Vous êtes sur la page 1sur 1

ACCT2102_Intermediate Financial Accounting 1_G-I_Ch.

1_22-23 Jan

Ch.1 Environment and Theoretical Structure of Financial Accounting


Discussion Question:
E1-4 Concepts; terminology; conceptual framework
Listed below are several terms and phrases associated with the conceptual framework. Pair each
item from List A (by letter) with the item from List B that is most appropriately associated with it.
List A List B
1. Predictive value a. Decreases in equity resulting from transfers to owners.
2. Relevance b. Requires consideration of the costs and value of information.
3. Timeliness c. Important for making inter-firm comparisons.
4. Distribution to owners d. Applying the same accounting practices over time.
5. Confirmatory value e. Users understand the information in the context of the decision being made.
6. Understandability f. Agreement between a measure and the phenomenon it purports to represent.
7. Gain g. Information is available prior to the decision.
8. Faithful representation h. Pertinent to the decision at hand.
9. Comprehensive income i. Implies consensus among different measurers.
10. Materiality j. Information confirms expectations.
11. Comparability k. The change in equity from non-owner transactions
12. Neutrality 1. The process of admitting information into financial statements.
13. Recognition m. The absence of bias.
14. Consistency n. Results if an asset is sold for more than its book value.
Increases in equity from peripheral or incidental transactions of an entity
15. Cost effectiveness o. Information is useful in predicting the future
16. Verifiability p. Concerns the relative size of an item and its effect on decisions.

E1-8 Basic assumptions and principles


Identify the accounting concept that was violated in each of the following situations.
1. Pastel Paint Company purchased inventory at a price of $250,000. Because the value of the
inventory has appreciated to $400,000, the company has valued the inventory at $400,000 in
its most recent statement of financial position.
2. Atwell Corporation has not prepared financial statements for external users for over three years.
3. The Klingon Company sells farm machinery. Revenue from a large order of machinery from a
new buyer was recorded the day the order was received.
4. Don Smith is the sole owner of a company called Hardware City. The company recently paid a
$150 utility bill for Smith's personal residence and recorded a $150 expense.
5. Golden Book Company purchased a large printing machine for $1,000,000 (a material amount)
and recorded the purchase as an expense.
6. Ace Appliance Company is involved in a major lawsuit involving injuries sustained by some
of its employees in the manufacturing plant. The company is being sued for $2,000,000, a
material amount, and is not insured. The suit was not disclosed in the most recent financial
statements because no settlement had been reached.

Vous aimerez peut-être aussi