Comprehensive 1

Question 1

What are the 5 elements that make up a financial statement?

Answer 1

Asset, Liability, equity, income and expense.

Question 2

Financial statement element that is a “present obligation of the entity arising from past events the settlement of which is expected to result in an outflow from the entity?

Answer 2

Liability

Question 3

Define conservatism in accounting

Answer 3

One of the objective of financial reporting

Question 4

Which of the enhancing characteristics of accounting relates to both relevance and faithful representation?

Answer 4

Comparability

Question 5

Which of the enhancing characteristics of accounting is an element of faithful representation?

Answer 5

Verifiability

Question 6

What enhancing characteristics of accounting are elements of relevance?

Answer 6

Timeliness and Feedback value

Question 7

When does realization of revenue occur?

Answer 7

When an entity converts good and service into accounts receivable

Question 8

What are the basic elements of financial statements?

Answer 8

Assets, Liability and Equity

Question 9

What are the three basic elements of Equity?

Answer 9

1. Contribution by owners
2. Distributions to owners
3. Comprehensive Income

Question 10

Define Comprehensive Income

Answer 10

All changes in equity other than “owner” sources

Question 11

What doe DENT stand for?

Answer 11

1. Derivative cash flow hedges
2. Excess adjustment of PBO and FV of plan assets at year end
3. Net unrealized gains or losses on AFS securities
4. Translation adjustments for foreing currency

Question 12

What is the physical capital maintenance concept?

Answer 12

Happens when an asset is sold or liability collected.

Question 13

What is the financial capital maintenance concept?

Answer 13

When changes in value of assets result in gains or losses

Question 14

Name and define the 4 elements of Comprehensive Income

Answer 14

1. Revenues - Inflows from primary operations
2. Expenses - Outflows from primary operations
3. Gains - increases in equity from incidental transactions
4. Losses - Decreases in equity from incidental trans.

Question 15

What is historical cost?

Answer 15

Amount paid for an asset?

Question 16

What is replacement cost?

Answer 16

Amount it takes to replace an asset(inventory)

Question 17

What is Fair Market Value (FMV)?

Answer 17

Price received for an asset between 2 market participants at a particular date.

Question 18

What is Net Realizable value (NRV)?

Answer 18

Amount expected to be converted into (A/R)

Question 19

What is Present Value?

Answer 19

Discounted cash flows due to the time value of money(Notes/Receivable, Bonds/Payable, Leases)

Question 20

Name and define the three methods of expense recognition.

Answer 20

1. Cause and effect - charging inventory to cost of goods sold
2. Systematic and rational Allocation - depreciation of property and equipment
3. Immediate recognition - Recognizing salary expense as it occurs.