Posted: April 26th, 2016

Please choose the best definition of of positive theory in accounting?

1. For this year, JJ company has 10,000 net earnings on income statement and 7,000 net cash inflow from operating activities, 5,000 net cash outflow from investing activities, and 2,000 cash outflow from financing activiies on the statement of cash flows. What is the free cash flow?
a. 5000
b. 3000
c. 15000
d. 2000

2. Which of the following statements is NOT TRUE?
a. For the income measurement, the are 2 approaches such as transaction and capital maintenance
b. The current GAAP is more based on the transaction approach
c. The transaction approach is more focused on the accounts on balance sheet
d. capital maintenance approach is more related to measurement problem, while transaction approach is more related to revenue recognition issue

3. Please choose the best definition of of positive theory in accounting
a. accepted principles and rules suggested by the FASB and SEC
b. systematic knowledge to justify how things should be
c. organized knowledge to explain observed phenomena in accounting context
d. structured knowledge applicable in a wide variety of circumstances

4. Which of the following is not true?
a. the comprehensive income should be reported on income statement
b. the comprehensive income shows the changes in firms’ equity that net income does not show
c. the comprehensive income is defined as a “change in equity (net assets) of a business for a period
d. the comprehensive income should be reported by firm under US GAAP

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