ACAE 14 REVIEWER

Quiz 1

Identification (15)

1. Published in Venice in 1494 included a 27-page, 36 short chapters on bookkeeping.

• Suma de Arithmetica, Geometria, Proprtioni et Proportionalita
2. The art of recording, classifying, summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of a financial character and interpreting the
results thereof.
• Accounting
3. An economic entity that produces and distributes goods or services primarily for profit.
• Business entity
4. The accounting process of preparing and distributing accounting reports to potential users of
accounting information and interpreting the significance of this processed information.
• Communication
5. Handling of accounts managed by a person entrusted with the custody and management of
property for the benefit of another.
• Fiduciary Accounting
6. Accounting for the national government and its instrumentalities, focusing attention on the
custody of public funds and the purpose or purposes to which such funds are committed.
• Government Accounting
7. Composed of CPAs who are professors of accounting in various colleges and universities. Their
task is to prepare entrants into the Accountancy Profession.
• Accounting Education
8. It means that in the absence of evidence to the contrary, the accounting entity is viewed as
continuing in operations indefinitely.
• Going Concern
9. It is a summary of the terms and concepts that underly the presentation and preparation of
financial statements for external users.
• Conceptual Framework
10. They are interested in the information that enables them to determine whether their loans, and
the interest attaching to them will be paid when due.
• Lenders
11. It is the availability of cash in the near future to cover currently maturing obligations.
• Liquidity
12. It requires that the financial information should be related or pertinent to the economic
decision.
• Relevance
13. It is a practical rule in accounting which dictates that strict adherence to GAAP is not required
when the items are not significant enough to affect the evaluation, decision and fairness of the
financial statements.
• Materiality
 14. It requires that relevant information should be presented in a way that facilities understanding
and avoids erroneous implication.
• Completeness
15. It means checking the inputs to a model, formula or other technique and recalculating the
inputs using the same methodology.
• Indirect Verification

Enumeration (15)

Three aspects of communication process of accounting

1. Recording

2. Classifying

3. Summarizing

Fundamental qualitative characteristics

4. Relevance

5. Faithful representation

Users of Financial Information (Other Users)

6. Employees

7. Customers

8. Government and their agencies

9. Public

Enhancing qualitative characteristics

10. Comparability

11. Understandability

12. Verifiability

13. Timelines

Two kind of Verification

14. Direct verification

15. Indirect verification

• Discuss on your on word Fundamental qualitative characteristics

• Discuss on your on word Ingredients of faithful representation

• Discuss on your on word Areas of Professional Accounting Practice

 • Discuss on your on word Underlying Assumptions

Quiz 2

Identification (15)

1. It is decrease in economic benefits during the accounting period in the form of an outflow or
decrease in asset or increase in liability that results in decrease in equity, other than distribution
to equity participants.
• Expense
2. It is the residual interest in the assets of the entity after deducting all of its liabilities.
• Equity
3. It is increase in economic benefit during the accounting period in the form of inflow or increase
in asset or decrease in liability that results in increase in equity, other than contribution from
equity participants.
• Income
4. These are present obligations of the entity arising from past transactions or events the
settlement of which is expected to result in an outflow from the entity of resources embodying
economic benefits.
• Liabilities
5. These are defined as resources controlled by the entity as a result of past transactions or events
and from which future economic benefits are expected to flow to the entity.
• Assets
6. It is the process of determining the monetary amounts at which the elements of the financial
statements are to be recognized and carried in the statement of financial position and income
statement.
• Measurement
7. It is the discounted value of the future net cash inflows that the item is expected to generate in
the normal course of business. This is also known as future exchange price.
• Present value
8. It is the amount of cash or cash equivalent that would have to be paid if the same or equivalent
assets were acquired currently. This is also known as current purchase exchange price.
• Current cost
9. It is the amount of cash or cash equivalent that could be obtained by selling the asset in an
orderly disposal. This is also known as current sale exchange price.
• Realizable cost
10. It is the amount of cash or cash equivalent paid or fair value of the consideration given to
acquire an asset at the time of acquisition. This is also known as past purchase exchange price.
• Historical cost
11. It is the traditional presentation of an income statement.
• Transactional approach
12. It means that net income occurs only after the capital used from the beginning of the year as at
the beginning.
 • Capital maintenance approach
13. It is the quantitative measure of the physical productive capacity to produce goods and services.
• Physical capital
14. It is the absolute monetary amount of the net assets contributed by shareholders and the
amount of the increase in net assets resulting from earnings retained by the entity.
• Financial capital
15. These are the end product of the financial reporting process and the means by which the
information gathered and processed is periodically communicated to users.
• Financial statements

Elements of Financial Statements

1. Assets

2. Liabilities

3. Equity

4. Income

5. Expense

Concepts of capital maintenance

1. Transactional approach
2. Capital maintenance approach

The four measurement bases or financial attributes

1. Historical cost
2. Current cost
3. Realizable cost
4. Present value

Complete set of financial statements

1. Statement of financial position

2. Statement of profit or loss and other comprehensive income
3. Statement of changes in equity
4. Statement of cash flows
5. Notes
6. Additional statement of financial position

General Features of financial statements

1. Fair Presentation and Compliance with PFRSs

2. Going Concern
3. Accrual Basis of Accounting
4. Materiality and Aggregation
5. Offsetting
6. Frequency of reporting
7. Comparative Information
8. Consistency of presentation

• Discuss Asset recognition principle.

• Discuss Liability recognition principle.

• Discuss Income recognition principle.

• Discuss Expense recognition principle.