Intermediate accounting I

Week one assignment

Noeisys Perez Diaz

Florida National University

CHAPTER 2

QUESTION #1

The term conceptual framework is basically used in the field of scientific research. Conceptual

framework means the general representation of all the information that is handled in the research

process.

QUESTION #2

The International Accounting Standards Board is currently in the process of updating its

conceptual framework.

This version of the Conceptual Framework includes the first two chapters published by the

Council as a result of the first phase of your draft conceptual framework — Chapter 1 The

purpose of purposeful financial information General and Chapter 3 Qualitative characteristics of

useful financial information. Chapter 2 will deal with concept of reporting entity. The Council

published a draft standard on this subject in March 2010 with a period to receive comments that

ended on July 16, 2010. Chapter 4 contains the remaining text of the Framework Conceptual

(1989)

QUESTION #3

A conceptual framework is like the constitution that leads the accounting system. The conceptual

framework consists of three. The first level presents the objectives of financial information. The

second level is presented (A) Qualitative characteristics of accounting information and (B)

Elements of the financial statements. While the third level is presented, the concepts of

recognition and measurement: (Assumptions, Principles and Restrictions).

QUESTION #4

The financial information has as fundamental objectives:

o Know and demonstrate the resources controlled by an economic entity, the obligations it has to

transfer resources to other entities, the changes that such resources would have experienced and

the result obtained during the period.

o Predict cash flows.

o Support administrators in the planning, organization and direction of business.

o Make decisions regarding investments and credit.

o Evaluate the management of the administrators of the economic entity.

o Exercise control over the operations of the economic entity.

o To base the determination of tax charges, prices and rates.

o Assist in the conformation of national statistical information, and

o Contribute to the evaluation of the social benefit or impact that the economic activity of an

entity represents for the community.

QUESTION #5

In order to adequately meet your objectives, the accounting information must be understandable

and useful. In certain cases it is also required that the information be comparable.

The information is understandable when it is clear and easy to understand.

The information is useful when it is relevant and reliable.

The information is relevant when it has feedback value, prediction value and is timely.

The information is reliable when it is neutral, verifiable and to the extent that it faithfully

represents economic facts.

The information is comparable when it has been prepared on a uniform basis.

QUESTION #6

Organizations must unanimously adopt a decision-making framework to inform what they

should be doing.

Organizations must measure and reinforce key behaviors that influence the decision making of

their employees.

Organizations need governance to connect the framework and these behaviors. Governance must

continually measure employee adherence to this framework and these key behaviors, assess how

well this framework works, hold employees accountable for their decisions and share best

practices throughout the organization.

QUESTION #7

COMPLETENESS deals with whether all transactions and accounts that should be in the

financial statements are included. For example, management asserts that all purchases of goods

and services are included in the financial statements. Similarly, management asserts that notes

payable in the balance sheet include all such obligations of the entity.

The next accounting concept is materiality. Only material items are included in the financial

statements, which might have an impact on the decisions made by the users of the financial

statements.
Free from error: means there are no errors and inaccuracies in the description of the phenomenon

and no errors made in the process by which the financial information was produced.

QUESTION #8

Improvement characteristics: comparability, understandability, verifiability and opportunity.

QUESTION #9

They are elements of the financial statements, assets, liabilities, equity, income, costs, expenses,

monetary correction

QUESTION #10

economic entity assumption

Indicates that personal and business record keeping should be separately maintained.

Going concern assumption

Rationale why plant assets are not reported at liquidation value (do not use historical cost

principle)

Periodcity assumption

Separates financial information into time periods for reporting purposes

Monetary unit assumption

Assumes that the dollar is the "measuring stick" used to report on financial performance.

QUESTION #11
Historical Cost means the actual price at which the transaction was done. All the commodity or

assets present in the balance are needed to be disclosed at historical value. Historical cost is

globally accepted as a measure to record the property plant and equipment. It will always show

asset on a historical basis which will be considered for calculating depreciation and for other

statutory matters.

Fair value means the actual value of the asset in the market as on the day. Fair value is highly

dependent on the demand, availability, perishability, market, set of assumptions etc.

Professionals are required to determine the fair value of any asset, commodity or intangibles.

Fair value is also known as intrinsic value, actuarial value, market price etc.

QUESTION #12

The basic principle is that an entity must recognize revenue to reflect the transfer of goods or

services (assets) due to customers for an amount that represents the expected compensation as

consideration.

QUESTION #13

The income accrued in each accounting period must be associated with the costs and expenses

incurred to produce such income, making simultaneous registration in the respective income

statements.

Association. The costs and expenses incurred to produce such income must be associated with

the income accrued in each period, recording each other simultaneously in the income

statements. When a game cannot be associated with an income, cost or expense, correlative and

it is concluded that it will not generate benefits or economic sacrifices in other periods, it must be

recorded in the income statements in the current period.

QUESTION #14

The cost of the product is the cost attributable to the product, that is, the cost that can be traced to

the product and is part of the inventory values. On the contrary, the Cost of the Period is just the

opposite of the cost of the product, since they are not related to production, they cannot be

distributed to the product, since it is charged to the period in which they arise.

QUESTION #15

Principle of full disclosure If certain information is important to an investor or lender using the

financial statements, that information must be disclosed in the state or in the notes to the state. It

is due to this basic accounting principle that numerous pages of "notes" often bind to the

financial statements.

QUESTION #16

a cost constraint arises when it is excessively expensive to report certain information in the

financial statements. When it is too expensive to do so, the applicable accounting frameworks

allow a reporting entity to avoid the related reporting. The intent of allowing the cost constraint

is to keep businesses from incurring excessive costs as part of their financial reporting

obligations, especially in comparison to the benefit obtained by readers of the financial

statements.