Conceptual Framework for Financial Reporting

True (A)

consistent, comparable

<p>Assets = Resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Liabilities = Present obligations of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Equity = The residual interest in the assets of the entity after deducting all its liabilities.</p> Signup and view all the answers

<p>The purpose of the Conceptual Framework is to provide a foundation for the development of accounting standards and to ensure that financial statements are useful to users.</p> Signup and view all the answers

<p>Comparability (C)</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>Historical cost is the price paid for an asset at the time of acquisition, while fair value is the current market price of the asset.</p> Signup and view all the answers

<p>Gross Profit (C)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Alternative performance measures (APMs)</p> Signup and view all the answers

<p>bookings</p> Signup and view all the answers

<p>Asset = A present economic resource controlled by the entity as a result of past events. Liability = A present obligation of the entity to transfer an economic resource as a result of past events. Equity = The residual interest in the assets of the entity after deducting all its liabilities.</p> Signup and view all the answers

<p>It represents a future benefit to be realized by the company. (D)</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>Equity is the residual interest in the assets of the entity after deducting all its liabilities. It represents the ownership interest in a company and is also known as shareholder's equity or owner's equity.</p> Signup and view all the answers

<p>Timeliness (B)</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>To provide guidance for developing accounting standards. (A)</p> Signup and view all the answers

<p>Historical cost is generally considered a faithful representation of the amount paid for an asset.</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>historical cost</p> Signup and view all the answers

<p>Measurement = Determining the monetary value of assets and liabilities Revenue Recognition = Recognizing revenue when it is earned Expense Recognition = Matching expenses with the revenues they generate Full Disclosure = Providing sufficient information for users to make informed decisions</p> Signup and view all the answers

<p>Enron and Satyam Computer Services</p> Signup and view all the answers

<p>Mixed-Attribute (A)</p> Signup and view all the answers

<p>going concern</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Accrual basis = Recognizing revenues when earned and expenses when incurred, regardless of cash flows. Cost constraint = The cost of providing information should not exceed its benefits to users. Economic entity = The business is distinct from its owners and other entities.</p> Signup and view all the answers

<p>It's difficult to establish a value for unsold items, can be subjective and vary between individuals, and requires frequent valuations to reflect changing market conditions.</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>To encourage reporting of the economic substance of transactions rather than relying on technical accounting loopholes.</p> Signup and view all the answers

<p>Historical cost (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>The revenue recognition principle states that a company should recognize revenue in the accounting period in which the performance obligation is satisfied. This means that revenue should be recognized when the company has delivered the goods or services to the customer, not when the customer pays for them.</p> Signup and view all the answers

<p>performance</p> Signup and view all the answers

<p>Historical cost = Records assets and liabilities at their original purchase price. Current value = Uses updated information to reflect the current value of assets and liabilities. Performance obligation = A promise made by a company to a customer to deliver goods or services. Revenue recognition principle = Recognizes revenue in the accounting period in which the performance obligation is satisfied.</p> Signup and view all the answers

<p>When the cleaning services are performed (D)</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>Current value accounting provides more relevant information to users as it reflects the current market conditions and changes in the value of assets and liabilities over time. This information is more useful for decision-making, while historical cost accounting only provides a snapshot of the past.</p> Signup and view all the answers

<p>To provide information sufficient to influence the judgment of users (B)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Within the financial statements, in the notes to the financial statements, as supplementary information.</p> Signup and view all the answers

<p>bad</p> Signup and view all the answers

<p>Statement of Financial Position = Reports assets, liabilities, and equity Income Statement = Shows revenues and expenses Statement of Cash Flows = Details cash inflows and outflows Statement of Changes in Equity = Tracks changes in equity over time</p> Signup and view all the answers

<p>Statement of Retained Earnings (C)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>quantifiable</p> Signup and view all the answers

The primary goal of financial reporting to provide useful information to users.

Traits that make financial information useful, including relevance and reliability.

Components such as assets, liabilities, and equity that make up financial statements.

The process of including items in the financial statements when they meet criteria.

The process of determining the monetary amounts at which the elements are recognized.

The act of providing relevant information about financial statements to users.

Underpinning ideas guiding the preparation and presentation of financial statements.

Principles that define how a company maintains its capital throughout operations.

A non-GAAP number used by companies to gauge future performance.

Hortonworks reported $46 million in actual revenues after misleading forecasts.

Total fares paid by customers, which Uber generally does not keep all of.

Distinctive terms that form the language of business and accounting.

Present economic resources controlled by an entity from past events.

Present obligations to transfer economic resources due to past events.

The residual interest in assets after deducting liabilities.

Fundamental principles that support financial reporting and accounting practices.

A structure to guide the development of financial reporting standards.

The main components including assets, liabilities, equity, revenues, and expenses.

Fundamental principles including Economic Entity, Going Concern, Monetary Unit, Periodicity, and Accrual Basis.

Recognizes revenue when earned and expenses when incurred, regardless of cash flow.

Cost of gathering information should not outweigh the benefits of it.

Accounting rules that focus on the economic substance of transactions rather than detailed procedures.

The approach in financial reporting to ensure clarity between rules-based and principles-based systems.

The level that implements objectives for recognizing, measuring, and reporting financial elements.

Key principles guiding financial reporting, including economic entity and going concern.

The assumption that a company will remain in operation for the foreseeable future.

A principle guiding how to determine the value of assets and liabilities.

Assets and liabilities are recorded based on their original purchase price.

An accounting system that uses different measurement bases for different assets and liabilities.

A principle stating when revenue should be recognized in financial statements.

A principle that requires expenses to be matched with the revenues they help generate.

Value measured according to the price of an asset or liability when acquired.

A valuation method updating monetary information to the current measurement date.

The price at which an asset could be sold or a liability settled in a current transaction.

The commitment a company has to deliver goods or services to a customer.

An asset representing money owed to a company for services or goods delivered.

The original cost of acquiring an asset, used as a basis for its valuation.

A practice of disclosing information important for users' judgment on financial reports.

Companies must provide information that influences informed users' decisions.

Balancing detail and understandability in financial reports.

Includes statements of financial position, income, cash flows, and changes in equity.

Elements are recognized when they meet specific definition criteria for financial statements.

Provide additional context or explanation for figures in the main financial statements.

Disclosure cannot substitute for proper accounting accuracy.

Main body statements may lack some performance details, which notes must clarify.