QC and assumptions Flashcards
Entity Assumption
the assumption that the
records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities
Going concern assumption
the assumption that the
business will continue to
operate in the future, and its records are kept on that basis
Period Assumption
the assumption that reports
are prepared for a particular
period of time, such as a month or year, in order to obtain
comparability of results
Accrual Basis Assumption
the assumption that revenues are recognized when earned and expenses are recognized
when incurred, so profit is
calculated as revenue earned in a particular period less expenses incurred in that period
Relevance
financial information must be
capable of making a difference
to the decisions made by
users by helping them to form
predictions and/or confirm
or change their previous
evaluations
Timeliness
financial information should be
available to decision makers
in time to be capable of
influencing their decisions
Understandability
financial information
should be understandable
or comprehensible to users
with a reasonable knowledge
of business and economic
activities, and presented clearly
and concisely
Faithful Representation
financial information should be
a faithful representation of the
real-world economic event it
claims to represent: complete,
free from material error and
neutral (without bias)
Comparability
financial information should
be able to be compared with
similar information about
other entities and with similar
information about the same
entity for another period or
another date
Verifiability
financial information should
allow different knowledgeable
and independent observers
to reach a consensus (agree)
that an event is faithfully
represented
