The Financial Statement Representation of a Transaction

1087 WordsApr 10, 20055 Pages
I - A. " Representational faithfulness is accomplished when transactions and events affecting the entity are presented in financial statements in a manner that is in agreement with the actual underlying transactions and events" (CICA, Financial statement Concepts 1000.21 (a), 2003). It means that all of information in the financial statement such as numbers and descriptions must be factual. The independent auditors checked the computer ID tags on each piece of equipment to confirm the actual numbers, and for that reason Byrn Company observes the representational faithfulness that is one of subsets of reliability. I - B. "The consistency principle states that businesses should use the same accounting methods and procedures from period…show more content…
A Bank of Montreal has been paid $10,500 for armoured car service. This transaction makes cash amount goes down. II - E. Sue 's Pizza Parlour sells 250 12" pizzas in a week for $8.95 each. "Revenues: are increases in economic resources, either by way of inflows or enhancements of assets or reductions of liabilities, resulting from the ordinary activities of an entity. Revenues of entities normally arise from the sales of goods, the rendering of services or the use by others of entity resources yielding rent, interest, royalties or dividends. In addition, many not-for-profit organizations receive a significant proportion of their revenues from donations and government, grants and other contributions" (CICA, Financial statement Concepts 1000.37 (a), 2003). According to definition of revenues, cash balance of Sue 's Pizza parlour increase by amount from selling Pizza. II - F. WestJet buys 12 used airplanes from Air Canada for $1,000 each. Six of the airplanes can fly and carry passengers. The other six airplanes will be used for parts to repair the first six airplanes as necessary. "Assts: are economic resources controlled by an entity as a result of past transactions or events and from which future economic benefits may be obtained" (CICA, Financial statement Concepts 1000.29 (a), 2003). The cash balance of WestJet decreases by $12,000, but, at the same time equipment balance increase by same amount of
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