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MGAB01H3 Chapter 2: Chapter 2 notes

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lavenderdonkey6
9 Jan 2011
School
UTSC
Department
Financial Accounting
Course
MGAB01H3
Professor
G.Quan Fun

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MGAB01H3 Full Course Notes
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MGAB01H3 Full Course Notes
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Document Summary

Chapter 2 financial statements framework, presentation, and usage notes. It ensures that existing standards and practices are clear and consistent. It makes it possible to respond quickly to new issues. International accounting standard board (iasb) formed to try to reduce areas of difference and unify global standard-setting after 2011, canadian standards with cease to exist for profit-oriented publicly traded companies as they move to the international. N not-for-profit companies and private companies will move to simplified set of standards considered to be suitable for their needs. N with such an unprecedented level of change in accounting standards about to occur, never before has conceptual framework been. N www. notesolution. com interim periods accounting time periods that are less than a year long going concern assumption the assumption that the business will remain in operation for the foreseeable future. N constraints permit a company to make changes to gaap as long as the reported information is still useful.

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Related Questions

What is a conceptual framework? Why is a conceptual frameworknecessary in financial accounting?

As the FASB implemented its conceptual framework, it emphasizedrelevance and faithful representation (initially relevance andreliability). How does the choice of assets and liabilities as themost primary financial statement elements influence the trade-offbetween these two primary qualitative characteristics?

Unit 6 GAAP Application-Conceptual Framework of Accounting TheConceptual Framework allows for the systematic adaptation ofaccounting standards to a changing business environment. The FASBuses the conceptual framework to aid in an organized and consistentdevelopment of new accounting standards. The conceptual frameworkoutlines the objectives of financial reporting and the qualities ofgood accounting information, precisely defines commonly used termssuch as asset and revenue, and provides guidance about appropriaterecognition, measurement, and reporting. Understanding theterminology associated with the framework is imperative. Match thenumbered statements below with the lettered terms. An answer(letter) may used more than once, and some terms require more thanone answer (letter). 1. Key ingredients in quality of relevance. 2.Traditional assumptions that influence the FASB's conceptualframework. 3. The idea that information should represent what itpurports to represent. 4. An important constraint relating to costsand benefits. 5. An example of conservatism 6. The availability ofinformation when it is needed. 7. Recording an item in theaccounting records. 8. Determines the threshold for recognition. 9.Implies consensus. 10. Transactions between independent parties. a)Cost-effectiveness b) Representational faithfulness c) Recognitiond) Verifiability e) Time periods f) Unrealized g) Completeness h)Timeliness i) Materiality j) Predictive value k) Economic entity l)Lower-of-cost-or-market rule m) Phrenology n) Arm's-lengthtransactions Now that you have reviewed the terminology, for eachsituation listed below, indicate by letter the appropriatequalitative characteristic(s) or accounting concept(s) applied. Aletter may be used more than once, and more than one characteristicor concept may apply to a particular situation. Explain why youchose your answer.

1. Goodwill is recorded in the accounts only when it arises fromthe purchase of another entity at a price higher than the fairmarket value of the purchased entity's identifiable assets. 2. Landis valued at cost. 3. All payments out of petty cash are debited toMiscellaneous Expense. 4. Plant assets are classified separately asland or buildings, with an accumulated depre-ciation account forbuildings. 5. Periodic payments of $1,500 per month for services ofH. Hay, who is the sole propri-etor of the company, are reported aswithdrawals. 6. Small tools used by a large manufacturing firm are^recorded as expenses when purchased. 7. Investments in equitysecurities are initially recorded at cost. 8. A retail storeestimates inventory rather than taking a complete physical countfor purposes of preparing monthly financial statements. 9. A notedescribing the company's possible liability in a lawsuit isincluded with the financial statements even though no formalliability exists at the balance sheet date. 10. Depreciation onplant assets is consistently computed each year by thestraight-line method. a) Understandability b) Verifiability c)Timeliness d) Representational faithfulness e) Neutrality f)Relevance g) Going concern h) Economic entity i) Historical cost j)Measurability k) Materiality l) Comparability Type your answers ina Word Document, and submit to the Drop Box.