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Useful Information quiz #2 Flashcards

Useful Information quiz #2
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  • Why is the going concern assumption necessary for accrual accounting?
    It allows companies to defer certain expenses and revenues, assuming ongoing operations.
  • What is the main benefit of the historical cost principle?
    It provides stability and reliability in asset valuation over time.
  • What is the main benefit of the fair value principle?
    It provides more relevant and up-to-date information about the current value of assets and liabilities.
  • How does the full disclosure principle affect the notes to financial statements?
    It requires companies to include additional explanations and details in the notes to ensure users have all relevant information.
  • What is the relationship between relevance and timeliness?
    Timely information is more relevant because it can influence users' decisions when they need it.
  • How does verifiability relate to the audit process?
    Auditors verify financial information to ensure it is accurate and faithfully represented.
  • Why is neutrality important in financial reporting?
    Neutrality ensures that information is not biased, increasing users' trust in the financial statements.
  • What is the purpose of the FASB's conceptual framework?
    It guides the development of accounting standards to ensure the provision of useful financial information.
  • How does the cost constraint impact the amount of information disclosed?
    It restricts disclosures to those that provide sufficient benefit to users relative to their cost.
  • What is an example of information with predictive value?
    Forecasted sales figures that help users estimate future company performance.
  • What is an example of information with confirmatory value?
    Actual sales results that confirm or refute previous sales forecasts.