ACF100, Week 2 Flashcards
(32 cards)
Q1: What is the going concern concept?
A: It assumes the business will continue operating into the foreseeable future.
Q2: How are assets valued under the going concern concept?
A: At historical cost using normal accounting rules.
Q3: How are assets valued if the business is not a going concern?
A: At net realisable value — the amount that could be received if the assets were sold today.
Q4: What does the accruals concept state?
A: Income and expenses are recorded when they occur, regardless of when cash is exchanged.
Q5: What is the matching concept?
A: It matches expenses with the revenues they helped generate in the same accounting period.
Q6: What is the historical cost concept?
A: Assets and liabilities are recorded at their original purchase price.
Q7: What is the money measurement concept?
A: Only transactions measurable in monetary terms are recorded in the accounts.
Q8: What is the entity concept?
A: The business is treated as separate from its owner for accounting purposes.
Q9: What is the time period concept?
A: The life of a business is divided into specific periods (e.g., months or years) for reporting.
Q10: What are accounting standards?
A: Technical rules that specify how to recognise, measure, and present transactions.
Q11: What are accounting policies?
A: The specific accounting methods chosen by an entity within the standards.
Q12: Who sets international accounting standards?
A: The International Accounting Standards Board (IASB).
Q13: Why are accounting standards important?
A: They ensure comparability, reliability, and consistency in financial reporting across firms and countries.
Q14: What are the two fundamental qualitative characteristics of accounting info?
A: Relevance and faithful representation.
Q15: What are the enhancing qualitative characteristics?
A: Comparability, verifiability, timeliness, and understandability.
Q16: What is meant by relevance in accounting?
A: Information that can influence decisions by helping users make predictions or confirm outcomes.
Q17: What is faithful representation?
A: Information that fully, neutrally, and accurately represents what it claims to represent.
Q18: What is verifiability?
A: Different users can reach the same conclusion based on the same evidence (e.g., auditors verify accuracy).
Q19: What is timeliness?
A: Information is provided in time to be useful for decision-making.
Q20: What is understandability?
A: Financial information should be clear, concise, and usable even by non-experts.
Q21: What are the two main types of assets?
A: Current assets and non-current assets.
Q22: What distinguishes a current asset?
A: It is expected to be used or converted to cash within 12 months.
Q23: What are non-current assets?
A: Long-term assets held for more than one year, such as property, plant, and equipment.
Q24: What are liabilities?
A: Obligations to pay another party, typically cash or services.
