Online Business Accounting

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Application of the full disclosure principle A. is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits B. is violated when important financial information is buried in the notes to the financial statements C. is demonstrated by the use of supplementary information presenting the effects of changing prices D. requires that the financial statements be consistent and comparable According to the FASB's conceptual framework, comprehensive income includes which of the following? A. Operating Income Yes; Investments by Owners No B. Operating Income Yes; Investments by Owners Yes C. Operating Income No; Investments by Owners Yes D. Operating Income No; Investments by Owners No The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as the A. conservatism constraint B. materiality constraint C. substance over form principle D. industry practices constraint

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1. my answer would be 1. C. Pro forma presentations are disclosed in the notes (choice a is wrong because it's a GAAP requirement for fair presentation; choice b refer to choice a explaination; choice d refers to consistency accounting concept) 2. A. per comprehensive income FASB definition. 3. A. Conservatism Constraint refers to the tendency of accountants to resolve uncertainty in favor of understanding assets and revenues and overstating liabilities and expenses.
2. First Question: C. is demonstrated by the use of supplementary information presenting the effects of changing prices The application of adequate disclosure (completeness)requires the disclosure and presention of only RELEVANT information so as not to misled the users of the financial information. However, disclosure of ALL information is not anymore practical. Its cost will surely exceeds its benefits. "Cost - Benefit Analysis" Second Question:A. Operating Income Yes; Investments by Owners No Comprehensive income includes only operating income but excludes all transaction from the owners of the business. Third Question:A. conservatism constraint This is not a permission to understate assets or revenue nor the permission to overstate liability or expenses. But in occassion of UNCERTAINTY, accounts take into consideration the recording of items with the LEAST EFFECT ON EQUITY.