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MEC 42 - IA 3 > Ch. 7 - Notes Pt. 1 > Flashcards

Ch. 7 - Notes Pt. 1 Flashcards

1
Q

Provides information to those presented in the financial statements

A

Notes

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2
Q

Integral part of a complete set of financial statements

A

Notes

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3
Q

Complete structure of Notes:

A
  1. General information
  2. Statement of compliance with PFRSs
  3. Summary of significant accounting policies
  4. Breakdown of line items
  5. Other disclosures required by PFRSs
  6. Other disclosure not required by PFRSs but management deems relevant
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4
Q

Specific principles, rules & practices applied by an entity in preparing & presenting financial statements

A

Accounting policies

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5
Q

Hierarchy to be followed by management:

A

Shall:
1. Requirements in other PFRSs dealing with similar transactions
2. Conceptual Framework
May:
1. Pronouncements issued by other standard-setting bodies
2. Other accounting literature

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6
Q

PAS 8 permits change in accounting policy only if:

A

Change is:
1. required by PFRSs
2. results in reliable and more relevant information

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7
Q

Usually results from a change in a measurement basis

A

Change in accounting policy

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8
Q

Change in accounting policies are accounted for using the following order of priority:

A
  1. Transitional provision, if any
  2. Retrospective application, in the absence of transitional provision
  3. Prospective application, if retrospective application is impracticable
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9
Q

Specifically deals with that accounting policy

A

Transitional provision

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10
Q

Adjusting the opening balance of each affected component of equity

A

Retrospective application

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11
Q

Means cannot be done after making every reasonable effort to do so

A

Impracticable

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12
Q

If the other standard-setting body amends the adopted pronouncement and entity decides to adopt the amended version

A

Voluntary change in accounting policy

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13
Q

Voluntary change in accounting policy is accounted for by

A

Retrospective application

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14
Q

Change that results in financial statements that are those of a different reporting entity

A

Change in reporting entity

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15
Q

Change in reporting entity is limited mainly to:

A
  1. presenting combined financial statements in place of financial statements of individual entities
  2. changing specific subsidiaries that make up the group of entities
  3. changing the entities included in combined financial statements
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16
Q

Change in reporting entity is accounted for by

A

Retrospective application

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17
Q

PAS 8 mentions only 2 accounting changes:

A
  1. Change in accounting policy
  2. Change in accounting estimate
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18
Q

Many items in the financial statements cannot be measured with precision but only through

A

estimation

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19
Q

Essential part of financial reporting and does not undermine reliability of information

A

Estimates

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20
Q

Following requires estimation (5)

A
  1. NRVs
  2. Depreciation
  3. Bad debts
  4. FV of assets & liabilities
  5. Provisions
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21
Q

Adjustment for the carrying amount of asset/liability or amount of the periodic consumption that results from assessment of present status and expected future benefits

A

Change in accounting estimate

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22
Q

Results from changes on how expected inflows/outflows of economic benefits are realized from assets or incurred on liabilities

A

Change in accounting estimate

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23
Q

If change is difficult to distinguish between those two, change is treated as:

A

Change in accounting estimate

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24
Q

Change in accounting estimate is accounted for by

A

Prospective application

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25
Q

Recognizing the effects of the change in profit or loss

A

Prospective application

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26
Q

Misapplication of accounting policies, mathematical mistakes, or misinterpretations of facts, and fraud

A

Errors

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27
Q

Cause the financial statements to be misstated

A

Material errors

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28
Q

Fraud

A

Intentional errors

29
Q

Errors can be:

A
  1. Error of commission
  2. Error of omission
30
Q

Doing something wrong

A

Error of commission

31
Q

Not doing something that should have been done

A

Error of omission

32
Q

2 types of errors according to period of occurrence:

A
  1. Current period errors
  2. Prior period errors
33
Q

Errors in the current period that were discovered during or after the current period but before authorization of FS; SIMPLE CORRECTED BY CORRECTING ENTRIES

A

Current period errors

34
Q

Errors in one or more prior periods that were discovered either during or after the current period but before authorization of FS; CORRECTED BY RETROSPECTIVE RESTATEMENT

A

Prior period errors

35
Q

Applying new accounting policy as if policy had always been applied

A

Retrospective application

36
Q

Correcting a prior period error as if the error had never occurred

A

Retrospective restatement

37
Q

Closing entries have not yet been made; NOMINAL ACCOUNTS CAN STILL BE USED IN CORRECTING ENTRIES

A

‘Books still open’

38
Q

Closing entries have already been made; ONLY REAL ACCOUNTS ARE USED IN CORRECTING ENTRIES

A

‘Books closed’

39
Q

Types of Errors

A
  1. Errors in principle
  2. Clerical and similar errors
40
Q

Lack of knowledge of accounting standards, misuse of available information, or misinterpretation of accounting standards

A

Errors in principle

41
Q

Intentional misstatement of financial statements is called

A

Fraudulent financial reporting

42
Q

Include mathematical mistakes, oversights or misinterpretation of facts

A

Clerical and similar errors

43
Q

The number of digits is incorrectly increased or decreased

A

Transplacement error

44
Q

When digits in an amount are interchanged

A

Transposition error

45
Q

Accountant forgot to record a transaction

A

Error of omission

46
Q

Accountant recorded a transaction twice

A

Error of commission

47
Q

Erroneous credit is compensated by the erroneous debit

A

Compensating errors

48
Q

Bug in the computer program

A

Accounting system error

49
Q

Errors affecting both SOFP and SCI are either:

A

a. Counterbalancing errors
b. Non-counterbalancing errors

50
Q

Errors, if remained uncorrected are automatically corrected in next accounting period

A

Counterbalancing errors

51
Q

Errors, if remained uncorrected, are not automatically corrected in next accounting period

A

Non-counterbalancing errors

52
Q

Ending inventory : Profit

A

Direct relationship

53
Q

Beginning inventory & Purchases : COGS

A

Direct relationship

54
Q

Beginning inventory & Purchases : Profit

A

Inverse relationship

55
Q

Ending inventory : COGS

A

Inverse relationship

56
Q

Asset-related account : Profit

A

Direct relationship

57
Q

Asset-related account:

A

> Error on prepaid asset
Error on accrued income

58
Q

Liability-related account : Profit

A

Inverse relationship

59
Q

Liabilty-related account:

A

> Error on unearned income
Error on accrued expense

60
Q

Current assets - Current liabilities

A

Working Capital

61
Q

If current assets are understated, working capital is

A

understated

62
Q

If current liabilities are understated, working capital is

A

overstated

63
Q

Events, favorable and unfavorable, that occur between the end of reporting period and date when financial statements are authorize for issue

A

Events after the Reporting Period

64
Q

Date when management authorizes financial statements for issue regardless of whether it is final or subject to further approval

A

Date of authorization of the financial statements

65
Q

2 Types of Events after the Reporting Period

A
  1. Adjusting events after the reporting period
  2. Non-adjusting events after the reporting period
66
Q

Events that provide evidence of conditions that existed at the end of the reporting period

A

Adjusting events after the reporting period

67
Q

Events that are indicative of conditions that arose after the reporting period; disclosed if they are material

A

Non-adjusting events after the reporting period

68
Q

Disclosure in the notes:

A

a. Date of authorization for issue
b. Update on the disclosures that includes effects of adjusting events
c. Non-adjusting events that are material
i. nature of event
ii. estimate of its financial effect, or a statement that such an estimated cannot be made

MEC 42 - IA 3 (1 decks)

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