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Explore fundamental qualitative characteristics of accounting information: relevance and faithful representation, crucial for accurate financial insights.
Accountants should take care to avoid overstating assets or income when they prepare financial statements
The benefit received from accounting info should be greater than the cost of providing that info
Company that can raise money easily, transfer ownership easily, and has limited liability, BUT is more complex to organize and has higher taxes
. The main users of financial statements . The purpose of financial statements . The qualities financial information should have The main elements of financial statements and how they should be defined, recognised and measured
11. What qualitative characteristic of accounting information ensures that it can be used to predict future outcomes with a reasonable degree of certainty?
24. Which qualitative characteristic of accounting information relates to the absence of error and bias?
Current Assets - Current Liabilities
60. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
39. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
the qualitative characteristic that enables users to identify and understand similarities in, and differences among, items
Each company is accounted for separately from its owners
Relevance & Faithful Representation
94. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
63. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
91. The qualitative characteristic that allows for the making of predictions about future outcomes is:
86. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
29. The qualitative characteristic that allows for the making of predictions about the future is:
i.e it can be used as an input to predict future outcomes
Financial information is material if excluding it or misstating it could influence users decision makingExampleError of £10m in expense item. Overall profit £500m . Error is not material at 2% profitError of £10m in expense item. Overall profit £20m . Error is material at 50% profit
Information should portray the economic event that it is intending to portray completely, accurately, and without biasInformation should be complete, neutral, and free from error
64. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
16. The qualitative characteristic that ensures information is complete, unbiased, and free from material error is:
20. Which qualitative characteristic of accounting information means that it should not favor one set of users over another?
Current Assets / Current Liabilities
Information that has the ability to influence decisions made by the users of the information
100. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
23. The qualitative characteristic that allows users to make valid comparisons between different reporting periods is:
68. The qualitative characteristic that allows for valid comparisons between different entities is:
66. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
32. What qualitative characteristic of accounting information means that it is free from material error and bias?
18. The qualitative characteristic that allows financial information to be compared across different entities is:
98. The qualitative characteristic that allows for valid comparisons between different entities is:
i.e it can be used to confirm past events
Information is available to users before it loses its ability to influence decisions
57. What qualitative characteristic of accounting information means that it can be verified by independent parties?
36. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
58. The qualitative characteristic that allows for valid comparisons between different entities is:
92. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
5. The qualitative characteristic of accounting information that ensures it is complete, neutral, and free from material error is:
14. When accounting information is timely and can influence decisions, it possesses which qualitative characteristic?
30. Which qualitative characteristic of accounting information ensures that it is presented in a manner that is easily understandable by users?
96. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
Accounting information should be made available to users in time to support their decision makingGenerally, the older the information is the less relevant it is for users decision making
55. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Globally used accounting standards
information faithfully represents the economic phenomena it purports to represent
46. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
89. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
65. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
12. The ability of accounting information to remain free from bias or prejudice is associated with which qualitative characteristic?
82. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
having information available to decision makers in time to be capable of influencing their decisions
26. What qualitative characteristic of accounting information refers to its capacity to make a difference in the decisions of users?
41. The qualitative characteristic that allows for the making of predictions about future outcomes is:
An expense must be recorded and reported in the same period as the revenue that it helped generate
85. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
70. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
83. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
52. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
Relevance. Information is relevant if it is capable of making a difference to the decision made by users (it is capable of this if it has predictive value or confirmatory value) Faithful representation. Information must faithfully represent the substance of what it purports to represent . a faithful representation is, to the maximu extent possible, complete, neutral and free from error
44. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
81. The qualitative characteristic that allows for the making of predictions about future outcomes is:
87. What qualitative characteristic of accounting information means that it can be verified by independent parties?
Revenues related to the financial year are recorded in the income statement whether the company received the revenue or not ( e.g credit sales)Expenses related to the financial year are recorded in the income statement whether the company paid the expense or not .Annual rent is £120, company only paid 100 Recorded expense in income statement is £120
90. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
Gross Margin - Operating Expenses
Net Sales - Cost of Goods Sold
The life of a company may be divided into artificial time periods so net income can be measured for a specific period of time
7. What is the primary goal of enhancing the qualitative characteristics of accounting information?
13. Which qualitative characteristic of accounting information refers to the faithful depiction of the economic substance of a transaction?
6. Which qualitative characteristic of accounting information ensures that it is available to users before it loses its capacity to influence decisions?
21. The characteristic of accounting information that makes it capable of influencing decisions by users is:
The primary accounting standard setter in the U.S.U.S. organization to whom the power to set accounting rules for publicly traded companies has been delegated
3. What fundamental qualitative characteristic of accounting information means that it must be capable of being understood by users who have a reasonable knowledge of business and economic activities?
72. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
The activities of a company are initially measured at the exchange price at the time the activity occurs
Economic Entity, Continuity (Going Concern), Time Period, & Monetary Unit
2. When financial information is capable of making a difference in the decisions of users, it possesses which qualitative characteristic?
49. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
45. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
78. The qualitative characteristic that allows for valid comparisons between different entities is:
95. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Independent parties can agree on the measurement of the activity
75. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
38. The qualitative characteristic that allows for valid comparisons between different entities is:
99. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
27. Which qualitative characteristic of accounting information ensures that it remains relevant and reliable over time?
Users who have a reasonable knowledge of accounting and business can, with reasonable study effort, comprehend the meaning of the information
International organization that sets accounting standards
no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process
53. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
59. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
Clarify and expand upon the information presented in the financial statements
Revenue is to be recognized or recorded in the period in which it is earned and the collection of cash is reasonably assured
42. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
Net Income / [Net] Sales Revenue
An attempt to provide a coherent set of accounting principles and concepts to guide the development of consistent accounting standards
54. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
61. The qualitative characteristic that allows for the making of predictions about future outcomes is:
Information is capable of making a difference in a business decisionMaterial information that has predictive or confirmatory value
77. What qualitative characteristic of accounting information means that it can be verified by independent parties?
56. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
Historical Cost, Revenue Recognition, Expense Recognition (Matching), & Conservatism
U.S. organization with the power to set accounting rules for publicly traded companies
Use similar policies from one financial period to another Where there is a change, explain reason for and effect of the change
encompass all qualitative aspects; see page 51
79. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
73. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
25. When accounting information faithfully represents the economic substance of transactions, it adheres to which qualitative characteristic?
Accounting info must represent what it is meant to representIt is faithfully represented if it is complete, neutral and free from material errorCompleteness - does it include all information necessary for a user to understand what is being reportedNeutrality - if the information biased? financial info must not be weighted, emphasised or manipulated to increase the profitability or faviourability by usersFreedom from error- has the information been processed and reported correctly
88. The qualitative characteristic that allows for valid comparisons between different entities is:
the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities
40. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
17. Which qualitative characteristic of accounting information is associated with the ability to present it in a clear and concise manner?
classifying, characterizing, and presenting information clearly and concisely
Can different knowledgable and independent observers reach consensus (broad, although not necessarily complete agreement) that a particular depiction is a faithful representation?. Direct verification by auditorsVerification by reference to external sources or comparisons
Management's explanation used to highlight favorable and unfavorable trends and significant risks facing the company
In the absence of information to the contrary, it should be assumed that a company will continue to operate indefinitely
Company that is easily formed, has tax advantages, and is completely controlled by owner, BUT has personal liability and limited life
19. When financial information can be verified through inspection, measurement, and review, it aligns with which qualitative characteristic?
28. When accounting information is capable of being verified through independent sources, it aligns with which qualitative characteristic?
Information allows users to identify similarities and differences between two or more items
62. What qualitative characteristic of accounting information ensures that it can be easily
35. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Financial statements are prepared on the assumption that the company will continue in business for the foreseeable future.Where there is intention or belief that company will cease to operate then separate rules will apply
51. The qualitative characteristic that allows for the making of predictions about future outcomes is:
97. What qualitative characteristic of accounting information means that it can be verified by independent parties?
Financial information is understandable if it is presented clearly and concisely, using recognisable classification and descriptions. The significance of information can be perceived by the user . Terminology should be simplified as much as possible
43. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
76. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
Cash Flows from Operating ExpensesCash Flows from Investing ExpensesCash Flows from Financing Expenses
8. Which characteristic of accounting information indicates that it is a faithful representation of the underlying economic events?
Going concern AccrualsConsistency Prudence
Company that has tax advantages and access to resources and skills of partners, BUT has shared control, personal liability, and limited life
37. What qualitative characteristic of accounting information means that it can be verified by independent parties?
50. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
Comparibility Verifiability Timeliness Understandability
Common set of rules and conventions developed to guide the preparation of financial statements, to make them easier to use over time and across companies
48. The qualitative characteristic that allows for valid comparisons between different entities is:
The financial statements should enable users to compare the performance of the company from one period to another or compare performance or father company with its competitors.Consistency: use of the same methods from the same items, either from period to period or in a single period across entities
Beginning Retained Earnings+ Net Income- Dividends
33. The qualitative characteristic that ensures that financial information is available to users before it loses its relevance is:
80. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
34. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
without bias in the selection or presentation of financial information
84. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
9. When information is free from material error, it aligns with which qualitative characteristic?
Debits: Expenses, Assets, DividendsCredits: Revenues, Liabilities, Stockholders' Equity
74. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
22. What qualitative characteristic of accounting information means that it can be reproduced by independent observers?
71. The qualitative characteristic that allows for the making of predictions about future outcomes is:
67. What qualitative characteristic of accounting information means that it can be verified by independent parties?
10. Which qualitative characteristic of accounting information refers to the ability of users to confirm the accuracy of financial information?
4. Which qualitative characteristic of accounting information relates to the ability to compare financial information from one period to another and with other companies?
Comparability, Verifiability, Timeliness, & Understandability
47. What qualitative characteristic of accounting information means that it can be verified by independent parties?
Opinion on whether the financial statements fairly represent the financial position of the company
A company must account for and report its financial results in monetary terms
all information necessary for a user to understand the phenomenon being depicted
93. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
69. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
Inclusion of a degree of caution in accounting judgements under conditions of uncertainty AVOID. Over statements of assets. Under statements of liabilities ...because both of these will lead to over statement of profit
15. Which qualitative characteristic of accounting information means that it is stable and consistent over time?
1. Which fundamental qualitative characteristic of accounting information ensures that financial information is free from error and bias?
31. When
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