Conceptual Framework and Accounting Standards

Conceptual Framework and Accounting Standards

A conceptual framework can be defined as a system of ideas and objectives that lead to the creation of a consistent set of rules and standards. Specifically in accounting, the rule and standards set the the nature, function and limits of financial accounting and financial statements.




AnswersQuestions
International Accounting Standards CommitteeIs an independent private sector body, with the objective of achieving uniformly in the accounting principles which are used by business and other organization for financial reporting worldwide.
Conceptual FrameworkSets out the concepts that underlie the preparation and presentation of financial statements for external users.
Generally Accepted Accounting PrincipleGAAP stands for?
Statement of changes in equityIn this statement, explains what the government's (or owner's) interest is comprise of. It also highlights the movement between the various classes of equity.
LiabilitiesAre defined in the conceptual framework as "present obligations of an entity arising from the past transaction or events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Financial ReportingEncompasses not only financial statements but also other members of communicating information that relates directly or indirectly to the financial accounting process.
Single statement of comprehensive incomeShowing all components of net income or loss and all components of other comprehensive income.
Statement of comprehensive incomeThis statement outlines the revenues and expenses over the year. It also includes non-cash transactions such as depreciation, and increases or decreases in the value of assets.
Asset equals Liability plus EquityThe statement of Financial Position is an expansion of the accounting equation:
CashIs any medium of exchange that a bank will accept fore deposit at face value. It includes coins, currency, checks, money orders, bank deposit and drafts.
Financial StructureIs the source of financing for the assets of the enterprise. It indicates what amount of assets has been financed by creditors, which is borrowed capital, and what amount of assets has been financed by owners, which is invested capital.
TRUEAccounting information of a business enterprise is used by many stakeholders.
TRUEConceptual Framework purpose is to assist the Board in the development of future IFRS and in its review of existing IFRS.
To deliver cash or another financial instrument to a second entity, To exchange other financial instruments on potentially unfavorable terms with the second entity.Imposes on one entity a contractual obligation either: (Choose two)
TRUEThe overall objective of Financial Reporting is to provide information that is useful for decision making.
To receive cash or another financial instrument from the first entity, To exchange other financial instruments on potentially favorable terms with the first entity.Conveys to that second entity a contractual right either:
FALSEAccounting information doesn't important information to customers about current position of a business organization and to make a judgment about its future.
TRUEGeneral Purpose Financial Statements provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.
Note ReceivableIs a written pledge that the customer will pay the business a fixed amount of money on a certain date.
CapitalThis account is used to record the original and additional investments of the owner of the business entity.
Natural PresentationThis presentation referred to as the nature of expense method.
Philippine Accountancy of 2004Republic Act No. 9298 is the law regulation the practice of accountancy in the Philippines. This law is also known as:
Philippine Accounting StandardPAS stands for?
Account FormAs the title suggests, the presentation follows that if an account, meaning, the assets are shown on the left side and the liabilities and equity on the right side of the statement of financial position.
Financial ReportsRepresent the main products of financial reporting.
PrudenceIn view of the uncertainty of future events, profits are not anticipated but recognized only when earned, though not necessarily in cash.
Relevant financial informationIs capable of making a difference in the decisions made by users. Information may be capable of making a difference in a decision even if some users choose not to take advantage of it or are already aware of it from other sources.
Statement of financial positionIn this statement, assets and liabilities are split into current and non-current which generally means if they are expected to be settled within 12 months.
TRUEAll certified public accountants shall abide by the requirements, rules and regulations on continuing professional education to be promulgated by the Board.
FALSEDisclosure of accounting policies or of the changes is the remedy for any wrong or inappropriate treatment of items in the accounts.
TRUEAn income statement displaying the components of net income or loss.
SuppliersAre business individuals or organizations that normally sell merchandise or raw materials to other businesses on credit.
Fair ValueIs the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
AssetResources controlled by entity as a result of past transactions and events and from which future economic benefits are expected to flow to the entity
Accounting PoliciesAre the specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements.
Gains and lossesArising from derecognition, reclassification, impairment or in the case of a financial asset, the moralization process, will be recognized in profit or loss.
Balance SheetOther term for Statement of Financial Position
Financial AssetsSimply put, is cash, an equity instrument of another entity, or a contract to receive cash at a future date.
Report FormThis form sets forth the three major sections in a downward sequence of assets, liabilities and equity.
GOVERNMENT ACCOUNTINGGovernment accountants and auditors work in the public sector to maintain and examine the records of government agencies and also to audit private businesses and individuals who pay taxes.
PRIVATE ACCOUNTINGDeals with the financial information of a single company they're employed by, usually preparing or analyzing reports for an internal manager.
FALSEThe fundamental qualitative characteristics are relevance, faithful representation and materiality.
FALSEThe objectives of general purpose financial reporting in the public sector should be, to not information useful for decision making, and to demonstrate the accountability of the entity for the resources entrusted to it.
Capacity for adaptionThe ability of the enterprise to use its available cash for unexpected requirements and investment opportunities.
Financial StatementsAre a structured representation of the financial position and financial performance of an entity.
FALSEFinancial Reports does not include non financial information such as description of major products and a listing of corporate officers and directors.
Substance over FormThe accounting treatment and presentation of transactions and events in financial statements should be governed by their substance and not merely by the legal form.
MaterialityFinancial statements should disclose all "material" items, i.e. items, the knowledge of which might influence the decisions of the user of the financial statements.
Functional PresentationThis form classifies expenses according to their function as part of sales, selling activities, administrative activities and other activities.
Government AgenciesUse financial information of businesses for the purpose of imposing taxes and regulations.
FALSEThe role of the external auditors in sustaining good corporate governance is not acknowledged.
Accounting and auditing servicesInvolve maintaining financial records and preparing and auditing financial statements for use by outside investors and banks.
Public AccountingIs the branch of accounting where an accountant works with a range of clients to review and prepare financial documents that an individual or corporation is required to disclose to the public.
AuditorAre usually trained accountants who specialize in checking accounts rather preparing them.
Statement of cash flowsIn this statement, categories all cash payments made and received through-out the year
TRUEA financial asset shall be recognized in accounting when, and only when, an entity receives or in accordance with the ongoing contract obtains a right to receive cash or another financial asset.
Consulting servicesInvolve financial planning services for individuals as well as business consultation services to help management design, develop and implement accounting systems and employee compensation packages.
TRUEFinancial liabilities shall recognized in accounting when, and only when, an entity assumes an obligation to deliver cash or another financial asset.
Internal AuditorWork for the organization as internal employees to examine records and help improve internal processes such as operations, internal controls, risk management, and governance.
Generally Accepted Accounting PrinciplesDefines a financial instrument as cash, evidence of an ownership interest in a company or other entity, or a contract.
Equity InstrumentAny contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
ACCOUNTINGThe art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions, and events which are, in part at least of financial character, and interpreting the results thereof.
Non-financial AssetsRefers to an asset that is not traded on the financial markets, and its value is derived from its physical characteristics rather than from contractual claims.
Tax ServicesInvolves the preparation of tax returns as well as advising clients on tax deductions, tax planning, and other tax-related issues.
External AuditorCome in from outside the organization to examine accounting and financial records and provide an independent opinion on these records.
AccountingIs the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information.
Fair ValueIs the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
International Financial Reporting StandardIFRS stands for?
TRUEAn entity shall derecognize a financial asset only when the contractual rights to the cash flows expire or it transfers the financial asset and that transfer qualifies for derecognition.
LiquidityRefers to the availability of cash in the near future after taking account of financial commitments over this period.
SolvencyRefers to the availability of cash over the longer term to meet financial commitments as they fall due.
Board of AccountancyIs the body authorized by law to promulgate rules and regulation affecting the practice of the accountancy profession in the Philippines.
AccountingIs a service activity. Its function is to provide qualitative information, primarily financial nature, about economic entities, that is intended to be useful in making economic decision.
TRUEAccounting policies refer to accounting principles and the methods of applying these principles adopted by the organization in the preparation of their financial statements.
LendersAre individuals or financial institutions that normally lend money to businesses and earn interest income on it.