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Midterm

AFM101 Study Guide - Midterm Guide: Financial Statement, Bookkeeping, Matching Principle


Department
Accounting & Financial Management
Course Code
AFM101
Professor
Donna Psutka
Study Guide
Midterm

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Time for Accounting Standards
Key Points:
- Over 100 countries in the world are already using this IFRS
- Canada is switching to IFRS standards, not using Canadian GAAPs anymore
- Switching to one accounting global language will secure Canada in recognition from other
countries
o Globalizing Canada
Benefits:
- Will reduce future costs of translating accounting financial information from Canadian to US
GAAPS
- Will save time because you won’t have to translate anymore
- IFRS makes accounting information more clear and high quality
Disadvantages:
- It will be costly to switch to IFRS
o Will need excessive education and training
GM Bookkeeping Errors may Indicate Aggressive Accounting Cycle
Aggressive Accounting:
- when revenues and assets are recorded early and high
- when liabilities and expenses are recorded low and later
When you increase earnings, error occurs much more
GM had problems with rebates, and credits, can’t record them until after the purchases
Premature Record of Payment, Increased Income
- losses are understated
o the financial statements become unreliable
Playing by the Rules
- Accounting standards and conceptual framework govern the financial statements
Earnings is just an estimate, uses the revenues and cost to take a guess at earnings
True Profitability: Cash generated Cost for generating this Cash
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