Revenue Analysis

1473 Words6 Pages
EXERCISES
2.1
Instructions
Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices.
(Do not use qualitative characteristics.)
(a) Market value changes are not recognized in the accounting records.
(b) Lower of cost or market is used to value inventories.
(c) Financial information is presented so that investors will not be misled.
(d) Intangible assets are capitalized and amortized over periods benefited.
(e) Repair tools are expensed when purchased.
(f) Agricultural companies use market value for purposes of valuing crops.
(g) Each enterprise is kept as a unit distinct from its owner or owners.
(h) All significant postbalance sheet events are reported.
(i) Revenue is
…show more content…
The purpose of Statement of Financial Accounting Concepts No. 2, “Qualitative Characteristics of Accounting Information,” is to examine the characteristics that make accounting information useful. The characteristics or qualities of information discussed in SFAC No. 2 are the ingredients that make information useful and the qualities to be sought when accounting choices are made.
Instructions
(a) Identify and discuss the benefits that can be expected to be derived from the FASB’s conceptual framework study.
(b) What is the most important quality for accounting information as identified in Statement of Financial Accounting Concepts No. 2? Explain why it is the most important.
(c) Statement of Financial Accounting Concepts No. 2 describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.
(CMA adapted)

2-5
(Revenue Recognition and Matching Principle) After the presentation of your report on the examination of the financial statements to the board of directors of Bones Publishing Company, one of the new directors expresses surprise that the income statement assumes that an equal proportion of the revenue is earned with the publication of every issue of the company’s
Get Access