Chapter 1

Question 1

A conceptual framework

Answer 1

A conceptual framework is a document outlining the main objectives and fundamental principles of a set of financial statements.

Question 2

Fundamental qualitative characteristics

Answer 2

Relevance

Faithful representation

Question 3

Enhancing qualitative characteristics

Answer 3

Compatibility
verifiability
timeliness
understandability

Question 4

Going concern

Answer 4

Going concern is the underlying assumption when preparing the financial statement. The assumption that the reporting entity will continue into the for seeable future at least 12 months.

Question 5

Consistency

Answer 5

Items should be treated in the same way year-on-year

Question 6

The duality concept

Answer 6

Every transaction has two equal effects

Question 7

The business entity concept

Answer 7

Every business is regarded as a separate entity distinct from its owner

Question 8

Accounting period convention

Answer 8

12 months

Question 9

The money measurement concept

Answer 9

Only items to which a monetary value can be attributed are recorded in the financial statements

Question 10

Substance over form

Answer 10

The economic substance of the transaction should be recorded rather than simply its legal form

Question 11

Historical cost

Answer 11

This means that transactions are recorded at their original purchase cost