Lesson 3 and 4 (CFAS)

Question 1

are the qualities or attributes that make financial accounting information useful to the users.

Answer 1

Qualitative characteristics

Question 2

Qualitative characteristics are classified into?

Answer 2

fundamental qualitative characteristics and enhancing qualitative characteristics.

Question 3

The fundamental qualitative characteristics relate to the _____________ of financial information.

Answer 3

content or substance

Question 4

The fundamental qualitative characteristics are?

Answer 4

relevance and faithful representation.

Question 5

is the capacity of the information to influence a decision.

Answer 5

Relevance

Question 6

INGREDIENTS OF RELEVANCE?

Answer 6

Predictive Value, and Confirmatory Value

Question 7

if the information can be used as an input to process employed by users to predict future outcome.

Answer 7

Predictive value

Question 8

when it enables users confirm or correct earlier expectations.

Answer 8

Confirmatory value

Question 9

The materiality concept is also known as the?

Answer 9

“doctrine of convenience”.

Question 10

Materiality is really a quantitative “_________” linked very closely to the qualitative characteristic of relevance.

Answer 10

Threshold

Question 11

Materiality of an item depends on ___________ rather than absolute size, and _________ of an item.

Answer 11

Relative Size, and Nature

Question 12

An item is __________ if knowledge of it could reasonably affect or influence the economic decision of the primary users of the financial statements.

Answer 12

Material

Question 13

Information is _________ if omitting, misstating or obscuring it could reasonably be expected to influence the economic decisions that primary users of general purpose financial statements make on the basis of those statements which provide financial information about specific reporting entity.

Answer 13

Material

Question 14

Information is obscured if presenting or communicating it would have a similar effect as omitting or misstating the information.

Answer 14

Obscuring information

Question 15

means that financial reports represent economic phenomena or transactions in words and numbers.

Answer 15

Faithful representation

Question 16

INGREDIENTS OF FAITHFUL REPRESENTATION?

Answer 16

Completeness
Neutrality
Free from error

Question 17

requires that relevant information should be presented in a way that facilitates understanding and avoids erroneous implication.

Answer 17

Completeness

Question 18

means that all significant and relevant information leading to the preparation of financial statements shall be clearly reported.

Answer 18

Standard of adequate disclosure

Question 19

depiction without bias in the preparation or presentation of financial information.

Answer 19

Neutrality

Question 20

is the exercise of care and caution when dealing with the uncertainties in the measurement process such that assets or income are not overstated and liabilities or expenses are not understated.

Answer 20

Prudence

Question 21

means that when alternative exist, the alternative which has the least effect on equity should be chosen.

Answer 21

Conservatism

Question 22

means there are no errors or omissions in the description of the phenomenon or transaction.

Answer 22

Free from error

Question 23

arises when monetary amounts in financial reports cannot be observed directly and must instead be estimated.

Answer 23

Measurement uncertainty

Question 24

if information is to represent faithfully the transactions and other events it purports to represent, it is necessary that the transactions and events are accounted in accordance with their substance and reality and not merely their legal form.

Answer 24

Substance over form

Question 25

relate to the presentation or form of the financial information.

Answer 25

enhancing qualitative characteristics

Question 26

The 4 Enhancing Qualitative Characteristics

Answer 26

Comparability Understandability Verifiability Timeliness

Question 27

means the ability to bring together for the purpose of noting points of likeliness and difference.

Answer 27

Comparability

Question 28

comparability within an entity

Answer 28

Horizontal comparability or intracomparability

Question 29

comparability across entities

Answer 29

Intercomparability or dimensional comparability

Question 30

refers to the use of the same method for the same item, either from period to period within an entity or in a single period across entities.

Answer 30

Consistency

Question 31

requires that financial information must be comprehensible or intelligible if it is to be most useful.

Answer 31

Understandability

Question 32

means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.

Answer 32

Verifiability

Question 33

Types of Verification?

Answer 33

Direct Verification, and Indirect Verification

Question 34

means verifying an amount or other representation through direct observation, for example, by counting cash.

Answer 34

Direct verification

Question 35

means checking the inputs to a model, formula or other technique and recalculating the inputs using the same methodology.

Answer 35

Indirect verification

Question 36

means that financial information must be available or communicated early enough when a decision is to be made.

Answer 36

Timeliness

Question 37

is a consideration of the cost incurred in generating financial information against the benefit to be obtained from having the information

Answer 37

cost constraint

Question 38

provide information about economic resources of the reporting entity, claims against the entity and changes in the economic resources and claims.

Answer 38

Financial statements

Question 39

Financial statements is useful to users in:

Answer 39

Assessing future cash flows to the reporting entity. Assessing management stewardship of the entity’s economic resources.

Question 40

Types of financial statements?

Answer 40

Consolidated, Unconsolidated, and Combined

Question 41

these are the financial statements prepared when the reporting entity comprises both the parent and its subsidiaries.

Answer 41

Consolidated financials statements

Question 42

these are the financial statements prepared when the reporting entity is the parent alone.

Answer 42

Unconsolidated financial statements

Question 43

these are the financial statements when the reporting entity comprises two or more entities that are not linked by a parent and subsidiary relationship.

Answer 43

Combined financial statements

Question 44

is an entity that is required or chooses to prepare financial statements. Individual corporation, partnership or proprietorship The parent alone The parent and its subsidiaries as single reporting entity Two or more entities without parent and subsidiary relationship as a single reporting entity A reportable business segment of an entity

Answer 44

Reporting Entity

Question 45

the period when financial statements are prepared for general purpose financial reporting.

Answer 45

Reporting Period

Question 46

not required but optional.

Answer 46

Interim financial statements

Question 47

must be prepared on an annual basis or a period of twelve months.

Answer 47

financial statements

Question 48

are the basic notions or fundamental premises on which the accounting process is based. Accounting assumptions are also known as postulates.

Answer 48

Accounting assumptions

Question 49

means that in the absence of evidence to the contrary, the accounting entity is viewed as continuing in operation indefinitely.

Answer 49

Going concern or continuity assumption

Question 50

-is the specific business organization, which may be a proprietorship, partnership or corporation. -Under this assumption, the entity is separate from the owners, managers, and employees who constitute the entity.

Answer 50

Accounting entity

Question 51

this assumption requires that the indefinite life of an entity is subdivided into accounting periods which are usually of equal length for the purpose of preparing financial reports on financial position, performance and cash flows.

Answer 51

Time period

Question 52

is a twelve-month period that ends on December 31.

Answer 52

Calendar year

Question 53

is a twelve-month period that ends on any month when the business is at the lowest or experiencing slack season.

Answer 53

Natural business year

Question 54

Monetary Unit 2 Aspects?

Answer 54

Quantifiability aspect, and Stabiity of the peso

Question 55

means that the assets, liabilities, equity, income and expenses should be stated in terms of a unit of measure which is peso in the Philippines.

Answer 55

Quantifiability aspect

Question 56

means that the purchasing power of the peso is stable or constant and that its instability is significant and therefore may be ignored.

Answer 56

Stability of the peso