ACCT 2313 D102 Financial Accounting
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Free ACCT 2313 D102 Financial Accounting Questions
What recent trend has been observed in the realm of sustainability reporting among companies?
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Decreased interest in sustainability reporting due to regulatory burdens
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Standardization of sustainability reporting practices across all industries
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Growing emphasis on sustainability reporting with new SEC regulations anticipated
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Complete elimination of sustainability reporting requirements by the SEC
Explanation
Explanation:
There has been a growing emphasis on sustainability reporting, reflecting the increased interest from investors, stakeholders, and regulators in corporate environmental, social, and governance (ESG) performance. The SEC is actively developing new regulations to standardize and improve the consistency and comparability of sustainability-related disclosures. Companies are responding by enhancing ESG reporting practices to provide transparent and decision-useful information.
Correct Answer:
Growing emphasis on sustainability reporting with new SEC regulations anticipated
What is meant by comparability when discussing financial accounting information?
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Similar economic activity in different companies has predictive or feedback value.
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Similar economic activity in different companies is reasonably free from error
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Different economic activity is measured and reported the same across companies.
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Similar economic activity is measured and reported in a similar fashion across companies.
Explanation
Explanation:
Comparability is an enhancing qualitative characteristic of financial information that allows users to identify similarities and differences between different companies’ financial statements. It ensures that similar economic transactions are measured and reported consistently across entities, which improves the usefulness of financial statements for decision-making, benchmarking, and trend analysis. Comparability does not imply identical reporting, but rather consistency in applying accounting methods.
Correct Answer:
Similar economic activity is measured and reported in a similar fashion across companies.
What is the primary characteristic of Fair Value in financial accounting?
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The historical cost of an asset at the time of acquisition
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The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
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The estimated future cash flows from an asset discounted to present value
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The average market price of an asset over a specified period
Explanation
Explanation:
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It reflects current market conditions and provides relevant information for decision-making, unlike historical cost, which records the original acquisition price, or discounted cash flows, which are an estimation technique. Fair value emphasizes an exit price notion in active markets.
Correct Answer:
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
Which of the following best describes the importance of understandability in financial reporting?
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It ensures that all financial statements are prepared using the same accounting methods.
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It allows users to comprehend the financial information and its implications for decision-making.
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It guarantees that all financial information is presented in a standardized format
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It focuses solely on the accuracy of the numerical data presented in the financial statements.
Explanation
Explanation:
Understandability is one of the enhancing qualitative characteristics of financial information as described in the FASB Conceptual Framework. It emphasizes that financial information should be presented in a clear and concise manner so that reasonably informed users can comprehend it and use it in their decision-making. While financial reports can be complex, understandability requires that information not be unnecessarily complicated and that disclosures help users grasp the implications of reported data.
Correct Answer:
It allows users to comprehend the financial information and its implications for decision-making.
Information is _______ if independent observers, using the same methods, obtain similar results
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Consistency
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Understandability
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Verifiable
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Comparability
Explanation
Explanation:
Verifiability in financial reporting means that independent, knowledgeable observers could reach similar conclusions or results using the same methods. It ensures that the reported information is not subjective but can be substantiated and confirmed, enhancing reliability for users of financial statements. This characteristic supports confidence in financial reporting, as users know the numbers can be checked and reproduced.
Correct Answer:
Verifiable
One objective of financial reporting is to provide
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information about the investors in the business entity
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information about the liquidation values of the resources held by the enterprise
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information that is useful in assessing cash flow prospects.
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information that will attract new investors.
Explanation
Explanation:
A primary objective of financial reporting is to provide information that helps users, particularly investors and creditors, assess the amount, timing, and uncertainty of future cash flows. This information enables stakeholders to make informed decisions regarding investment, lending, and resource allocation. While knowing liquidation values or attracting new investors may be secondary considerations, the core purpose focuses on the decision-usefulness of financial information in evaluating future cash flow prospects.
Correct Answer:
information that is useful in assessing cash flow prospects
Objectives of financial reporting to external investors and creditors include preparing information about all of the following except:
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Information that is useful in making investment and credit decisions.
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Information about economic resources, claims to those resources, and changes in both resources and claims
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Information that is useful in assessing the amount, timing, and uncertainty of future cash flows
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Information used to determine which products to produce
Explanation
Explanation:
The objectives of financial reporting focus on providing useful information to external users, primarily investors and creditors. This includes information for decision-making, details about a company’s economic resources and obligations, and data that help assess future cash flows. However, determining which products to produce is a managerial decision, relevant to internal users, and falls under managerial accounting rather than financial reporting. Therefore, this is not an objective of external financial reporting.
Correct Answer:
Information used to determine which products to produce.
In accounting, the present obligations of an entity to transfer economic benefits are known as:
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Expenses
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Assets
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Liabilities
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Shareholders' equity
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Revenues
Explanation
Explanation:
Liabilities represent present obligations of an entity to transfer economic benefits, typically in the form of cash, goods, or services, as a result of past transactions or events. They arise from borrowing, purchasing on credit, or legal obligations such as taxes. Unlike expenses, which reduce equity through consumption of resources, liabilities are obligations that remain outstanding until settled.
Correct Answer:
Liabilities
Which of the following forms is required to be filed with the SEC to report significant corporate events that may affect shareholders?
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Form 10-K: annual audited report
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Form 10-Q: unaudited quarterly report
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Form 8-K: report of major events
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Form S-1: registration statement
Explanation
Explanation:
Form 8-K is specifically used by companies to notify the Securities and Exchange Commission (SEC) and investors of major events that could be important to shareholders. These events may include mergers, acquisitions, leadership changes, bankruptcy, or other material developments. Unlike the 10-K and 10-Q, which provide periodic financial information, the 8-K provides timely disclosure of significant events. Form S-1, on the other hand, is used when a company plans to go public.
Correct Answer:
Form 8-K: report of major events
The FASB's Conceptual Framework does all except
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identify the goals and purpose of accounting.
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provide definitions of accounting concepts and principles.
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provide the Accounting Standards Codification
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provide guidance in establishing accounting standards
Explanation
Explanation:
The FASB Conceptual Framework provides a structured foundation for accounting standards by defining objectives, concepts, and qualitative characteristics of financial reporting. It guides the development of accounting standards and enhances consistency. However, it does not include the Accounting Standards Codification itself; the Codification is the official source of authoritative U.S. GAAP.
Correct Answer:
provide the Accounting Standards Codification
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