Comparability.
c. Faithful representation.
d. Consistency.

14. What is meant by comparability when discussing financial accounting information?

a. Information has predictive or feedback value.
b. Information is reasonably free from error.
c. Information that is measured and reported in a similar fashion across
companies.
d. Information is timely.

15. What is meant by consistency when discussing financial accounting information? a.

Information presented by a company that applies the same accounting treatment
to similar events, from period to period.
b. Information is timely.
c. Information that is classified, characterized, and presented clearly and concisely.
d. Information is verifiable.

16. Which of the following is an ingredient of relevance?

a. Verifiability.
b. Timeliness.
c. Predictive value.
d. Neutrality.
UL COLLEGE OF ACCOUNTANCY
ACC417/ACP: QUIZ ON CONCEPTUAL FRAMEWORK-PART 1

17. Which of the following is an ingredient of faithful representation?

a. Predictive value.
b. Materiality.
c. Neutrality.
 d. Confirmatory value.

18 Changing the method of inventory valuation should be reported in the financial statements
under what qualitative characteristic of accounting information?
a. Consistency.
b. Verifiability.
c. Timeliness.
d. Comparability.

19. Company A issuing its annual financial reports within one month of the end of the year is
an example of which enhancing quality of accounting information?
a. Comparability.
b. Timeliness.
c. Understandability.
d. Verifiability.

20. What is the quality of information that is capable of making a difference in a decision?
a. Faithful representation.
b. Materiality.
c. Timeliness.
d. Relevance.
21. Neutrality is an ingredient of which fundamental quality of information?
a. Faithful representation.
b. Comparability.
c. Relevance.
d. Understandability.
22. 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
a. relevance.
b. faithful representation.
c. understandability.
d. materiality.

23. The two fundamental qualities that make accounting information useful for decision making
are
a. comparability and timeliness.
b. materiality and neutrality.
c. relevance and faithful representation.
d. faithful representation and comparability.
24. Accounting information is considered to be relevant when it
a. can be depended on to represent the economic conditions and events that it is
intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of accounting information.
d. is verifiable and neutral.
25. The quality of information that means the numbers and descriptions match what really
existed or happened is
a. relevance.
b. faithful representation.
c. completeness.
d. neutrality.
26. Financial information does not demonstrate consistency when
UL COLLEGE OF ACCOUNTANCY
ACC417/ACP: QUIZ ON CONCEPTUAL FRAMEWORK-PART 1

a. firms in the same industry use different accounting methods to account for the same
type of transaction.
b. a company changes its estimate of the salvage value of a fixed asset. c. a company
fails to adjust its financial statements for changes in the value of the measuring unit.
d. none of these.
 27. When information about two different enterprises has been prepared and presented in a
similar manner, the information exhibits the characteristic of
a. relevance.
b. faithful representation.
c. consistency.
d. none of these.

28. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework,

qualitative characteristics
a. Are considered either fundamental or enhancing.
b. Contribute to the decision-usefulness of financial reporting information. c. Distinguish
better information from inferior information for decision-making purposes. d. All of the
choices are correct.

29. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an

enhancing qualitative characteristic is
a. Predictive value.
b. Free from error.
c. Timeliness.
d. Confirmatory value.

30. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, an

ingredient of a fundamental qualitative characteristic is
a. Neutrality.
b. Verifiability.
c. Timeliness.
d. Understandability.

31. In the International Accounting Standards Board’s (IASB’s) Conceptual Framework, a

fundamental qualitative characteristic is
a. Materiality.
b. Faithful representation.
c. Decision usefulness.
d. Neutrality.

32. To be a faithful representation as described by the International Accounting Standards

Board’s (IASB’s) Conceptual Framework, information must be all of the following except:
a. Complete.
b. Free from error.
c. Confirmatory.
d. Neutral.

33. Enhancing qualities as described by the International Accounting Standards Board’s

(IASB’s) Conceptual Framework, include all of the following except:
a. Comparability.
b. Neutrality.
c. Understandability.
d. Verifiability.
UL COLLEGE OF ACCOUNTANCY
ACC417/ACP: QUIZ ON CONCEPTUAL FRAMEWORK-PART 1

34. Erin Company applies the same accounting treatment to similar events from period to
period. Erin Company is exhibiting which of the following qualities as described by the
International Accounting Standards Board’s (IASB’s) Conceptual Framework? a.
Verifiability.
b. Consistency.
c. Predictive value.
d. All of the choices are correct.

35. According to the IASB Conceptual Framework, the elements⎯assets, liabilities, and
equity⎯describe amounts of resources and claims to resources at/during a
 Moment in Time Period of Time
a. Yes No
b. Yes Yes
c. No Yes
d. No No

36. Which of the following is not a basic element of financial statements?

a. Assets.
b. Statement of financial position.
c. Expenses.
d. Income.

37. Which of the following basic elements of financial statements is more associated with the
statement of financial position than the income statement?
a. Equity.
b. Income.
c. Gains.
d. Expenses.

38. Issuance of common stock for cash affects which basic element of financial statements?
a. Revenues.
b. Losses.
c. Liabilities.
d. Equity.

39. The International Accounting Standards Board (IASB) defines five interrelated elements of
financial statements. Which of the following is not one of those elements? a. Asset.
b. Income.
c. Equity.
d. All of the choices are elements defined by the IASB.

40. The International Accounting Standards Board (IASB) defines one of the 5 elements as
follows: “the residual interest in the assets of the entity after deducting all its liabilities”
Which element matches this description?
a. Retained earnings.
b. Income.
c. Equity.
d. All of the choices match this definition.

41. Which basic assumption may not be followed when a firm in bankruptcy reports financial
results?
a. Economic entity assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Monetary unit assumption.

42. Preparation of consolidated financial statements when a parent-subsidiary relationship

exists is an example of the
a. economic entity assumption.
UL COLLEGE OF ACCOUNTANCY
ACC417/ACP: QUIZ ON CONCEPTUAL FRAMEWORK-PART 1

b. relevance characteristic.
c. comparability characteristic.
d. neutrality characteristic.

43. Expensing the cost of copy paper when the paper is acquired is an example of
a. Materiality.
b. Cost constraint.
c. Conservatism.
d. Industry practices.

44. Charging off the cost of a wastebasket with an estimated useful life of 10 years as an
expense of the period when purchased is an example of the application of the a.
 consistency quality.
b. expense recognition principle.
c. materiality quality.
d. historical cost principle.

45. Which of the following statements about materiality is correct?

a. An item must make a difference or it need not be disclosed.
b. Materiality is a matter of relative size or importance.
c. An item is material if its inclusion or omission would influence or change the judgment
of a reasonable person.
d. All of these answers are correct.

46. The International Accounting Standards Board’s conceptual framework includes a cost
constraint. Which of the following best describes the cost constraint?
a. The benefits of the information must be greater than the costs of providing it.
b. Financial information should be free from cost to users of the information. c. Costs
of providing financial information are not always evident or measurable, but must be
considered.
d. All of the choices are correct.

47. The International Accounting Standards Board’s (IASB) conceptual framework includes a
cost-benefit constraint. Which of the following is true regarding this constraint? a.
Benefits are more difficult to quantify than costs.
b. The IASB seeks input on costs and benefits as part of their due process.
c. Benefits to preparers may include access to capital at a lower cost.
d. All of the choices are correct.

48. The International Accounting Standards Board’s (IASB) conceptual framework a.

Includes the concept of prudence or conservatism which means when in doubt,
choose the solution that will be least likely to overstate assets or income and/or
understate liabilities or expenses.
b. Excludes the concept of prudence or conservatism because it is inconsistent
with neutrality, which encompasses freedom from bias.
c. Includes the concept of prudence or conservatism which means when in doubt,
choose the solution that will be least likely to understate assets or income and/or
overstate liabilities or expenses.
d. Includes the concept of prudence or conservatism as a desirable, but not required,
quality of financial reporting information.

49. The conceptual framework is not a financial reporting standard.

a. True b. False

50. The conceptual framework can override a requirement in one standard. a.

True b. False