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Test bank For Intermediate Accounting 11th Edition by David Spiceland
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Test bank For Intermediate Accounting 11th Edition by David Spiceland
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Test bank For Intermediate Accounting11th Edition by David Spiceland
Objectives of Financial Reporting - ANSProvide 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.
Entity Perspective - ANSCompanies viewed as separate and distinct from their owners.
Decision-Usefulness - ANSInvestors are interested in assessing the company's
1) ability to generate net cash inflows and
2) management's ability to protect and enhance the capital providers' investments.
Three Organizations involved in Standard Settings for Accounting - ANSSecurities and
Exchange Commission (SEC).
American Institute of Certified Public Accountants (AICPA).
Financial Accounting Standards Board (FASB).
Conceptual Framework - ANS1) To develop a coherent set of standards and rules.
2) To solve new and emerging practical problems.
A conceptual framework underlying financial accounting is important because it can lead to
consistent standards and it prescribes the nature, function, and limits of financial accounting and
financial statements. - ANSTrue
A conceptual framework underlying financial accounting is necessary because future accounting
practice problems can be solved by reference to the conceptual framework and a formal
standard-setting body will not be necessary. - ANSFalse
Three Levels of Conceptual Framework - ANSFirst or Bottom Level = Basic Objectives
Second or Middle Level = Qualitative Characteristics and Elements
Third or Top Level = Recognition, Measurement, and Disclosure Concepts
Objective (Lower Level) of Conceptual Framework - ANSProvide information about the reporting
entity that is useful to present and potential equity investors, lenders, and other creditors in their
capacity as capital providers.
2 Parts of the Second of Middle level of Conceptual Framework - ANSQualitative Characteristics
& Elements
, 2 Main Points of Qualitative Characteristics - ANS1) Fundamental Qualities
2) Enhancing qualities
Fundamental Qualities - ANSRelevance & Faithful representation
Enhancing Qualities - ANS1) Comparability
2) Verifiability
3) Timeliness
4) Understandability
Relevance - ANS1) Predictive Value
2) Confirmatory Value
3) Materiality
Faithful Representation - ANS1) Completeness
2) Neutrality
3) Free from error
Elements - Key Items - ANSAssets
Liabilities
Equity
Investment by owners
Distribution to owners
Comprehensive income
Revenues
Expenses
Gains
Losses
Components of the Recognition, Measurement, and Disclosure Concepts (Third or Top Level) -
ANS1) Assumptions
2) Principles
3) Constraints
Assumptions of Recognition, Measurement, and Disclosure - ANS1) Economic Entity
2) Going Concern
3) Monetary Unit
4) Periodicity
Principles of Recognition, Measurement, and Disclosure - ANS1) Measurement
2) Revenue Recognition
3) Expense Recognition
4) Full Disclosure
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