Chapter 2 Slides

Question 1

Conceptual Framework Definition

Answer 1

Group of ideas or principles used to plan or decide something
Normative theory
Prescribes basic principles that should be followed

Question 2

Purpose of the CF

Answer 2

Concerned with general purpose financial reports

Focus on economic events and transactions

Question 3

Objective of Financial Reporting

Answer 3

Provide financial info of the reporting entity that is useful to existing and future lenders, investors, creditors etc.
Info should help predict the future, provide feedback on previous decisions, and hold accountability and stewardship

Question 4

Qualitative Characters of Financial Information

Answer 4

Fundamental

Enhancing

Question 5

Fundamental Qualitative Characteristics

Answer 5

Relevance
Faithful Representation
Comparability 
Verifiability 
Timeliness
Understandability

Question 6

Probability

Answer 6

Probable that any future economic benefit associated with the item will flow out or into the entity

Question 7

Measurability

Answer 7

The item has a cost or value that can be measured with reliability
Estimation is acceptable

Question 8

Benefits of a CF

Answer 8

Technical (improves the practice of accounting and helps answer specific accounting problems)
Political (prevent political interference in setting standards)
Professional (protect the professional status of accountants)

Question 9

Problems of the CF

Answer 9

Ambiguous (vague principles and interpretations can vary)

Descriptive and not prescriptive (should be more normative and try to improve practice)