Chapter 4 FA 12 Discussion Questions Flashcards
What shapes and limits an accountant’s measurement of wealth?
Assets like cash, accounts receivable, inventories, prepaid expenses and property, plant and equipment.
Are financial statements primarily intended for internal or external users?
It is primarily intended for external users since it reports their financial position of the company at year-end
What are the common classifications within a classified balance sheet?
Assets, Liabilities, Equity,
What are current assets?
They are assets that are expected to be converted to cash within a year or one operating cycle. EX: Cash
What are non-current assets?
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
What are current liabilities?
They are obligations that are due within one year or operating cycle. For example, accounts payable.
What are non-current liabilities?
They are obligations that are not due within a year or one operating cycle. For example, mortgage payable.
What is the purpose and content of the notes to the financial statements?
Notes to financial statements detail the accounting policies, assumptions, and contingencies behind the numbers, offering clarity and enhancing understanding of the company’s financial position and performance for users
What is the purpose and content of the auditor’s report?
The auditor’s report assesses if financial statements are fairly presented, detailing the auditor’s opinion, the audit process, and any findings. It also confirms GAAP compliance
What is the purpose and content of the report that describes management’s responsibility for financial statements?
Management’s responsibilities for financial statements are to ensure that they are prepared in accordance with GAAP, in this case International Financial Reporting Standards.
