FINANCIAL ACCOUNTING>IC<
15th Edition
ISBN: 9781119344988
Author: Kimmel
Publisher: WILEY C
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Chapter 2, Problem 2.8BE
To determine
Useful information: The financial information which is more relevant to make significant decisions for the investors and creditors is referred to as useful information. The useful information should have the following qualities according to Financial Accounting Standards Board (FASB):
- Fundamental qualities:
- Relevance: The relevant accounting information should have a predictive value and a confirmatory value. Predictive value means the accounting information should help the investors and creditors in predicting the future trends. Confirmatory value means the predicted accounting information comes to pass. All the financial items which could significantly influence the investors and creditors should be reported. This is the materiality concept of useful and relevant information.
- Faithful representation: This concept requires that the accounting information reported by a company should be complete, neutral (unbiased), and represented without any mathematical and material errors.
- Enhancing qualities:
- Comparability: All the accounting information reported by the companies should be comparable because the accounting principles used to prepare accounting information would be similar; and consistent because accounting methods and principles would not vary from year to year.
- Verifiability: The accounting information should provide similar results, if tested and examined by independent public accountants.
- Timeliness: As per the Securities Exchange Commission, companies should report the accounting information in the time it would influence the investors and creditors decisions, which is within 60 days of the accounting period of the company.
- Understandability: The accounting information should be concise, precise, interpretable, and able to comprehend.
To complete: The statements with the qualitative characteristics of accounting information
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Students have asked these similar questions
Below are the four underlying assumptions of generally accepted accounting principles.
Assumptions
Descriptions
1. Economic entity
2. Going concern
3. Periodicity
4. Monetary unit
a. A common denominator is needed to measure all business activities.
b. Economic events can be identified with a particular economic body.
c. In the absence of information to the contrary, it is anticipated that a business entity will continue to operate indefinitely.
d. The economic life of a company can be divided into artificial time intervals for financial reporting.
Required:Match each business assumption with its description.
Which of the following states that the business should use the same accounting methods from period to period?
a.
Materiality concept
b.
Consistency principle
c.
Disclosure principle
d.
Accounting conservatism
A business will construct its financial statements in a particular order because they are interrelated. This means that items formulated in an earlier statement feed into the subsequent statements, and changes to items on one financial statement can have compounding effects on the overall financial position of a company.
1. Which of the following is one reason the statement of owner's equity is prepared after the income statement?
2. Which of the following is one reason the statement of owner's equity is prepared before the balance sheet?
Chapter 2 Solutions
FINANCIAL ACCOUNTING>IC<
Ch. 2 - What is meant by the term operating cycle?Ch. 2 - Define current assets. What basis is used for...Ch. 2 - Prob. 3QCh. 2 - Prob. 4QCh. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - What do these classes of ratios measure? (a)...Ch. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - (a) What is the primary objective of financial...Ch. 2 - Merle Hawkins, the president of Pathway Company,...Ch. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Prob. 18QCh. 2 - What is the economic entity assumption? Give an...Ch. 2 - Prob. 20QCh. 2 - The following are the major balance sheet...Ch. 2 - Prob. 2.2BECh. 2 - Prob. 2.3BECh. 2 - Prob. 2.4BECh. 2 - Prob. 2.5BECh. 2 - Prob. 2.6BECh. 2 - Prob. 2.7BECh. 2 - Prob. 2.8BECh. 2 - Here are some qualitative characteristics of...Ch. 2 - Prob. 2.10BECh. 2 - Prob. 2.1ADIECh. 2 - Prob. 2.1BDIECh. 2 - Prob. 2.2DIECh. 2 - The following characteristics, assumptions,...Ch. 2 - Prob. 2.1ECh. 2 - The major balance sheet classifications are listed...Ch. 2 - Prob. 2.3ECh. 2 - Prob. 2.4ECh. 2 - Prob. 2.5ECh. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Prob. 2.8ECh. 2 - Nordstrom, Inc. operates department stores in...Ch. 2 - Prob. 2.10ECh. 2 - Prob. 2.11ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Prob. 2.1APCh. 2 - Prob. 2.2APCh. 2 - Prob. 2.3APCh. 2 - Prob. 2.4APCh. 2 - Prob. 2.5APCh. 2 - Prob. 2.6APCh. 2 - Prob. 2.7APCh. 2 - Prob. 2.8APCh. 2 - Prob. 2.1EYCTCh. 2 - Prob. 2.2EYCTCh. 2 - Prob. 2.3EYCTCh. 2 - Prob. 2.4EYCTCh. 2 - Prob. 2.7EYCTCh. 2 - Prob. 2.8EYCTCh. 2 - Prob. 2.9EYCTCh. 2 - ETHICS CASE At one time, Boeing closed a giant...Ch. 2 - In what ways does the format of a statement of...Ch. 2 - Prob. 2.2IFRSCh. 2 - Prob. 2.3IFRSCh. 2 - Prob. 2.4IFRSCh. 2 - Prob. 2.5IFRS
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