Week 1

Question 1

Quantitative characteristics

Answer 1

fundamental QCs such as relevance and faithful representation.

Enhancing QCs such as comparability, verifiability, timeliness and understandability

Question 2

Relevance and materiality

Answer 2

Relevance is importance and materiality is if omitting, misstating pre obscuring it could reasonably be expected to influence results. Based on nature and magnitude.

Bigger the entity, the higher the materiality threshold

Question 3

Faithful representation

Answer 3

Does not mislead. It is, complete, neutral and free from error

Question 4

Comparability

Answer 4

Information should be comparable. Consistent application of accounting policies assist comparability

Question 5

Verifiability

Answer 5

Means observers could meet consensus. Where an item cannot be verified, disclosure of assumptions and methodology assist

Question 6

Timeliness

Answer 6

Older the information the less useful. However information from past periods are useful for trend analysis

Question 7

Going concern

Answer 7

FS prepared in assumption that the entity will continue in perpetual

Question 8

Definition of an asset

Answer 8

A present economic resource controlled by the entity as a result of past events

Question 9

Definition of a liability

Answer 9

A present obligation of the entity to transfer an economic resource as a result of past events

Question 10

Definition of income

Answer 10

Increase in assets or decrease in liabilities that result in an increase in equity. Except for equity contributions eg. Issuing shares

Question 11

Definition of expenses

Answer 11

Decrease in assets or increase in liabilities that result in an decrease in equity. Except for equity distributions eg. Profit to shareholders (dividends)