Flashcards
Financial Statements
Cards in this deck (19)
- 1What is the definition of an asset?A resource controlled by an entity as a result of past events & from which future economic benefits are expected to flow to the entity.
- 2What is the definition of a liability?A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
- 3What is the definition of equity?The residual interest in the assets of an entity after deducting all its liabilities, so
EQUITY = NET ASSETS = SHARE CAPITAL + RESERVES - 4What is the definition of income?Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants.
- 5What is the definition of an expense?Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
- 6What are the 5 elements of the financial statements?1. Asset
2. Liability
3. Equity
4. Income
5. Expenses - 7What is the process of recognition of the elements of financial statementsThe item is recognised in the statement of financial position or statement of profit or loss with a description in words & a £ value:
1. When it meets the definition of an element of the financial statements and
2. It is probable that any future economic benefit associated with the item will flow to or from the entity and
3. The item has a cost or value that can be reliably measured - 8Measuring the elements of financial statements What are the 4 key measurement techniques?Historical cost
Current cost
Realisable value
Present value - 9What are the main purpose of accounting standards?Credibility - ensure give true & fair view
Comparability - compare company results
Discipline - less scope for manipulation - 10What are the duties & responsibilities of directors?1. Keeping proper accounting records
2. Preparing financial statements & having audited & presented to shareholders in AGM
3. Filing financial statements with Companies Hse - 11What are the objectives of the Conceptual Framework?To provide financial information about the reporting entity that is useful to:
Existing & potential investors
Existing & potential lenders & other creditors - 12Who are the secondary users of financial statements according to the Conceptual Framework?Management
Regulators
Employees
Individuals - 13What are the secondary users of Financial statements interested in ?The entity's assets / resources
Claims against the assets / liabilities
Stewardship - how efficiently and effectively management have used resources - 14What 2 categories are the qualitative characteristics of useful financial information categorised in?1 Fundamental qualitative characteristics
2 Enhancing qualitative characteristics - 15What are the fundamental qualitative characteristicsRelevance
Faithful representation
Materiality - 16What are the enhancing qualitative characteristics?Comparability
Verifiability
Timeliness
Understandability - 17What other consideration should be given when reporting information?The cost constraint
Do the benefits justify the costs - 18What is the underlying assumption when preparing financial statements?Going concern
- 19What is the accounting equation?Assets = Equity + Liabilities
Information
- Description
- Conceptual frameworks quick questions
- Created by
- Sharon Yates
- Views
- 801
- Tags
- Rating