Chapter 4 Discussion Q's

Question 1

What shapes and limits an accountant’s measurement of wealth?

Answer 1

Assets like cash, accounts receivable, inventories, prepaid expenses and property, plant and equipment.

Question 2

Are financial statements primarily intended for internal or external users?

Answer 2

It is primarily intended for external users since it reports their financial position of the company at year-end

Question 3

What are the common classifications within a classified balance sheet?

Answer 3

Assets, Liabilities, Equity,

Question 4

What are current assets?

Answer 4

They are assets that are expected to be converted to cash within a year or one operating cycle. EX: Cash

Question 5

What are non-current assets?

Answer 5

They are assets that are not expected to be converted into cash or used up within a year or operating cycle. EX: Long-term investments

Question 6

What are current liabilities?

Answer 6

They are obligations that are due within one year or operating cycle. For example, accounts payable.

Question 7

What are non-current liabilities?

Answer 7

They are obligations that are not due within a year or one operating cycle. For example, mortgage payable.

Question 8

What is the purpose and content of the notes to the financial statements?

Answer 8

It is to provide information and explanations about the numbers presented in the financial statements. They clarify accounting policies, assumptions, contingencies, and other relevant details that helps users better understand the financial position and performance of the company.

Question 9

What is the purpose and content of the auditor’s report?

Answer 9

To provide an opinion on whether the financial statements are presented fairly. This would include the opinion, a description of the audit, and any findings or observations. The auditor’s report indicates that GAAP have been consistently applied in the financial statements

Question 10

What is the purpose and content of the report that describes management’s responsibility for financial statements?

Answer 10

Management’s responsibilities for financial statements are to ensure that they are prepared in accordance with GAAP, in this case International Financial Reporting Standards.