Exam 3: Financial Reporting Concepts

IFRS will be the standard for all Canadian companies.

Canadian accounting standards are based mainly on principles rather than rules because it is impossible to create a rule for every situation.

The expense-recognition criteria states that expenses are recognized when there is an increase in an asset or decrease in a liability, excluding transactions with owners.

The objective of financial reporting is to provide information that is mainly useful to

It is an underlying assumption that financial statements are prepared as if the company is not a going concern.

Information is understandable when it is understood by users

A number of unrelated transactions recorded by Abba Company are as follows: Instructions For each of the above situations, identify the accounting assumption, concept, constraint, or recognition criteria that have been violated. Prepare the correct journal entry as it should have been made. If no entry should have been made, or if additional financial statement disclosure is required, explain.

Not every country uses the same conceptual framework. This lack of uniformity has arisen because

There is a direct association between cost of goods sold and sales revenue.

If the company is a going concern, the classification of assets and liabilities as current and noncurrent would not matter.

The qualitative characteristic that should be first applied is that of relevance.

Relevance and faithful representation are the two fundamental characteristics that financial information must have in order to be considered useful.

Understandability enables users to have timely information that is useful for decision makers.

An inexperienced accountant for Can't Add Company recorded the following transactions in the records of the company for the year ended December 31, 2021. The controller has questioned the appropriateness of the entries since she thinks that they have not been recorded in accordance with generally accepted accounting principles. Profit for the year, including the entries described below, is $ 200,000. Instructions a) For each of the above entries, indicate the concept or constraint that was violated. b) Determine the correct profit for 2021.

Accounting information is neutral if

Which of the following is not a qualitative characteristic associated with faithful representation?

A conceptual framework ensures we have a coherent set of standards.

One of the conditions of recognizing revenue from the sale of goods is that costs relating to the sale of the goods can be reliably measured.

Understandability is greater when the information is classified, characterized, and presented clearly and concisely.

Canadian accountants rely on ______ to help them apply the conceptual framework to specific situations.