Test Bank For manual Australian
Financial Accounting 9th Edition
General-purpose financial statements - ANSWERSThe product of financial accounting.
Users of financial reports - ANSWERSInclude creditors, government agencies, and unions,
except for 'All of these are users.'
Financial statements most frequently provided - ANSWERSInclude balance sheet, income
statement, and statement of cash flows, except for 'statement of retained earnings.'
Information provided by financial reporting - ANSWERSPertains to individual business
enterprises, rather than to industries or an economy as a whole or to members of society as
consumers.
Differences between financial and managerial accounting - ANSWERSInclude planning and
controlling company's operations, deciding whether to invest in the company, and
evaluating borrowing capacity, except for 'All the above.'
Form of communication through financial reporting - ANSWERSPresident's letter, which is
not a financial statement.
Process of identifying, measuring, analyzing, and communicating financial information -
ANSWERSCalled managerial accounting.
Accounting's role in capital allocation process - ANSWERSHelps attract investment capital by
providing timely, relevant information.
Factors determining business success - ANSWERSMarkets, free enterprise, and competition,
referred to as 'all of these.'
,Effective capital allocation process - ANSWERSPromotes productivity, encourages
innovation, and provides an efficient market for buying and selling securities, referred to as
'all of these.'
Financial statements in the early 2000s - ANSWERSProvide information related to
nonfinancial measurements, forward-looking data, and hard assets.
Major challenges facing the accounting profession - ANSWERSInclude nonfinancial
measurements, timeliness, accounting for hard assets, and forward-looking information.
Objective of financial reporting - ANSWERSTo provide information that is useful to present
and potential equity investors, lenders, and other creditors.
Primary users for general-purpose financial statements - ANSWERSInclude creditors,
employees, and investors, with 'both creditors and investors' being a specific group.
Investors' interests when making decisions - ANSWERSAssessing the company's ability to
generate net cash inflows and management's ability to protect and enhance the capital
providers' investments.
Accrual accounting - ANSWERSUsed because it provides a better indication of ability to
generate cash flows than the cash basis.
Objective of general-purpose financial reporting - ANSWERSAdopts a perspective that
includes the needs of various stakeholders.
Decision-usefulness perspective - ANSWERSA perspective adopted as part of the objective of
general-purpose financial reporting.
Accounting principles - ANSWERSAre 'generally accepted' only when an authoritative
accounting rule-making body has established it in an official pronouncement or it has been
accepted as appropriate because of its universal application.
, Common set of accounting standards and procedures - ANSWERSCalled generally accepted
accounting principles.
General limitation of general purpose financial statements - ANSWERSGeneral purpose
financial statements may not be the most informative for a specific enterprise.
Primary objective of financial reporting - ANSWERSTo provide information that is useful to
those making investing and credit decisions.
Fundamental characteristic of useful accounting information - ANSWERSIncludes
comparability, relevance, neutrality, and materiality.
Primary characteristic of useful accounting information - ANSWERSIncludes comparability,
faithful representation, and consistency.
Comparability in financial accounting information - ANSWERSInformation that is measured
and reported in a similar fashion across companies.
Consistency in financial accounting information - ANSWERSInformation that is measured
and reported in a similar fashion across points in time.
Ingredient of relevance - ANSWERSIncludes timeliness.
Ingredient of faithful representation - ANSWERSIncludes predictive value, materiality,
neutrality, and confirmatory value.
Changing the method of inventory valuation - ANSWERSShould be reported in the financial
statements under the qualitative characteristic of comparability.
Company A issuing its annual financial reports within one month of the end of the year -
ANSWERSIs an example of the ingredient of timeliness in fundamental quality of accounting
information.
Financial Accounting 9th Edition
General-purpose financial statements - ANSWERSThe product of financial accounting.
Users of financial reports - ANSWERSInclude creditors, government agencies, and unions,
except for 'All of these are users.'
Financial statements most frequently provided - ANSWERSInclude balance sheet, income
statement, and statement of cash flows, except for 'statement of retained earnings.'
Information provided by financial reporting - ANSWERSPertains to individual business
enterprises, rather than to industries or an economy as a whole or to members of society as
consumers.
Differences between financial and managerial accounting - ANSWERSInclude planning and
controlling company's operations, deciding whether to invest in the company, and
evaluating borrowing capacity, except for 'All the above.'
Form of communication through financial reporting - ANSWERSPresident's letter, which is
not a financial statement.
Process of identifying, measuring, analyzing, and communicating financial information -
ANSWERSCalled managerial accounting.
Accounting's role in capital allocation process - ANSWERSHelps attract investment capital by
providing timely, relevant information.
Factors determining business success - ANSWERSMarkets, free enterprise, and competition,
referred to as 'all of these.'
,Effective capital allocation process - ANSWERSPromotes productivity, encourages
innovation, and provides an efficient market for buying and selling securities, referred to as
'all of these.'
Financial statements in the early 2000s - ANSWERSProvide information related to
nonfinancial measurements, forward-looking data, and hard assets.
Major challenges facing the accounting profession - ANSWERSInclude nonfinancial
measurements, timeliness, accounting for hard assets, and forward-looking information.
Objective of financial reporting - ANSWERSTo provide information that is useful to present
and potential equity investors, lenders, and other creditors.
Primary users for general-purpose financial statements - ANSWERSInclude creditors,
employees, and investors, with 'both creditors and investors' being a specific group.
Investors' interests when making decisions - ANSWERSAssessing the company's ability to
generate net cash inflows and management's ability to protect and enhance the capital
providers' investments.
Accrual accounting - ANSWERSUsed because it provides a better indication of ability to
generate cash flows than the cash basis.
Objective of general-purpose financial reporting - ANSWERSAdopts a perspective that
includes the needs of various stakeholders.
Decision-usefulness perspective - ANSWERSA perspective adopted as part of the objective of
general-purpose financial reporting.
Accounting principles - ANSWERSAre 'generally accepted' only when an authoritative
accounting rule-making body has established it in an official pronouncement or it has been
accepted as appropriate because of its universal application.
, Common set of accounting standards and procedures - ANSWERSCalled generally accepted
accounting principles.
General limitation of general purpose financial statements - ANSWERSGeneral purpose
financial statements may not be the most informative for a specific enterprise.
Primary objective of financial reporting - ANSWERSTo provide information that is useful to
those making investing and credit decisions.
Fundamental characteristic of useful accounting information - ANSWERSIncludes
comparability, relevance, neutrality, and materiality.
Primary characteristic of useful accounting information - ANSWERSIncludes comparability,
faithful representation, and consistency.
Comparability in financial accounting information - ANSWERSInformation that is measured
and reported in a similar fashion across companies.
Consistency in financial accounting information - ANSWERSInformation that is measured
and reported in a similar fashion across points in time.
Ingredient of relevance - ANSWERSIncludes timeliness.
Ingredient of faithful representation - ANSWERSIncludes predictive value, materiality,
neutrality, and confirmatory value.
Changing the method of inventory valuation - ANSWERSShould be reported in the financial
statements under the qualitative characteristic of comparability.
Company A issuing its annual financial reports within one month of the end of the year -
ANSWERSIs an example of the ingredient of timeliness in fundamental quality of accounting
information.
