Chapter 2 Accountancy

Question 1

• is not a standard. Rather, the _______________________ serves as a general frame of reference in developing or applying the standards.

Answer 1

Conceptual framework

Question 2

-Personal money and your business money are separated.

-The business is viewed as a separate entity, distinct from its owner(s). Only the transactions of the business are recorded in the books of accounts. The personal transactions of the business owner(s) are not recorded.

Answer 2

Separate Entity Concept

Question 3

Initially recorded at their acquisition cost.

Answer 3

Historical Cost Concept (Cost Principle)

Question 4

• As if your business lives forever.
• The business is assumed to continue to exist for an indefinite period of time.

Answer 4

Going concern

Question 5

Some costs are initially recognized as assets and charged as expenses only when the related revenue is recognized.

Answer 5

Matching principle (C&E)

Question 6

Inc & Exp Recog.

Answer 6

Accrual Basis of Accounting

Question 7

Choosing the unfavorable outcome.

Answer 7

Prudence (or conservatism)

Question 8

• Accounting period or Reporting period.
• Fiscal year & Calendar year are almost the same.
• Interim period (quarter 3 mos & semiannual 6 mos)

Answer 8

Time/Reporting Period

Question 9

• Peso’s purchasing power is regarded as stable.
• Convert other currencies in peso.

Answer 9

Stable monetary unit

Question 10

• An item is material if its omission or misstatement could influence economic decisions.
• It is a matter of professional judgment and is based on the size and nature of an item being judged.

Answer 10

Materiality Concept

Question 11

• Should not exceed the benefits to be derived from the information used.

Answer 11

Cost Benefit (Cost constraint)

Question 12

• Related to Materiality & Cost Benefit Concepts
• Reflects a series of judgmental trade offs
• Sufficient detail to disclose matters that make a difference to users yet.
• Sufficient condensation to make the information understandable

Answer 12

Full Disclosure Principle

Question 13

• Accounting policies used this year shall be the same used last year
• If it were to change, do it in the next accounting period or year

Answer 13

Consistency Concept

Question 14

• Are the traits that determine whether an item of information is useful to others. Without these characteristics, information may be deemed unless.

Answer 14

QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION

Question 15

• It is relevant if it can affect decision.
  (Fundamental Qualitative Characteristics)

Answer 15

A. Relevance

Question 16

• if it can help users to make predictions about future outcomes.

Answer 16

Predictive Value

Question 17

• if it can help users confirm their past predictions.

Answer 17

Confirmatory Value

Question 18

• is material if omitting it or misstating it could influence the decisions of users.

Answer 18

Materiality

Question 19

• It represents the actual effects of events that have taken place
  (Fundamental Qualitative Characteristics).

Answer 19

B. Faithful Representation

Question 20

All information necessary for users to have a complete understanding of the FS is provided .

Answer 20

Completeness

Question 21

information is selected or presented without bias

Answer 21

Neutrality

Question 22

means the
information is not materially misstated.

Answer 22

Free from Error

Question 23

• Information is comparable if it can help users identify similarities and differences between sets of information.
  (Enhanced Qualitative Characteristics)

Answer 23

A. Comparability

Question 24

• Information is verifiable if different users could reach a general agreement as to what the information intends to represent.
  (Enhanced Qualitative Characteristics)

Answer 24

B. Verifiability

Question 25

• Information is timely if it is available to users in time to be able to influence their decisions.
  (Enhanced Qualitative Characteristics)

Answer 25

C. Timelines

Question 26

• Information is understandable if it is presented in a clear and concise manner.
  (Enhanced Qualitative Characteristics)

Answer 26

D. Understandability

Question 27

• Regulating corporations it includes partnerships
• Requires them to file audited financial statements

Answer 27

1. Securities Exchange Commission (SEC)

Question 28

• Task in Collecting national Taxes and Administering the provisions of the Tax Code.
• The provisions do at times reflect the choice of accounting methods and procedures .

Answer 28

2. Bureau of Internal Revenue (BIR)

Question 29

FSRSC

Answer 29

Financial Sustainability Reporting Standards Council

Question 30

PFRS

Answer 30

Philippine Financial Reporting Standards

Question 31

IFRS

Answer 31

International Financial Reporting Standards

Question 32

• Tasked in regulating banks and other entities performing banking functions .
• BSP influences the selection and application of accounting policies by these business.

Answer 32

3. Bangko Sentral ng Pilipinas (BSP)

Question 33

• Tasked in regulating cooperatives.
• CDA influences the selection and application of accounting policies by these businesses.

Answer 33

4. Cooperative Development Authority (CDA)

Question 34

• are the characteristics that make information useful to users.

Answer 34

Fundamental Qualitative Characteristics

Question 35

• are the characteristics that enhance the usefulness of information

Answer 35

Enhancing Qualitative Characteristics