TRUEFALSE QUESTIONS - Accounting Theory: 8 th edition TRUE/FALSE QUES...

Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY

Accounting Theory: 8

th edition Page 1 of 11

TRUE/FALSE QUESTIONS

1.Financial accounting refers to accounting information that is used by management for decision- making purposes.

ANSWER: False

2.Accounting theory includes the basic rules, definitions, and principles that underlie the drafting of accounting standards and how they are derived.

ANSWER: True

3.Accounting theory includes conceptual frameworks, accounting legislation, valuation models, and hypotheses and theories.

ANSWER: True

4.Hypotheses and theories are based on an informal method of investigation.

ANSWER: False

5.Replacement cost as a measure of asset value is generally more reliable than historical cost.

ANSWER: False

6.Accounting theory is developed and refined by the process of accounting research.

ANSWER: True

7.Indirect measures are usually preferable to direct measures because they are less costly to obtain.

ANSWER: False

8.Assessment measures are concerned with particular attributes of objects and are always direct measurements.

ANSWER: False

9.When a direct assessment measure is used, there is always only one correct measure.

ANSWER: False

10.The simplest type of measuring system is the nominal scale.

ANSWER: True

11.A chart of accounts is an example of an ordinal classification.

ANSWER: False

Accounting Theory, Conceptual Issues in a Political and Economic Environment 8e Harry Wolk James Dodd John Rozycki (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY

Accounting Theory: 8

th edition Page 2 of 11 12.Numerals assigned in ordinal rankings indicate an order of preference where the degree of preference among ranks is the same.

ANSWER: False

13.In a ratio scale, the zero point implies "nothingness," or the absence of the quality being measured.

ANSWER: True

14.Using ratio scale measurement is possible in accounting.

ANSWER: True

15.Objectivity may be defined as the degree of consensus among measurers.

ANSWER: True

16.Assessment measures are not concerned with particular attributes of objects.

ANSWER: False

17.Prediction measures are concerned with factors that may be indicative of future conditions.

ANSWER: True

18.Timeliness and cost are pertinent to assessment measures but are not pertinent to prediction measures.

ANSWER: False

19.All accounting measurements are of either the assessment or the prediction variety.

ANSWER: True

20.The need for information on a timely basis may conflict with cost constraints in some situations.

ANSWER: True

21.The terms calculation and measurement both refer to the valuation of a real phenomena or attribute.

ANSWER: False

22.Calculations attempt to simulate or come as close as possible to the measurement of real phenomena or attributes.

ANSWER: False 2 / 4

Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY

Accounting Theory: 8

th edition Page 3 of 11

• FIFO and LIFO measures of cost of goods sold and inventories are examples of calculations

rather than measurements.

ANSWER: True

• There are often trade-offs between objectivity and the usefulness of numbers generated by the

measurement process.

ANSWER: True

• Measurement is an integral part of accounting theory.

ANSWER: True

• Throughout the financial history of the United States, current value has been the accepted

valuation system for published financial statements.

ANSWER: False

• The discounted cash flow approach can be used to determine an objective measurement for most

assets and liabilities.

ANSWER: False

• A general price-level adjustment refers to the purchasing power of the monetary unitary unit

relative to all goods and services in the economy.

ANSWER: True

• Both exit value and replacement cost are valuation systems that fall into the current value

category.

ANSWER: True

• The principal argument used to justify the replacement cost system over exit values is that if the

great majority of the firm's assets were not already owned, it would be economically justifiable to acquire them.

ANSWER: True

MULTIPLE CHOICE QUESTIONS

• Which of the following methods of valuing an asset is based on the amount that a firm could

acquire by selling the asset?

• Replacement cost
• Entry value
• Exit value
• Both a and b

ANSWER: C

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Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY

Accounting Theory: 8

th edition Page 4 of 11

• Which of the following methods of valuing an asset is based on the amount that would be paid

for it in markets where the asset would ordinarily be acquired?

• Replacement cost
• Entry value
• Exit value
• Both a and b

ANSWER: D

• Which of the following would be considered a political factor relative to the financial accounting

policy function?

• Auditors
• Inflation
• Taxes
• Price changes

ANSWER: A

• Which of the following groups carry out most accounting research?
• Public accounting firms
• Private industry
• Accounting professors
• Chartered Financial Analysts

ANSWER: C

• If a number assigned to an object is an actual measurement of a property of the object, it is

referred to as a(n):

• Direct measurement.
• Biased measurement.
• Indirect measurement.
• Prediction measurement.

ANSWER: A

• Which of the following factors is not listed in your text as affecting a direct assessment measure?
• The measurer
• The attribute being measured
• Instruments available for the measuring task
• The individual who will use the measure

ANSWER: D

7. The simplest type of measuring system is the:

• Interval scale.
• Ratio scale.
• Nominal scale.
• Ordinal scale.

ANSWER: C

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