CH5 - Accounting Principal & Characteristics Flashcards
A business own a NCA which cost 4000 and is recorded at its carrying amount in the financial statements.
What are accounting principle has been applied?
Going concern
[Supposedly not record in breakup value]
A number of users would broadly agree that faithful representation has been achieved.
What is the qualitative characteristic?
Verifiability [ can be verified ]
A business applies the same depreciation policy to all of its computer?
What are the accounting principle?
Comparability
Describes consistency, which applied the qualitative characteristic of comparability.
Comparability.
- possible to compare an entity over time.
- similar information about other entities.
Transactions are stated at the value at which they occurred and are not adjusted at the end of the year.
What are accounting principle?
Historical cost
Many of the characteristic and concepts in the Conceptual Framework interact with each other.
Prudence helps to support the qualitative characteristic of neutrality.
Which qualitative characteristic of financial information can be achieved through a combination of CONSISTENCY AND DISCLOSURE
Comparability
Basic acccounting principle and characteristics
The broad assumptions which underlie the periodic financial accounts of business entities.
Immaterial
An error which is too trivial to affect a user’s understanding of the accounting statements
Item may be considered material based on
Value
Nature
Amount of the item
Context
The IASB’s Conceptual Framework for Financial Reporting identifies characteristic which make financial information faithfully represent what it purpose to represent.
Which of the following are examples of those characteristics?
Completeness
Neutrality
Importance of maintaining financial records?
Financial records shoul be maintained to enable a business owner to make decisions regarding the business and to make information available to interested external parties when appropriated to do so.
Purpose of purchase invoice
To claim back the sales tax,
To identify the goods bought.
Why must a business retain documents
It is a requirement of tax law
