Conceptual Framework

Question 1

What is the Going Concern Basis?

Answer 1

When financial statements are prepared on the basis the that company will continue in operation for the foreseeable future and makes enough money to do so and will not need to sell off assets to pay off liabilities

Question 2

What is the Accrual Concept?

Answer 2

When the effects of transactions and other events are recorded/recognised in the period that they occur - they are recorded when the business earns the income and not when they receive/send the money

Question 3

What are the two fundamental qualitative characteristics of useful financial information?

Answer 3

Relevance and Faithful representation

Question 4

Describe the following fundamental qualitative characteristic of useful financial information - Relevance

Answer 4

Information that is capable of making a difference in decisions made by users - this can be used to predict future outcomes or alter decisions made previously

Question 5

Describe the following fundamental qualitative characteristic of useful financial information - faithful representation

Answer 5

Complete, neutral and free from errors