Conceptual Framework of Financial Reporting

Question 1

What four characteristics enhances financial accounting data?

Answer 1

Comparability
Verifiability
Timeliness
Understandability

Question 2

Comparability

Answer 2

similar items are measured and reported in a similar way to allow comparisons across different organizations as well as within organizations over time.

Question 3

Verifiability

Answer 3

Financial accounting information is verifiable if auditors would conceded that the data faithfully represent economic activity

Question 4

Timeliness

Answer 4

Decision makers have data in time to influence their decisions

Question 5

Understandability

Answer 5

Data is classified, characterized, and presented in a way that users can understand the information that is being conveyed

Question 6

Accounting Entity

Answer 6

The entity for which a set of financial statements apply. It also established what business or businesses is being reported on.

Question 7

historical cost

Answer 7

The purchase price of an asset

Question 8

Accounting period

Answer 8

the period covered by a set of financial statements often a year but sometimes a quarter or another period of time

Question 9

fiscal year

Answer 9

The year covered by an organizations financial statements; it usually coincides with the calendar year

Question 10

Revenue Recognition Principle

Answer 10

The concept that revenues must be recognized in the accounting period in which they are realizable and earned.

Question 10

Why is it important to understand the basic concepts that underlie the preparation of financial statements?

Question 11

What is the goal of financial reporting