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Accounting Theory chapter 4

20 Questions - Developed by: - Updated on: 2018-10-30 - 5,003 taken - 2 people like it

1

Measurement in an accounting context involves

Estimating the amounts to be derived from assets
Apportioning costs between items
All of the above
Determining the quantities of assets held by an entity

2

Which of the following is NOT a benefit of measurement in accounting?

It allows users to compare entities
It makes information more decision useful
It allows users to assess the performance of the entity
Dissimilar items can be easily combined into meaningful totals

3

Which of the following is NOT a limitation of measurement in accounting?

There is little agreement on what measurement methods should be used
There are some accounting items that are not easily measured
Measurement can be quite subjective
It is impossible to compare entities over a period of time

4

The statement in relation to current trends in accounting that is NOT correct is:

There is a movement towards a 'fair value' approach
More emphasis is now being placed on the relevance of information rather than its reliability'
The concepts of capital and profit have changed and evolved over time.
There is a movement towards a more traditional approach

5

Which of these is NOT a criticism of historical cost accounting?

Historical cost overstates profit in times of rising prices
It has been used by business over many centuries
Cost information is not always available
It is not objective and is open to manipulation

6

The statement that is true with respect to current cost accounting is:

Holding gains are not included in current operating profits
None of the above is true
Gains are recorded only when the assets are disposed of
Current operating profit is the excess of the current value of the output sold over the current cost of the related inputs

7

Which of these is a defense of current cost accounting?

Relevant current events of the accounting period should be accounted for to maintain the usefulness of accounting information for decision-making
It specifically recognizes future technological changes in profit determination
It is the most objective of the proposed accounting methods
All of the above are defenses

8

Which of the following is NOT an argument in favor of exit price accounting?

Exit price accounting involves references to real-world examples therefore it is more grounded in reality than historical cost accounting
The financial statements are allocation-free
Rather than measuring past events the method measures those that might happen if a firm does something other than what was planned
Valuing all elements in the financial statements at their money equivalents provides one rule that can be applied consistently.

9

Deprival value is:

Considered relevant as theft of business assets is common
The loss that would be incurred if the asset was removed
All of the above
An objective measure of value

10

Under the Conceptual Framework the preferred measurement model is:

None of the above
Historical Cost
Current Cost
Present Value

11

Information produced using historical cost as the measurement base is considered

All of the above
More comparable
Less relevant
Less faithfully represented

12

Information produced using fair value as the measurement base is considered

More relevant
Less Neutral
More faithfully represented
All of the above

13

Information produced using current cost as the measurement base is considered

More comparable between different companies
Less relevant
Less understandable
All of the above

14

Information produced using deprival value as the measurement base is considered

All of the above
Less faithfully represented
Less understandable
Less relevant

15

An argument against fair value measurement in accounting is:

It does not allow enough professional judgement
Market prices are too objective
It can lead to volatility in earnings
It reflects the value of the item today

16

Which measurement system would seem most relevant to investors?

Current cost
Deprival value
Fair value
Historic cost

17

Which measurement system would seem most relevant to creditors?

Current cost
Historic cost
Deprival value
Fair value

18

Which of the following is NOT a reason measurement is a controversial accounting issue?

It can be quite subjective
It is not a political issue
It can affect how entities are perceived
It does not lead to consistent recording

19

Accounting for the environment is a difficult area because

As a common good it is hard to value the environment
Environmental issues extend beyond the entity boundary
It is difficult to measure the accounting consequences of environmental issues
All of the above

20

Intangible assets have been identified as one of the hardest area to value because:

They are one of the most important assets on the balance sheet
All of the above
It is difficult to measure an asset with no physical substance
There are too many markets to choose from

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