1. The overriding criterion by which accounting information can be judged is that of

freedom from bias.

comparability.

timeliness.

usefulness for decision making.

2. Gains are defined as

increases in equity resulting from an entitys peripheral or incidental transactions.

increases in economic resources resulting from an entitys ordinary activities.

the residual interest remaining after liabilities are deducted from assets.

decreases in economic resources resulting from an entitys ordinary activities.

3. During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with the

economic entity assumption.

full disclosure principle.

periodicity assumption.

going concern assumption.

4. Which of the following situations does not demonstrate an attempt at financial engineering?

Aggressively interpreting GAAP so that the impact on critical ratios is minimized.

Structuring debt financing so that it meets the GAAP definition of equity rather than debt.

Accounting for bona fide business transactions in a transparent manner.

Creating complex legal arrangements and financial instruments.