OVERVIEW OF ACCOUNTING Flashcards
Conceptual Framework prescribes the concepts for
General Purpose Financial Reporting
The Conceptual Framework also assists the _____ _____
International Accounting Standards Board
Standards
Standards are refed to as
International Financial Reporting Standards or the Philippine Financial Reporting Strandards
The Conceptual Framework develops consistent accounting policies when:
No _____ exists
When the situation allows _____
Standard or choice of accounting policy
The Conceptual Framework provides the foundation where Standards are developed with
Promoting TRANSPARENCY
Strengthen ACCOUNTABILITY
Contribute ECONOMIC EFFICIENCY
The Conceptual Framework is not a Standard
True
Standard < Conceptual Framework
False, Standards prevail first
The Objective of Financial Reporting
Provide financial information that is useful in making decisions
What is the hierarchy of reporting standards
- PFRS
- Judgement
- Management Shall Consider
a. Requirements of other PFRS with similar Transactions
b. PFRS
- Management May Consider
a. Other standard-setting bodies
b. Other accounting literature and practices
The objective of Financial Reporting is not the foundation of the Conceptual Framework
False, the objective of Financial Reporting is the foundation of Conceptual Framework
Investors, Lenders, and Creditors are considered
Primary users
Primary users can demand information directly from reporting entities
False, they must rely on general purpose financial repots
General Purpose Financial Statements show the value of a reporting entity
False, they provide an ESTIMATE of the value of a reporting entity
What are the reasons why users demand for information
- Investment (buy, sell, hold)
- Loans (provide, settle)
- Voting
on EXPECTED RETURNS
Financial Reporting aims to provide information that meets the needs of the _____ number of primary users
Maximum
Expected Return depends on
- Future net cash inflows - resources (assets) , claims against entity (liability), changes in those resources and claims
- Management Stewardship
This refers to the economic resources and claims against an entity
Financial Positing
This refers to the financial performance that leads to changes in financial position
Changes in Economic Resources and Claims
Financial Position and Financial Performance are referred to as
Economic Phenomena
Financial Position can help users asses the entity’s
a. Liquidity and Solvency
b. Additional Financing and How Possible
c. Management Stewardship
This refers to an entity’s ability to pay short-term obligations
Liquidity
This refers to an entity’s ability to pay long-term obligations
Solvency
This refers to the use of too much debt
Overleverage
This helps users asses an entity’s ability to produce return from its economic resources
Financial Performance
After assessing an entity’s financial position, they can asses the ability to generate
Cash Flows
- Maturity of receivables and timing
- Potential for resources to produce
- Distribution
Information of the variability of the returns assesses
Uncertainty of Future Cash Flows
Information based on accrual accounting assesses
Better basis than cash basis
Information on past cash flows assesses
Ability to generate cash flows
This refers to characteristics that make information useful to users
Fundamental Qualitative Characteristics
This refers to characteristics that enhance the usefulness to users
Enhancing Qualitative Characteristics
