Conceptual Framework and Accounting Standards > Chapter 8 > Flashcards

Chapter 8 Flashcards

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1
Q

Definition of Financial Statements

A

Financial statements are the means by which the information accumulate and processed in the financial accounting and periodically communitcated to the users.

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2
Q

What is the end product or main output of Financial Accounting process?

A

Financial Statements

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3
Q

General Purpose of finanacial accounting

A

The general purpose of financial statements are directed to all common users and not to a specific users

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4
Q

The entity shal prepare and present the financial statements in accordance to ______________.

A

International Financial Reporting Standards

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5
Q

Components of Financial Statements

A
  1. Statement of Financial Position
  2. Income statements
  3. Statement of comprehensive Income
  4. Statement of changes in equity
    5.Statement of cash flow
    6.note, comprising the summary of significant accounting accounting policies and other explanatory notes
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6
Q

Objective of Financial Statements

A

The objective of financial statements is to provide information about the financial position, financial performance, and cash flow of an entity that is useful in wide range users in making economic decisions

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7
Q

What are the information provide by the financial statements to meet it objective.

A
  1. Assets
  2. Liability
  3. Equity
  4. Income and expenses, including gains and losses
    5.contributions by, and distribution to owners ,in their capacity as owners
    6.cash flows
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8
Q

Frequency of reporting financial statements

A

Atleast annually

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9
Q

When an entity’s end of reporting period changes and financial statements are presented in longer or shorter than one year an entity shall disclose what information?

A
  1. The period covered by the financial statements
    2.the reason of using shorter or longer period
    3.the fact amounts presented in the financial statements are not entirely comparable.
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10
Q

Define statements of Financial Position

A

Statement of financial position is a formal statements showing the three elements compromising the financial position namely assets liability and equity.

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11
Q

What are the factors that evaluate by the investors, creditors and other statements users using statements of Financial Position?

A

1.liquidity
2.solvency
3.the needs of entity for additional financing

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12
Q

Define Asset

A

Asset is a present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benifits.

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13
Q

Assets are classified only into two, namely____?

A

Current and non-current assets

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14
Q

When the entity’s normal operating cycle is not clearly identifiable the duration is presumed to be____________

A

Twelve months

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15
Q

When an assets is classifies as current?

A
  1. The asset is cash and cash equivalent unless it is restricted to settle a liability for more than 12 months after the reporting period
  2. The entity holds the assets primarily for the purpose of trading
  3. The entity expects to realize the asset with twelve months after the reporting period.
  4. The entity expects to realize the asset or intends to sell or consume it within the normal operating cycle.
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16
Q

Current assets is usually listed in the order of its ________?

A

Liquidity

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17
Q

On what paragraph in PAS1 provide the minimum line items under xurren2 assets

A

Paragraph 54

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18
Q

PAS 1 paragraph 54 provides that as a minimum the line items under current assets are

A

A. Cash and cash equivalent
B. Financial assets at fair value such as trading securities and other investment qouted equity instruments
C. Trade and other receivables
D. Inventories
E. Prepaid Expenses

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19
Q

PAS 1 paragraph 66 states that ________

A

An entity shall classify all other assets not classified as current as non current

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20
Q

What are the assets classified as non current

A

A. Property, plant and equipment
B. Long term investments
C. Intangible assets
D. Deferred tax assets
E. Other noncurrent assets

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21
Q

Define property,plant, and equipment

A

PAS 1 paragraph 6 define the property, plant and equipment as intangible assets which are held by an entity for use in production or supply of goods and services, for rentals to others, or for administrative purposes and are expect to use during more than one period.

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22
Q

Define Investment

A

It is an assets held by the entity for the accretion of wealth through capital distribution such as interest, royalties, dividends and rentals for capital appreciation and for other benefit to the investing entity such as for those obtain through trading relationship

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23
Q

Define intangible assets

A

It is identifiable non-monetary asset without physical subtance

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24
Q

Define liability

A

Liability is a present obligation of the entity to transfer economic resource as a result of past event.

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25
PAS 1 paragraph 69, provides that the entity shal classify a liability as current when
1.the entity expects to settly the liability within the entity's normal operating cycle 2. The entity holds the liability primarily for the purpose of trading 3. The liability is due to be settled within twelve months after the reporting period. 4. The entity does not have unconditional right to defer settlement of the liability for atleast twelve months after the reporting period.
26
Minimum Line items of current liabilities include
A. Trade and othe payables B. Current provision C. Short term borrowings D. Current portion of long term debt E. Current tax liability
27
Line items connsider as non current liabilities
A. Noncurrent portion of long term debt B. Finance lease liability C. Deferred tax liability D.long term obligation to company officers E. Long term deferred revenue
28
Define equity
Equity is a residual interest in the assets of the entity after deducting all of its liabilities.
29
Define covenant
Covenants is often attached to the borrowing agreements which represents undertakings by the borrower.
30
Define shareholders equity
Shareholders equity is the residual interest of owners in the net assets of a corporation measured by tg excess of assests over liabilities.
31
Define notes to financial statements
Notes to financial statements provide narrative description and disaggregation of items presented in the financial statements and information about the items that do not qualify for recognition.
32
Capital stock : IAS term
Share capital
33
Subscribed capital stock: IAS term
Subscribed share capital
34
Preferred stock: : IAS term
Preference share capital
35
Common stock: IAS term
Ordinary share capital
36
Additional paid in capital:: IAS term
Share premium
37
Retained earnings ( deficit): IAS term
Accumulated profits( losses)
38
Retained earnings appropriated: IAS term
Appropriations reserve
39
Revaluation surplus=: IAS term
Revaluation reserve
40
Treasury stock: : IAS term
Tresuary share
41
What are the two customary forms in presenting the statement of financial position?
Report for and account form
42
What is report form
This form is set forth the three major sections in a downward sequence of assets liabilities and equity
43
Define account form
The presentation follows that of an account meaning the assets are shown on the left side and the liabilities and equity on the right side of the statements of financial position.
44
The line item of financial position includes what items
1. Cash and cash equivalent 2. Financial Assets ( other than 1, 3, and 6) 3. Trade and other receivables 4. Inventories 5. Property, Plant and Equipment 6. Investment in associate accounted for by the equity method 7. Intangible Assets 8.Investment property 9. Biological assets 10. Total assets classified as held for sale and assets included in disposal group classified as held for sale. 11. Trade and other receivables 12. Current tax liability 13 Deferred tax assets and deferred tax liability 14. Provisions 15.Financial liability ( other thank 11 anf 14) 16. Liabilities included in disposal group classified as held for sale 17. Noncontrolling interest 18. Share capital and reserves
45
Define Income statements
Income statements is a formal statements showing the financial performance of the entity for a given period of time.
46
Define statements of cash flow
Statement of cash flow is a component if financial statements summarizing the operating financing and investing activities of an entity.
47
Define cash?
Cash comprises as cash on hand and emand deposits.
48
Define cash equivalent?
Cash equivalents are short term highly liquid investments that are readily convertible to known amount of cash and which are subject to a significant risk of change in value.
49
Example of cash equivalents
1. Three month bsp treasury bill 2. Three- year bsp treasury bill purchased three months before date of maturity. 3 Three month time deposit 4. Three month money market instrument or commercial paper.
50
Define operating activities
Operating activities derived primarily from the principal revenue producing activities of the entity.
51
Define trading securities
PAS 7 paragraph 15 provides that cash flow arising from the purchase abd sale of dealing or trading securities are classified as operatibg activities.
52
Define investing activities
Investing activities are the cash flows derived fron the acquisition and disposal of long-term assest and other investments not included in cash equivalent.
53
Define financing activities
Financing activities are the cash flows derived from the equity capital and borrowings of the entity
54
Noncash transaction
PAS 7 paragraph 43 provides that investing and financing transaction that do not require use of cash or cash equivalents shall be excluded from the statement cash flow.
55
Define comprehensive income
Comprehensive income is thr change in equity during a period resulting from transaction and other events, other than changes resulting from transactions with owners in their capacity as owners.
56
The components of comprehensive income include
A. Components of profit or loss B. Components of ther comprehensive income
57
Define profit or loss
The term profit or loss is the total of income less expenses, exluding the components of other comprehensive income.
58
Define other comprehensive income
Other comprehensive income comprises items of income and expenses including reclassification adjustments that are not recorgnized in profit or loss as required on permitted by Philippines Financial Reporting Standards.
59
What are the spurces of income
A. Sale of merchandise to customers B. Rendering of services C. Use of entity resources D. Disposal of resources other than products
60
What are the components of expense
A. Cost of goods sold or cost of sales B. Distribution costs or selling expenses C. Administrative Expenses D. Other Expenses E. Income tax expense
61
Define distribution cost
Distribution costs constitute costs whuch are directly related to selling, advertising and delivery of goods to customers.
62
Define administrative expenses
Administrative Expenses constitute cost of adminitering the business. Administrative Expenses ordinarily include all operating expense not related to selling and cost of goods sold.
63
Define other expenses
Other expenses are those expenses which are not directly related to the selling and administrative function.
64
PAS 1 paragraph 87
PAS 1 paragraph 87 specifically mandates that an entity shall noy present any item of income and expenses as extraordinary either on the face of the income statement or statement of comprehensive income or in the notes.
65
Line items of income statements and statement of comprehensive income
PAS 1 paragraph 82 provides that as a minimum the incpme statement and statement of comprehensive income shall include the following line items: A. Revenue B. Gain and loss from the derecognition of financial asset measured at amortized cost as required by PFRS 9. C. Finance cost D. Sharenin income or loss of associate and joint venture accounted for using the equity method E. Gain or loss on the reclassification of financial asset from amortized cost of fair value profit or loss G. Income taxes expense H. A single amount comprising discontinued operations I. Profit or Loss for the period J. Total other comprehensive income K. Comprehensive income fpr the period being the total of profit or loss and other comprehensive income.
66
Forms of Income Statements
PAS 1, paragraph 99, provides that an entity shall present an analysis of expenses recognized in profit or loss useing a classification vased on either the function of expenses or their nature within the entity, whichever provides information that is reliable and more relevant
Conceptual Framework and Accounting Standards
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