MULTIPLE CHOICE QUESTIONS I 50 questions; 4 points each! Circle the letter of the best answer. uestion/Possible Answers 1. Accrual accounting is used because Ans cash flows are considered less important. cash flows D. it provides a better indication of a company's ability to generate than the cash basis. C. recognizes revenues when cash is received and expenses when cash is paid. it provides past ability to generate negative cash flows. it Which of the following represents a form of communication through financial reporting but not through financial statements? 2. Ans. a. Balance sheet. b. President's letter. c. Income statement. d. Notes to financial statements A characteristic of generally accepted accounting principles includes: b. standards and principles are based a federal statutes. a. a common set of standards and principles. Ans. acceptance requires an affirmative vote of Certified Public Accountants. - d. practice thatb come accepted for at least a year by all industry members. The underlying theme of the conceptual framework is c. , 4 Ans. a. decision usefulness. b. understandability c. faithful representation. d. comparability 5. In classifying the elements of financial statements, the primary distinction between Ans. a. the materiality of the amounts involved. revenues and gains is b. c. d. the likelihood that the transactions involved will recur in the future. the nature of the activities that gave rise to the transactions involved the costs versus the benefits of the alternative methods of disclosing the transactions involved. 6. Which of the following is commonly referred to as the matching principle? Ans. a. Revenue recognition principle b. Measurement principle c. Expense recognition principle d. Full disclosure principle According to the FASB's conceptual framework, which of the following is an essential characteristic of an asset? 7. Ans. a. The claims to an asset's benefits are legally enforceable. b. An asset is tangible c. An asset is obtained at a cost. d. An asset provides future benefits Page 3 of 12