Flashcards in Chapter 1 Deck (37)
WHAT ARE THE QUALITATIVE CHARACTERISTICS?
RELEVANCE: PREDICTIVE VALUE, CONFIRMATORY VALUE, MATERIALITY
FAITHFUL REPRESENTATION: COMPLETENESS, NEUTRALITY, FREE FROM ERRO
EXPLAIN THE RELEVANCE QUALITATIVE CHARACTERISTIC?
Capable of making a difference in decision of users via predictive value, confirmatory value and materiality.
EXPLAIN THE PREDICTIVE VALUE?
If it can be used as an input to processes employed by users to predict outcomes. (like sales from the previous 5 years to predict this year's sales. Useful in predictions.
EXPLAIN THE CONFIRMATORY VALUE?
Provides feedback (confirms or changes) about previous evaluations. (like the amount of sales reported this year is used to asses what we expected sales to be this year. )
Information is material if omitting it or misstating it could influence decisions that users maker (like companies not reporting revenue on segments). Capable of Influencing decisions.
EXPLAIN THE FAITHFUL REPRESENTION QUALITIVE CHARACTERISTIC?
Represents economic phenomena in words and numbers via completeness, neutrality and free from error.
This includes all information necessary for a user to understand the phenomenon being depicted. includes information necessary for understanding.
Depiction is without bias. Free from bias.
EXPLAIN FREE FROM ERROR?
NO errors or omissions. Generally accurate.
WHAT ARE THE ENCHANCING CHARACTERISTICS?
COMPARABILITY, VERIFIABILITY, TIMELINESS, UNDERSTANBILITY
Can be compared with similar information about other entities and with similar information about the same entity. Helps users decisions involve choosing between alternatives.
Information faithfully represents the economic phenomena it purports to represent. This means that different knowledgeable and independent observers could reach consensus. Confirmable
In time to be capable of influencing their decisions. Reported soon enough to make a difference.
Presented clearly and concisely
EXPLAIN EFFECTIVENESS CONSTRAINT
Costs of reporting are justified by the benefits of reporting that information.
WHAT FINANCIAL STATEMENT ARE POINT IN TIME ELEMENTS?
Balance sheet. Assets, liabilities, equity
Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
Probable future sacrifices of economic benefits arising from present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transaction or events.
Net assets is the residual interest in the assets of an entity that remains after deducting its liabilities.
WHAT IS THE FINANCIAL STATEMENT THAT IS PERIOD OF TIMES?
Stockholders equity statements, Income Statements
EXPLAIN INVESTMENTS BY OWNERS?
Increases in equity of a particular business enterprise resulting from transfers to it from other entities of something valuable to obtain or increase ownership interests in it. (Stockholders Equity Statement)
EXPLAIN DISTRIBUTION TO OWNERS?
Decreases in equity of a particular business enterprise resulting from transferring assets, rendering service, or incurring liabilities by the enterprise to owners. (Stockholders Equity Statement)
EXPLAIN COMPREHENSIVE INCOME?
A change in equity of a business enterprise during a period from transaction and other events and circumstances from nonowners sources. (Comprehensive Income Statement)
Inflows or other enhancements of assets of an entity or settlements of its liabilities from delivering or producing goods, rendering service or other activities that constitute the entity’s ongoing major or central operations. (Income Statement)
Outflows or other using up of assets or incurrences of liabilities from delivering or producing goods, rendering services or carrying out other activities that constitute the entity’s ongoing major or central operations. (Income Statement)
Increases in equity from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from revenues or investments by owners. (Income Statement)
Decreases in equity from peripheral or incidental transactions of an entity and from all transactions and other events and circumstances affecting the entity except those that result from expenses or distribution to owners. (Income Statement)
WHAT ARE THE FOUR KEY ACCOUNTING ASSUMPTIONS?
Economic Entity, Going Concern, Periodicity, Monetary Unit
WHAT IS THE ECONOMIC ENTITY?
Specific economic activities are considered an identifiable accounting unit. Entities are separate from its owners and from other entities. Specific activities are identified with an accounting unit.