F.A.THEORY QUIZ

Create an engaging and informative illustration of a quiz about financial accounting theories, featuring accounting symbols like ledgers, calculators, and financial graphs, with a background of a modern office or classroom setting.

F.A.THEORY Quiz

Test your knowledge on F.A.THEORY with this comprehensive quiz designed for accounting enthusiasts and professionals. Dive into questions that cover essential principles and concepts, bolstering your understanding of financial reporting and accounting standards.

Multiple-choice questions
Covers essential accounting concepts
Ideal for study and certification preparation

27 Questions7 MinutesCreated by CalculatingStar92

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.

Which of the following is an implication of the going concern assumption on financial reporting?

A. The historical cost principle is credible.

b. Depreciation and amortization policies are justifiable and appropriate.

c. The current-noncurrent classification of assets and liabilities is justifiable.

D. A & B .

E. All of these.

The Fair Value option under IAS:

A) Allow firms to report assets or liabilities at fair value on the balance sheet.

B) The resulted unrealized gain or loss should be reported as other comprehensive income in the equity section/ BS.

C) At the end of each accounting period company has the option to report assets or liability either at HC or fair value

D) A & B

. E) All of the above

Which of the following statement is the most true

A) Comprehensive income consists of net income and Other Comprehensive Income (OCI) components.

B) according to FASB all unrealized gain or loss reported among OCI in the equity section.

C) Comprehensive income could take negative value but always higher than NI.

D) A & B only

D) A , B & C are true.

E ) None of the above.

An example employing materiality concept in financial reporting

The reporting of Inventory at lower of cost or market value (NRV).

B) Reporting receivable at NRV

C) Permitted the use of Direct Write Off method to account for bad debt expenses.

D) the treatment of small capital expenditure (e.g. Telephone) as expenses (this answer could also be cost benefit relation) answer for cost benefit constraint

E) all of the above are true

Increases in equity from central operating transactions of an entity are

A. Expenses

B. Gains.

C. Investments by owners.

D. Revenues.

State that overstatement of provisions/reserves (bad debt expense, sales return and allowance, warranty expenses) and use these overstatements in good performance year to reduce similar charge in future bad performance year.

Cook’s Jar

Abusing Materiality Concept

Transactional Approach

Earning Quality

σ� State the change in asset or liability value during the period

1-Holding gain

2- inventory profit

3-Realization

1+2

Unbiased information (free from bias), company cannot select information to favor one set of interested parties over another.

1. Completeness:

2. Neutrality:

3. Faithful representation

None of the above

Which of the following investments should always be reported as current assets

Available-for-sale securities.

Held-to-maturity securities.

. Long-term investments

Trading securities.

(Income Statement Approach) State that revenue recorded when its earned and expenses recorded when its incurred Income measured by matching expenses with revenue

True

False

The accounting profession requires the percentage of completion method be used when

The contract specifies the enforceable rights regarding goods or services to be provided and recieved by the parties

. The contractor can be expected to perform the contractual obligations

. The buyer can be expected to satisfy all obligations under the contract

All of the above

Accrual basis:

State that recording revenue when we receive cash and expense when cash paid regardless when it will be earned (revenue) or when it I will be incurred (expense) in the future.

State that recording revenue in the period in which its earned and expenses when its incurred regardless time of cash payment or receipt

Which of the following methods of determining annual bad debt expense best achieves the matching concept?

Percentage of sales

Direct write-off

Information must be available when its needed, means having information available to decision-makers before it loses its relevancy: , the definition of Understandability

True

False

Trial balance or statement of financial position: List of asset, liabilities and owners’ equity of specific entity at specific date.

True

False

Full Disclosure Principle : States that any information that could affect economic decisions by users should be disclosed in the annual report, subjective to cost benefit constraint.

True

False

Cook's Path: State that overstatement of restriction charge (depreciation and other expenses) to reduce similar charge in following year in order to enhance revenue.

True

False

Justification 1. Risk of the ownership is substantially 2. P.O. S is the most critical point in the earning process 3. P.O.S Provide reliable ,objective and verifiable measure (because it result from exchange)

1. Risk of the ownership is substantially 2. P.O. S is the most critical point in the earning process 3. P.O.S Provide reliable ,objective and verifiable measure (because it result from exchange)

1. Risk of the ownership is substantially transferred to other party 2. Control over asset substantially transfer to the buyer 3. In case of credit sale future uncollectable can be estimated reasonably

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