Chapter 1 Flashcards
According to the FASB and IASB conceptual frameworks, the primary users of financial reports includes
a. Investors.
b. Creditors.
c. Lenders
According to the FASB and IASB conceptual frameworks useful information must exhibit the fundamental quantitative characteristics of
Faithful representation and relevance
What is the underlying concept governing the recording of gain contingencies
Conservatism
According to the FASB conceptual framework, the following attributes would be used to measure inventory
Historical cost, Replacement cost, net realizable value
The present value of the future cash flows is used to
measure long-term receivables or payables, not inventory, because inventory is a short term asset, which has more immediate cash flows SFAC 5 para 67
according to the FASB and IASB conceptual frameworks, the objective of general purpose financial reporting is to
Provide financial information that is useful to primary users.
Faithful representation
Neutrality, completeness and freedom from error
What is the underlying concept that supports the immediate recognition of contingent loss
conservatism
Recognition is a process
of recording an item in the financial statement of an entity
Realization is the process
of converting noncash resources and rights into money or claims to cash
Allocation is the accounting process of
assigning or distributing an amount according to a plan or a formula
Matching of costs and revenue is
simultaneous or combined recognition of the revenues and expenses that result directly and jointly from the same transactions or other invents.
The joint FASB and IASB conceptual framework project is intended to establish
A common set of objectives and concepts for use in developing standards of financial accounting and reporting
Financial information provided in general purpose financial reports should include
information about the resources of the entity, the claims against the entity and how effectively the entity’s management and governing board have discharged their responsibilities to use the entity’s resources.
On December 31, brooks co. decided to end operations and dispose of its assets within three months. At december 31 the net realizable value of the equipment was below historical cost. What is the appropriate measure basis for equipment included in brooks dec 31 balance sheet?
Net realizable value is the appropriate measurement basis for equipment included in brooks dec 31 balance sheet, because of the decision to end operations and quickly 3 months dispose of its assets.
