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Explore fundamental qualitative characteristics of accounting information: relevance and faithful representation, crucial for accurate financial insights.
the qualitative characteristic that enables users to identify and understand similarities in, and differences among, items
i.e it can be used to confirm past events
93. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
98. The qualitative characteristic that allows for valid comparisons between different entities is:
The life of a company may be divided into artificial time periods so net income can be measured for a specific period of time
57. What qualitative characteristic of accounting information means that it can be verified by independent parties?
Accounting info must represent what it is meant to representIt is faithfully represented if it is complete, neutral and free from material errorCompleteness - does it include all information necessary for a user to understand what is being reportedNeutrality - if the information biased? financial info must not be weighted, emphasised or manipulated to increase the profitability or faviourability by usersFreedom from error- has the information been processed and reported correctly
Information is available to users before it loses its ability to influence decisions
43. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
Common set of rules and conventions developed to guide the preparation of financial statements, to make them easier to use over time and across companies
44. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
82. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
26. What qualitative characteristic of accounting information refers to its capacity to make a difference in the decisions of users?
16. The qualitative characteristic that ensures information is complete, unbiased, and free from material error is:
14. When accounting information is timely and can influence decisions, it possesses which qualitative characteristic?
Accountants should take care to avoid overstating assets or income when they prepare financial statements
62. What qualitative characteristic of accounting information ensures that it can be easily
96. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
38. The qualitative characteristic that allows for valid comparisons between different entities is:
9. When information is free from material error, it aligns with which qualitative characteristic?
11. What qualitative characteristic of accounting information ensures that it can be used to predict future outcomes with a reasonable degree of certainty?
63. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
71. The qualitative characteristic that allows for the making of predictions about future outcomes is:
classifying, characterizing, and presenting information clearly and concisely
The financial statements should enable users to compare the performance of the company from one period to another or compare performance or father company with its competitors.Consistency: use of the same methods from the same items, either from period to period or in a single period across entities
45. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Information that has the ability to influence decisions made by the users of the information
72. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
31. When
19. When financial information can be verified through inspection, measurement, and review, it aligns with which qualitative characteristic?
41. The qualitative characteristic that allows for the making of predictions about future outcomes is:
A company must account for and report its financial results in monetary terms
37. What qualitative characteristic of accounting information means that it can be verified by independent parties?
23. The qualitative characteristic that allows users to make valid comparisons between different reporting periods is:
32. What qualitative characteristic of accounting information means that it is free from material error and bias?
67. What qualitative characteristic of accounting information means that it can be verified by independent parties?
49. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
79. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
34. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
15. Which qualitative characteristic of accounting information means that it is stable and consistent over time?
5. The qualitative characteristic of accounting information that ensures it is complete, neutral, and free from material error is:
Going concern AccrualsConsistency Prudence
Financial statements are prepared on the assumption that the company will continue in business for the foreseeable future.Where there is intention or belief that company will cease to operate then separate rules will apply
Current Assets / Current Liabilities
Company that is easily formed, has tax advantages, and is completely controlled by owner, BUT has personal liability and limited life
Net Sales - Cost of Goods Sold
An attempt to provide a coherent set of accounting principles and concepts to guide the development of consistent accounting standards
53. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
i.e it can be used as an input to predict future outcomes
Use similar policies from one financial period to another Where there is a change, explain reason for and effect of the change
64. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
Cash Flows from Operating ExpensesCash Flows from Investing ExpensesCash Flows from Financing Expenses
100. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
Relevance & Faithful Representation
87. What qualitative characteristic of accounting information means that it can be verified by independent parties?
85. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Users who have a reasonable knowledge of accounting and business can, with reasonable study effort, comprehend the meaning of the information
Clarify and expand upon the information presented in the financial statements
84. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
Financial information is understandable if it is presented clearly and concisely, using recognisable classification and descriptions. The significance of information can be perceived by the user . Terminology should be simplified as much as possible
65. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
13. Which qualitative characteristic of accounting information refers to the faithful depiction of the economic substance of a transaction?
40. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
Management's explanation used to highlight favorable and unfavorable trends and significant risks facing the company
73. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
having information available to decision makers in time to be capable of influencing their decisions
Comparibility Verifiability Timeliness Understandability
59. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
51. The qualitative characteristic that allows for the making of predictions about future outcomes is:
48. The qualitative characteristic that allows for valid comparisons between different entities is:
7. What is the primary goal of enhancing the qualitative characteristics of accounting information?
2. When financial information is capable of making a difference in the decisions of users, it possesses which qualitative characteristic?
6. Which qualitative characteristic of accounting information ensures that it is available to users before it loses its capacity to influence decisions?
20. Which qualitative characteristic of accounting information means that it should not favor one set of users over another?
encompass all qualitative aspects; see page 51
55. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
99. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
Company that can raise money easily, transfer ownership easily, and has limited liability, BUT is more complex to organize and has higher taxes
68. The qualitative characteristic that allows for valid comparisons between different entities is:
54. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
70. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
22. What qualitative characteristic of accounting information means that it can be reproduced by independent observers?
24. Which qualitative characteristic of accounting information relates to the absence of error and bias?
Information is capable of making a difference in a business decisionMaterial information that has predictive or confirmatory value
58. The qualitative characteristic that allows for valid comparisons between different entities is:
83. The characteristic of accounting information that ensures it remains relevant and reliable over time is:
80. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
35. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Information allows users to identify similarities and differences between two or more items
78. The qualitative characteristic that allows for valid comparisons between different entities is:
Financial information is material if excluding it or misstating it could influence users decision makingExampleError of £10m in expense item. Overall profit £500m . Error is not material at 2% profitError of £10m in expense item. Overall profit £20m . Error is material at 50% profit
Economic Entity, Continuity (Going Concern), Time Period, & Monetary Unit
76. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
U.S. organization with the power to set accounting rules for publicly traded companies
33. The qualitative characteristic that ensures that financial information is available to users before it loses its relevance is:
74. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
17. Which qualitative characteristic of accounting information is associated with the ability to present it in a clear and concise manner?
60. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
Information should portray the economic event that it is intending to portray completely, accurately, and without biasInformation should be complete, neutral, and free from error
46. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
27. Which qualitative characteristic of accounting information ensures that it remains relevant and reliable over time?
Relevance. Information is relevant if it is capable of making a difference to the decision made by users (it is capable of this if it has predictive value or confirmatory value) Faithful representation. Information must faithfully represent the substance of what it purports to represent . a faithful representation is, to the maximu extent possible, complete, neutral and free from error
Historical Cost, Revenue Recognition, Expense Recognition (Matching), & Conservatism
89. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
information faithfully represents the economic phenomena it purports to represent
Globally used accounting standards
Revenues related to the financial year are recorded in the income statement whether the company received the revenue or not ( e.g credit sales)Expenses related to the financial year are recorded in the income statement whether the company paid the expense or not .Annual rent is £120, company only paid 100 Recorded expense in income statement is £120
Current Assets - Current Liabilities
In the absence of information to the contrary, it should be assumed that a company will continue to operate indefinitely
Net Income / [Net] Sales Revenue
75. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
47. What qualitative characteristic of accounting information means that it can be verified by independent parties?
Accounting information should be made available to users in time to support their decision makingGenerally, the older the information is the less relevant it is for users decision making
Gross Margin - Operating Expenses
Revenue is to be recognized or recorded in the period in which it is earned and the collection of cash is reasonably assured
86. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
Company that has tax advantages and access to resources and skills of partners, BUT has shared control, personal liability, and limited life
no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process
42. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
29. The qualitative characteristic that allows for the making of predictions about the future is:
Comparability, Verifiability, Timeliness, & Understandability
52. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
The primary accounting standard setter in the U.S.U.S. organization to whom the power to set accounting rules for publicly traded companies has been delegated
88. The qualitative characteristic that allows for valid comparisons between different entities is:
Each company is accounted for separately from its owners
92. What qualitative characteristic of accounting information ensures that it can be easily comprehended by users?
Inclusion of a degree of caution in accounting judgements under conditions of uncertainty AVOID. Over statements of assets. Under statements of liabilities ...because both of these will lead to over statement of profit
21. The characteristic of accounting information that makes it capable of influencing decisions by users is:
61. The qualitative characteristic that allows for the making of predictions about future outcomes is:
94. Which qualitative characteristic of accounting information relates to the absence of favoritism towards any particular group of users?
Beginning Retained Earnings+ Net Income- Dividends
69. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
1. Which fundamental qualitative characteristic of accounting information ensures that financial information is free from error and bias?
18. The qualitative characteristic that allows financial information to be compared across different entities is:
An expense must be recorded and reported in the same period as the revenue that it helped generate
50. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
all information necessary for a user to understand the phenomenon being depicted
without bias in the selection or presentation of financial information
The activities of a company are initially measured at the exchange price at the time the activity occurs
77. What qualitative characteristic of accounting information means that it can be verified by independent parties?
3. What fundamental qualitative characteristic of accounting information means that it must be capable of being understood by users who have a reasonable knowledge of business and economic activities?
30. Which qualitative characteristic of accounting information ensures that it is presented in a manner that is easily understandable by users?
97. What qualitative characteristic of accounting information means that it can be verified by independent parties?
66. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
Can different knowledgable and independent observers reach consensus (broad, although not necessarily complete agreement) that a particular depiction is a faithful representation?. Direct verification by auditorsVerification by reference to external sources or comparisons
Debits: Expenses, Assets, DividendsCredits: Revenues, Liabilities, Stockholders' Equity
8. Which characteristic of accounting information indicates that it is a faithful representation of the underlying economic events?
10. Which qualitative characteristic of accounting information refers to the ability of users to confirm the accuracy of financial information?
56. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
95. The ability of accounting information to faithfully represent the financial position and performance of an entity is associated with which qualitative characteristic?
Opinion on whether the financial statements fairly represent the financial position of the company
25. When accounting information faithfully represents the economic substance of transactions, it adheres to which qualitative characteristic?
28. When accounting information is capable of being verified through independent sources, it aligns with which qualitative characteristic?
. The main users of financial statements . The purpose of financial statements . The qualities financial information should have The main elements of financial statements and how they should be defined, recognised and measured
81. The qualitative characteristic that allows for the making of predictions about future outcomes is:
the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities
91. The qualitative characteristic that allows for the making of predictions about future outcomes is:
Independent parties can agree on the measurement of the activity
39. Which qualitative characteristic of accounting information ensures that it is free from error and bias?
12. The ability of accounting information to remain free from bias or prejudice is associated with which qualitative characteristic?
36. When accounting information is stable and consistent over time, it adheres to which qualitative characteristic?
90. When accounting information can be verified through inspection and measurement, it adheres to which qualitative characteristic?
International organization that sets accounting standards
4. Which qualitative characteristic of accounting information relates to the ability to compare financial information from one period to another and with other companies?
The benefit received from accounting info should be greater than the cost of providing that info
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