91 Questions
What is the primary concern when Andrea withdraws money for personal expenses?
Recording the fact of the withdrawal
What does historical cost measure provide information about?
Assets, liabilities, income, and expenses
How are assets and liabilities recorded in the context of FA2?
At the original historical cost
What is not necessary to be recorded when Andrea withdraws funds for personal expenses?
The nature of the expense
What is used to derive the value at which transactions are recorded?
Historical cost
Which factor will historical cost be updated to depict over time?
Fulfillment of part or all of a liability
What is the assumption when financial statements are prepared?
The entity will continue in operation for the foreseeable future
When might the financial statements have to be prepared on a different basis?
If the entity has the intention or need to enter liquidation or to cease trading
What does the materiality definition refer to?
Information that could influence decisions made by primary users of financial reports
What is an advanced issue that candidates do not need to consider for FA2?
Time period that might be regarded as the foreseeable future
What is assumed about the entity according to the going concern principle?
It will continue in operation for the foreseeable future
When is information considered material?
When it could influence decisions made by primary users of financial reports
What is the main purpose of financial statements according to the passage?
To provide information for decision making
What does 'materiality' refer to in the context of financial reporting?
Reporting values in a way that provides essential information for decision making
What is the 'duality' principle in accounting based on?
The fact that each transaction has a dual aspect and requires double entry accounting
What is the main implication of the dual aspect principle in accounting?
Every transaction must be recorded with both a debit and a credit entry
According to the passage, what does the business entity principle imply?
That unincorporated businesses should be treated as separate entities from their owners
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The going concern principle assumes that the reporting entity will cease trading in the foreseeable future.
False
If the intention or need to enter liquidation exists, the financial statements may have to be prepared on a different basis.
True
The materiality concept refers to the influence of omitted, misstated, or obscured information on decisions made by primary users of financial reports.
True
For FA2, candidates are not required to consider the time period that might be regarded as the 'foreseeable future' in the context of the going concern principle.
True
The historical cost measure provides information about the current market value of assets and liabilities.
False
The going concern assumption implies that the entity has neither the intention nor the need to cease trading.
True
When Andrea withdraws money for personal expenses, the nature of the expense is recorded in detail.
False
Historical cost is the only basis that needs to be considered in the context of FA2.
True
Assets and liabilities in FA2 will be recorded at their current market value.
False
The historical cost of assets and liabilities will never be updated over time.
False
Historical cost measures provide monetary information about assets, liabilities, income, and expenses based on current market values.
False
The primary purpose of financial statements is to depict the current value of assets and liabilities.
False
Materiality and complete accuracy are the same thing.
False
Financial statements typically report values in exact dollar amounts.
False
Materiality is related to the fact that financial statements provide information for decision making.
True
Materiality is affected only by whether information is included or omitted from financial statements.
False
Duality principle in accounting requires the use of single entry accounting.
False
Every transaction gives rise to both a debit entry and a credit entry in double entry accounting.
True
The total value of the debit entries will be different from the total value of the credit entries for any given transaction.
False
The business entity principle means that the business is not treated as a separate entity from the owner(s) of the business.
False
A sole trader's personal assets may be used to settle business debts.
True
Historical cost measure provides information about current market values of assets and liabilities.
False
One implication of the dual aspect principle is that every transaction has a 'dual aspect' and therefore requires the use of single entry accounting.
False
The purpose of financial statements according to the passage is to provide information for decision making about whether to undertake transactions with a particular entity.
True
What is the primary concern when Andrea withdraws money for personal expenses?
Recording the nature of the expense in detail
What is used to derive the value at which transactions are recorded?
Historical cost measures
What does historical cost measure provide information about?
Current market values of assets and liabilities
What is an advanced issue that candidates do not need to consider for FA2?
The time period regarded as the 'foreseeable future'
What is assumed about the entity according to the going concern principle?
The intention or need to cease trading in the foreseeable future
When is information considered material?
Whether information is included or omitted from financial statements
What is the assumption made about the reporting entity according to the going concern principle?
The entity will continue in operation for the foreseeable future
What does the materiality definition refer to in the context of financial reporting?
The influence of omitted, misstated, or obscured information on decision making
What is the primary purpose of financial statements according to the passage?
To provide information for decision making about specific entities
What is assumed by the business entity principle according to the passage?
The business is not treated as a separate entity from the owner(s) of the business
What is used to derive the value at which transactions are recorded?
Historical cost measure
What does historical cost measure provide information about according to the passage?
Current market value of assets and liabilities
What does the 'duality' principle in accounting imply?
Every transaction has a 'dual aspect' and therefore requires the use of single entry accounting.
According to the passage, what does the business entity principle imply?
The business is treated as a separate entity from the owner(s) of the business.
What is an implication of the dual aspect principle in accounting?
Every transaction gives rise to both a debit entry and a credit entry in double entry accounting.
What is assumed about the entity according to the going concern principle?
The entity has neither the intention nor the need to cease trading.
'Materiality' refers to what in the context of financial reporting?
'Materiality' refers to the influence of omitted, misstated, or obscured information on decisions made by primary users of financial reports.
When might the financial statements have to be prepared on a different basis?
If the intention or need to enter liquidation exists, the financial statements may have to be prepared on a different basis.
'Historical cost measure provides information about what?
'Historical cost measure provides monetary information about assets, liabilities, income, and expenses based on current market values.
'What is not necessary to be recorded when Andrea withdraws funds for personal expenses?
'Historical cost measure provides monetary information about assets, liabilities, income, and expenses based on current market values.
'What is assumed when financial statements are prepared?'
'The going concern assumption implies that the entity has neither the intention nor the need to cease trading.'
'Which factor will historical cost be updated to depict over time?'
The historical cost of assets and liabilities will never be updated over time.
When Andrea withdraws money for personal expenses, the nature of the expense is recorded in detail.
False
The historical cost of assets and liabilities will never be updated over time.
False
The total value of the debit entries will be different from the total value of the credit entries for any given transaction.
False
The going concern assumption implies that the entity has neither the intention nor the need to cease trading.
True
The historical cost of assets and liabilities will continue to be recorded at the value at which they were initially recorded.
True
Every transaction gives rise to both a debit entry and a credit entry in double entry accounting.
True
The going concern principle assumes that the entity will continue to operate for the foreseeable future.
True
Materiality refers to whether omitting, misstating, or obscuring information could reasonably be expected to influence decisions made on the basis of financial reports.
True
The historical cost measure provides information about the current market value of assets and liabilities.
False
Every transaction gives rise to both a debit entry and a credit entry in double entry accounting.
True
The primary purpose of financial statements is to depict the current value of assets and liabilities.
False
The materiality of information is related to its potential influence on decisions made by the primary users of financial reports.
True
Materiality is different from complete accuracy.
True
Materiality is not related to the purpose of financial statements in decision making.
False
Materiality is only affected by whether information is included or omitted from financial statements.
False
Double entry accounting is not a fundamental underpinning principle in accounting.
False
The dual aspect principle means that every transaction gives rise to both a debit entry and a credit entry.
True
The business entity principle means that for accounting records, the business is treated as a separate entity from the owner(s) of the business.
True
Historical cost measure provides information about current market values of assets and liabilities.
False
Every transaction requires the use of single entry accounting according to the dual aspect principle.
False
A sole trader's personal assets may not be used to settle business debts.
False
The going concern principle assumes that the reporting entity will cease trading in the foreseeable future.
False
Materiality allows for excessive detail to be included in financial statements which can improve presentation and assist users.
False
Duality refers to the fact that every transaction has a 'dual aspect' and therefore requires the use of 'double entry' accounting.
True
Explore the definition and significance of the going concern concept in financial reporting. Understand the implications for financial statement preparation when an entity is not considered a going concern.
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