Ch1: ...

Question 1

What do accounting information systems do?

Answer 1

• Measures business activities.
• Processes the data into reports.
• Communicates the results to decision makers.

Question 2

What are assets?

Answer 2

It is a resource controlled by the entity as a result of previous events from which future economic benefits are expected to flow to the entity.

Question 3

When are assets recognised?

Answer 3

Only when it is probable that the future economic benefits will flow to the entity, and it must be possible to reliably measure the cost or other value of such benefits.

Question 4

What are the 2 fundamental characteristics of financial information?

Answer 4

• Relevant - financial information should be capable of making a difference in the decisions made by the users of the information.
• Faithfully represented - accounting information must be complete, unbiased or ‘neutral’, and free from error.

Question 5

What are the 4 enhancing characteristics of fiancial information?

Answer 5

• Comparable - over time/across firms
• Verifiable
• Timely
• Understandable

Question 6

Who prepares financial reports?

Answer 6

• Managers
• Board of Directors

Question 7

The conceptual framework

Answer 7

Provides an understanding of the assumptions underlying concepts such as assets, liabilities, equity, income and expenses and these relate to other fundamental concepts (e.g. rights, obligations, control over resources and the objectives of financial statements)