Chapter 12- Conceptual Framework

Question 0

What are the four sections of CICA’s conceptual framework

Answer 0

Objective of financial reporting
Elements of FS
Quantitative Characteristics
Measurement and recognition criteria

Question 1

What is GAAP

Answer 1

Set of standards and rules set as a general guide for financial reporting

Question 2

What is the primary objective of financial reporting?

Answer 2

To provide useful information for decision making

Question 3

Financial statements provide information on what?

Answer 3

Assets liabilities and equity
Changes in A, L, E
Economic performance

Question 4

What are the qualitative characteristics?

Answer 4

Understandability (users must have knowledge, must be clear)
Relevence (must help in decision making, timely, have feedback and predictive value)
Reliability (must be free from bias and error, conservatism)
Comparability (able to be compared to other establishments, be consistent)

Question 5

What are the elements of FS?

Answer 5

A,L,E,R,E

Question 6

What is recognition criteria?

Answer 6

Is used to determine what is to be recognized on FS

Question 7

What is measurement criteria?

Answer 7

Is used to determine amounts for items on FS

Question 8

What are assumptions?

Answer 8

Foundation of accounting process

Question 9

What are principles?

Answer 9

They are used to determine how economic events should be reported

Question 10

What are constraints?

Answer 10

A relaxation of GAAP principles under certain circumstances

Question 11

What is the going concern assumption?

Answer 11

The assumption that the business will continue to operate for the forseeable future

Question 12

What is the monetary unit assumption?

Answer 12

States that only items with a dollar value should be reported on FS

Question 13

What is the Economic Entity assumption?

Answer 13

Business should be kept seperate from owners personal and other businesses

Question 14

What is the time period assumption?

Answer 14

All business activity can be divided into artificial time periods

Question 15

What is the revenue recognition principle?

Answer 15

All revenue must be recorded in the same fiscal period that it is earned in

Question 16

What is the matching principle?

Answer 16

All expenses must be reported in the same fiscal period as the revenue that it helped to generate

Question 17

What is the full disclosure principle?

Answer 17

Requires that all activity must be reported that is useful to the users of FS. (Be Honest)

Question 18

What is the cost principle?

Answer 18

Assets must be recorded at the cost of acquisition or construction

Question 19

What is the cost benefit constraint?

Answer 19

Full disclosure principle can be relaxed if the cost of providing the information is greater than the value of it for the users

Question 20

What is the materiality constraint?

Answer 20

Items don’t have to be recorded if they do not make a difference in decision making