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level: The Context and Purpose of Financial Reporting

Questions and Answers List

level questions: The Context and Purpose of Financial Reporting

QuestionAnswer
What is 'Prudence'?"The exercise of caution when making judgements under conditions of uncertainty."
What two things does accounting consist of?Recording and summarising
What statements would the supplier of goods on credit be interested in?Both the main statements.
What is Corporate Governance?'The system by which an organisation is directed and controlled, at its most senior levels, in order to achieve its objectives and meet the necessary standards of accountability and probity.'
What is used as an international benchmark for countries which create their own financial reporting requirements?The IFRS Standards.
What is Accounting?The recording of transactions and summarising of information.
Increase in Net Assets =Capital Introduced + Profit - Drawings
What is the Conceptual Framework?A framework created by the IASB to set out the underlying concepts in the preparation and presentation of financial statements.
IFRSs are developed within what framework?The Conceptual Framework.
What is an Exposure Draft?A proposed IFRS published for public comment.
What are the main reasons for the accounting standards?- Reduce Subjectivity - Gain the ability to compare different organisations
What is financial reporting?Recording, analysing and summarising financial data.
What is an asset?'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 benefits.‘
What is a liability?'A present obligation of the entity to transfer economic resource as a result of past events. An obligation is a duty of responsibility that the entity has no practical ability to avoid.‘
What is equity?“the residual interest in the assets of the entity after deducting all its liabilities.”
Sole Traders Profit =Closing capital + Drawings - Capital introduced - Opening Capital
What two things does accounting consist of?Recording and summarising
What is 'Prudence'?"The exercise of caution when making judgements under conditions of uncertainty."
What is an asset?A present economic resource controlled by an entity as a result of past events.
What is a liability?A present obligation of the entity to transfer an economic resource as a result of past events.
What is Equity?"The residual interest in the assts of the entity after deducting all liabilities. "
What is income?"The increases in assets, or decrease in liabilities that result in increase in equity, other than those relating to contributions from holders of equity claims."
What is Expense?"The decrease in assets or increase in liabilities that results in decrease in equity, other than those relating to distributions to holders of equity claims."
What is an economic resource?"A right that has the potential to produce economic benefits. "