Conceptual Framework and Financial Statements

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CONCEPTUAL FRAMEWORK AND FINANCIAL STATEMENTS

TEN-MINUTE QUIZ

Circle the letter of the best response.

1. The Accounting Equation is:

A. Assets + Liabilities = Owner’s Equity.

B. Assets = Liabilities –Owner’s Equity.

C. Assets = Liabilities + Owner’s Equity.

D. Assets = Liabilities x Owner’s Equity.

2. Which item is not an asset?

A. Cash

B. Accounts Payable

C. Accounts Receivable

D. Supplies

3. Given that total liabilities decreased by $75, 000 and total owner’s equity increased by $90, 000 during the same accounting time period what is the net effect on total assets during this period?

A. $15, 000 increase

B. $15, 000 decrease

C. $90, 000 increase

D. $90, 000 decrease

4. Which of the following qualitative characteristic mandates provided below is complete, free from material error or bias and prudent?

A. Understandability

B. Comparability

C. Relevance

D. Reliability

5. Which financial statement formula is the same as the accounting equation?

A. Income Statement

B. Statement of Changes in Equity

C. Balance Sheet

D. Statement of Cash Flow

6. The Accrual Basis Assumption allows one to:

A. Recognise revenue when they are earned and not when cash is received.

B. Accrue expenses when they are incurred, despite cash not being paid yet.

C. Do both A and B.

D. Do none of the above.

7. Which financial statement reports on the revenues and expensed during a specified period of time?

A. Income Statement

B. Statement of Changes in Equity

C. Balance Sheet

D. Statement of Cash Flows

8. Mr. Ronald Smith is the owner of several small businesses. He has decided to save money during his initial years of operation by not hiring a professional accountant. He has one journal and logging book where he intermingles the transactions of all of his businesses to find the net effect of his entrepreneurship. Which qualitative characteristic, constraint or assumption does this violate?

A. Accrual Basis Assumption

B. Going Concern Assumption

C. Relevance Qualitative Characteristic

D. Reliability Qualitative Characteristic

9. Listed below are the account balances of the Arthur Frank entity:

|Accounts Payable |75, 000 | |Cash |100, 000 | |Share Capital |500, 000 | |Dividends |50, 000 | |Land |60, 000 | |Miscellaneous Expense |3,000 | |Service Revenue |250, 000 | |Equipment |40, 000 | |Accounts Receivable |125,000 | |Office Supplies |13, 000 | |Salaries Expense |110, 000 |

Total Assets are:

A. $100, 000.

B. $338, 000.

C. $278, 000.

D. $213, 000.

10. Listed below are the account balances of...
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