chap 4: financial statements and reporting entity underlying assumptions

Question 1

it provide information about economic resources of the reporting entity, claims against the entity and changes in the economic resources and claims.

Answer 1

financial statements

Question 2

what are the three types of financial statements recognized by the revised conceptual framework?

Answer 2

consolidated, unconsolidated, and combined financial statements.

Question 3

are the financial statements prepared when the reporting entity comprises both the parent and its subsidiaries.

Answer 3

consolidated financial statements

Question 4

are the financial statements prepared when the reporting entity is the parent alone.

Answer 4

unconsolidated financial statements

Question 5

are the financial statements when the reporting entity comprises two or more entities that are not linked by a parent and subsidiary relationship.

Answer 5

combined financial statements

Question 6

it provides information about the assets, liabilities, equity, income, and expenses of both the parent and its subsidiaries as a single reporting entity.

Answer 6

consolidated financial statements

Question 7

it is the entity that exercises control over the subsidiaries.

Answer 7

parent

Question 8

it is useful for existing and potential investors, lenders, and other creditors of parent in their assessment of future net cash infows to the parent.

Answer 8

consolidated information. this is because net cash inflows to the parent include distributions to the parent from its subsidiaries.

Question 9

are designed to provide information about the parent’s assets, liabilities, income, and expenses and not about thoese of the subsidiaries.

Answer 9

unconsolidated financial statements

Question 10

such information can be useful to the existing and potential investors, lenders, and other creditors of the parent because a claim against the parent typically does not give the holder of that claim against subsidiaries.

Answer 10

unconsolidated financial statements

Question 11

information provided in _ is typically not sufficient to meet the requirement meeds of primary users.

Answer 11

unconsolidated financial statements

Question 12

true or false: when consolidated financial statements are required, unconsolidated financial statements cannot serve as substitute for consolidated financial statements.

Answer 12

true

Question 13

it provide financial information about the assets, liabilities, equity, income, and expenses of two or more entities not linked with parent and subsidiary relationship.

Answer 13

combined financial statements

Question 14

is an entity that is required or chooses to prepare financial statements. it can be a single entity or a portion of an entity, or can comprise more than one entity.

Answer 14

reporting entity

Question 15

it is not necessarily a legal entity.

Answer 15

reporting entity

Question 16

is the preiod when financial statements are prepared for general purpose financing reporting.

Answer 16

reporting period

Question 17

true or false: interim financial statements are not required but optional.

Answer 17

true

Question 18

true or false: financial statements must be prepared on a monthlg basis.

Answer 18

false - annual basis or a period ov twelve months

Question 19

to help users of financial statements to identify and assess change in trends, financial statements also provide _ for atleast one preceeding reporting period.

Answer 19

comparative information

Question 20

financial statements may include information about transactions and other events that occured _ if the information is necessary to meet the general objective of financial statements.

Answer 20

after the end of reporting period

Question 21

are the basic notions or fundamentals or fundamental premises on which the accounting process is based.

Answer 21

accountinv assumptions of accounting postulates

Question 22

it serves as the foudnation or bedrock of accounting in order to avoid misunderstanding but rather enhance the understanding and usefulness of the financial statements.

Answer 22

accounting assumptions

Question 23

the cf for financial reporting mentions only one assumption, namely?

Answer 23

going concern

Question 24

true or false: implicit accounting are the basic assumptions of accounting entity, time period, and monetary unit.

Answer 24

true

Question 25

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

Answer 25

going concern or continuity assumption

Question 26

the going concern postulate is the very foundation of the _. thus, assets are normally recorded at cost. as a rule, market values are ignored.

Answer 26

cost principle

Question 27

it is the specific business organization, which may be a proprietorship, partnership, or corporation.

Answer 27

accounting entity. under this, assumption, the entity is separate from the owners, managers, and employees who constitute the entity.

Question 28

true or false: the transactions shall be merged with the transactions of the owners.

Answer 28

false - should not be merged. the reason for the entity assumption is to have a fair presentation of financial statements.

Question 29

true or false: The personal transactions of the owners shall not be allowed to distort the financial statements of the entity.

Answer 29

true

Question 30

true or false: Each business is not an independent accounting entity.

Answer 30

false - is an independent

Question 31

true or false: The shareholder is not the corporation and the corporation is not the shareholder.

Answer 31

true

Question 32

However, where parent and subsidiary relationship exists, consolidated statements for the affiliates are usually madebecause for practical and economic purposes, the parent and the subsidiary are a single _?

Answer 32

economic entity

Question 33

true or false: The consolidation, however, does not eliminate the legalboundary segregating the affiliated entities. Accounting will continue to be done separately for each entity.

Answer 33

true

Question 34

it requires that the indefinite lifeofan 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.

Answer 34

time period

Question 35

true or false: By convention, the accounting period or fiscal period is one-year or a period of twelve months.

Answer 35

true

Question 36

A natural business year is a _ period that ends on any month when the business is at the lowest or experiencing slack season.

Answer 36

12 month

Question 37

the monetary unit has two aspects, namely?

Answer 37

quantifiabikity and stability of the pesos

Question 38

means that the assets, liabilities, equity, income and expenses should be stated in terms of aunit of measures which is the peso in the Philippines.

Answer 38

The quantifiability aspect

Question 39

means that the purchasing power of the peso is stable or constant and thatits instability is insignificant and therefore may be ignored.

Answer 39

The stability of the peso assumption

Question 40

is actually an amplification of the going concern assumption so much so that adjustments are unnecessary to reflect any changes in purchasing power.

Answer 40

The stable peso postulate

Question 41

true or false: The accounting function is to account for nominal pesos only and not for constant pesos or changes in purchasing power.

Answer 41

true