5

Question 1

it refers to primary users and other users. Primary users refer to existing and potential investors, lenders and other creditors. In contrast, other users refer to employees, customers, governments and their agencies, and the public.

Answer 1

USERS

Question 2

information about the entity’s economic resources(assets) and the claims (liabilities and equity) against the reporting entity at a particular moment in time.

Answer 2

Financial position

Question 3

is the availability of cash in the near future to cover currently maturing obligations.

Answer 3

Liquidity

Question 4

is the availability of cash over the long term to meet financial commitments when they fall due.

Answer 4

Solvency

Question 5

comprises revenue, expenses and net income or loss for a period of time.

Answer 5

Financial Performance

Question 6

are the qualities or attributes that make financial accounting useful to the users.

Answer 6

Qualitative characteristics

Question 7

relate to the content or substance of financial information. It has two characteristics namely, relevance and faithful representation.

Answer 7

Fundamental qualitative characteristics

Question 8

is the capacity of the information to influence a decision.

Answer 8

Relevance

Question 9

is also known as the doctrine of convenience.

Answer 9

Materiality

Question 10

the financial reports represent economic phenomena or transaction in words and number.

Answer 10

Faithful representation

Question 11

requires that relevant information should be presented in a way that facilitates understanding and avoids erroneous implication. It is the result of principle of adequate disclosure.

Answer 11

Completeness

Question 12

all significant and relevant information leading to the preparation of financial statements shall be clearly reported.

Answer 12

Standard of adequate disclosure

Question 13

the information is free from bias.

Answer 13

Neutrality

Question 14

means that there are no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process.

Answer 14

Free from error

Question 15

relate to the presentation or form of the financial information.

Answer 15

Enhancing Qualitative Characteristics

Question 16

means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.

Answer 16

Verifiability

Question 17

means the ability to bring together the points of likeness and differences.

Answer 17

Comparability

Question 18

refers to the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities.

Answer 18

Consistency

Question 19

requires that financial information must be comprehensible or intelligible if it is to be most useful.

Answer 19

Understandability

Question 20

means that financial information must be available or communicated early enough when a decision is to be made.

Answer 20

Timeliness

Question 21

refer to the quantitative information reported in the balance sheet and income statement(IS). Probable means that the chance if the future economic benefit arising is more likely rather than less likely.

Answer 21

Elements of financial statements

Question 22

is recognized in the balance sheet when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.

Answer 22

Asset

Question 23

is recognized in the balance sheet when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably.

Answer 23

Liability

Question 24

is the residual interest in the assets of the entity after deducting all its liabilities.

Answer 24

Equity

Question 25

is recognized in the income statement when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably.

Answer 25

Income

Question 26

are recognized in the income statement when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

Answer 26

Expenses

Question 27

represent other items that meet the definition of expenses and may, or may not, arise in the course of the ordinary activities of the entity.

Answer 27

Losses

Question 28

is a term which means the reporting of an asset, liability, income or expense on the face of the financial statements of an entity.

Answer 28

Recognition

Question 29

arises in the course of ordinary regular activities like sales, fees, interest, dividends, royalties and rent.

Answer 29

Revenue

Question 30

arises other than the course of ordinary regular activities like gains include gain from disposal of noncurrent assets and unrealized gain on trading securities to mention a few.

Answer 30

Gains

Question 31

is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the statement of financial position and income statement.

Answer 31

Measurement

Question 32

is the amount of cash or cash equivalent paid or the fair value of the consideration given to acquire an asset at the time of acquisition.

Answer 32

Historical cost

Question 33

is the amount of cash or cash equivalent that would have to be paid if the same of equivalent asset was acquired currently.

Answer 33

Current cost

Question 34

is the amount of cash or cash equivalent that could currently be obtained by selling the asset in an orderly disposal.

Answer 34

Realizable value

Question 35

is the discounted value of the future net cash inflows that the asset is expected to generate in the normal course of business.

Answer 35

Present value

Question 36

are the basic notion or fundamental premises on which the accounting process is based. It is also known as postulates.

Answer 36

Accounting assumptions

Question 37

in the absence of evidence to the contrary, the accounting entity is viewed as continuing in operation indefinitely.

Answer 37

Going Concern or continuity assumption

Question 38

the entity is separate from the owners, managers, ad employees who constitute the entity.

Answer 38

Accounting entity

Question 39

requires that the indefinite life of an entity is subdivided into accounting periods which are usually of equal length for the purpose of preparing financial reports on financial position, performance and cash flows of an entity

Answer 39

Time period

Question 40

assumes that transactions and events are measured in terms of monetary unit which are both stable and dependable

Answer 40

Monetary unit