Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Question
Chapter 1, Problem 1.12BE
To determine
To identify: Whether the given items are a characteristic of a principles-based (P) or rules-based (R) accounting system.
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Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.
a. The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.
b. Relevant information only has predictive value, confirmatory value, or both.
c. Information that is a faithful representation is characterized as having predictive or confirmatory value.
d. Comparability pertains only to the reporting of information in a similar manner for different companies.
e. Verifiability is solely an enhancing characteristic for faithful representation.
f. In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.
Accounting information provides useful information about business transactions and events. Those whoprovide and use financial reports must often select and evaluate accounting alternatives. The Conceptual
Framework examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may
necessitate trade-offs or sacrifices among the characteristics of useful information.For each of the following pairs of information characteristics, provide a hypothetical situation in which inwhich one of the characteristics may be sacrificed in return for a gain in the other. Explain the situationand criterion should be used to evaluate trade-offs between information characteristics? give your opinionsthati) Relevance and faithful representation.ii) Comparability and consistency.iii) Relevance and consistency.iv) Relevance and understandability.
The following are basic characteristics of management accounting, except
A. It is future-oriented.
B. It is used by both the external and internal stakeholders
C. It may use non-financial data or information
D. It complies with generally accounting principles.
(choose letter only)
Chapter 1 Solutions
Intermediate Accounting
Ch. 1 - Prob. 1.1QCh. 1 - Prob. 1.2QCh. 1 - How is the allocation of capital linked to the...Ch. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - What is the function of the accounting standard...Ch. 1 - Can U.S. companies listen on U.S. stock exchanges...Ch. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.1BECh. 1 - Prob. 1.2BECh. 1 - Financial Statement Users and Other Parties...Ch. 1 - Prob. 1.4BECh. 1 - Prob. 1.5BECh. 1 - Economic Entity. What is an economic entity?Ch. 1 - Prob. 1.7BECh. 1 - Prob. 1.8BECh. 1 - Prob. 1.9BECh. 1 - Prob. 1.10BECh. 1 - Prob. 1.11BECh. 1 - Prob. 1.12BECh. 1 - Financial Accounting. Define financial accounting...Ch. 1 - Prob. 1.2ECh. 1 - Convergence of Accounting Standards, IFRS Vikram...Ch. 1 - History of Standard Setting in the United States....Ch. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Rules-versus Principles-Based Accounting. Review...
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Similar questions
- The qualitative characteristics that make accounting information useful for decision-making purposes are as follows. Relevance Neutrality Verifiability Faithful representation Completeness Understandability Predictive value Timeliness Comparability Confirmatory value Materiality Free from error Instructions Identify the appropriate qualitative characteristic(s) to be used given the information provided below. a. Qualitative characteristic being employed when companies in the same industry are using the same accounting principles. b. Quality of information that confirms users’ earlier expectations. c. Imperative for providing comparisons of a company from period to period. d. Ignores the economic consequences of a standard or rule. e. Requires a high degree of consensus among individuals on a given measurement. f. Predictive value is an ingredient of this fundamental quality of information. g. Four qualitative characteristics that are…arrow_forwardWhich of the following statements is incorrect? Select one: a. Reports produced using management accounting must follow GAAP. b. The information gathered from management accounting is not required by law. c. The practice of management accounting is fairly flexible. d. Management accounting focuses mainly on the internal user.arrow_forwardComparability is an enhancing qualitative characteristic that results in Select one: rigid uniformity in the application of accounting principles. information that enables users to identify and understand similarities in and differences among financial statement items. greater use of judgment in the application of accounting standards. the ability of users to understand inherently complex phenomena.arrow_forward
- Which is not a purpose of the conceptual framework?a. To provide definitions of key terms and fundamental concepts.b. To provide specific guidelines for resolving situations not covered by existing accounting standards.c. To assists accountants in selecting among alternative accounting and reporting methods.d. To assists the International Accounting Standards Board in standard-setting process.arrow_forwardWhich of the following statements is incorrect? a.Management accounting focuses mainly on the internal user. b.The information gathered from management accounting is not required by law. c.The practice of management accounting is fairly flexible. d.Reports produced using management accounting must follow GAAP.arrow_forwardOutline the technical benefits of a conceptual framework. What problems could occur if accounting standards were set without a conceptual framework?arrow_forward
- Which of the following is not a fundamental quality of useful accounting information? Group of answer choices Faithful representation. Relevance. Faithful representation and Relevance. Materialityarrow_forwardCreative accounting is defined as using the flexibility in accounting within the regulatory framework to manage the management and presentation of accounts so that they give primacy to the interest of the preparers not the users. Required. Giving examples, discuss the main methods of creative accounting.arrow_forwardBetween Principles- Based and Rules-Based Accounting Standards, which would you use and do you think that this is the right way to create accounting standards?arrow_forward
- What two primary qualitative characteristics make accounting information useful? Predictive value and relevance. Relevance and neutrality. Faithful representation and relevance. Faithful representation and predictive value.arrow_forwardfactors that influence the adoption of computarised accounting systems.arrow_forwardWhich of the following is not an advantage of accounting standards? Select one: a. All of the given answers are correct. b. It reduces the reliability of financial statements. c. It helps to attain uniformity in accounting. d. It provides guidance on the content and presentation of financial statements.arrow_forward
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