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Accounting Grade 12 > GAAP and IFRS > Flashcards

GAAP and IFRS Flashcards

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1
Q

What does GAAP stand for?

A

Generally Accepted Accounting Principles

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2
Q

What does IFRS stand for?

A

International Financial Reporting Standards

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3
Q

True or False: GAAP is used primarily in the United States.

A

True

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4
Q

True or False: IFRS is used in many countries around the world.

A

True

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5
Q

Fill in the blank: GAAP is a set of _____ for financial reporting.

A

rules

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6
Q

Fill in the blank: IFRS aims to provide _____ financial statements.

A

transparent

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7
Q

Which principle requires that expenses be matched with revenues?

A

Matching Principle

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8
Q

What is the primary objective of financial reporting under GAAP?

A

To provide useful information to users for decision making.

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9
Q

Multiple Choice: Which of the following is NOT a characteristic of financial statements under IFRS? A) Relevance B) Reliability C) Complexity D) Comparability

A

C) Complexity

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10
Q

What is the main difference between GAAP and IFRS?

A

GAAP is rule-based while IFRS is principle-based.

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11
Q

True or False: Under IFRS, companies can use the revaluation model for property, plant, and equipment.

A

True

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12
Q

What does the revenue recognition principle dictate?

A

Revenue should be recognized when it is earned and realizable.

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13
Q

Multiple Choice: Which of the following is a key feature of IFRS? A) Historical cost B) Fair value C) LIFO D) Specific identification

A

B) Fair value

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14
Q

Fill in the blank: Under GAAP, the _____ method is commonly used for inventory valuation.

A

FIFO

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15
Q

What is the time period assumption in accounting?

A

The assumption that a company’s financial activities can be divided into specific time periods.

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16
Q

True or False: Under GAAP, the cost of goods sold is calculated using the average cost method.

A

True

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17
Q

What is the going concern assumption?

A

The assumption that a business will continue to operate indefinitely.

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18
Q

Multiple Choice: Which principle states that businesses should record expenses in the same period as the revenues they help generate? A) Cost Principle B) Matching Principle C) Revenue Recognition Principle D) Full Disclosure Principle

A

B) Matching Principle

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19
Q

What is the full disclosure principle?

A

The principle that requires all information that affects the full understanding of a company’s financial statements to be disclosed.

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20
Q

Fill in the blank: Under IFRS, companies must present a _____ statement of comprehensive income.

A

single

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21
Q

What is the purpose of the statement of cash flows?

A

To provide information about a company’s cash inflows and outflows during a period.

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22
Q

True or False: GAAP allows the use of the LIFO inventory method.

A

True

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23
Q

What is the impairment of assets principle?

A

The principle that requires assets to be written down to their recoverable amount when the carrying amount exceeds it.

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24
Q

Multiple Choice: Which of the following is a key benefit of IFRS? A) Increased transparency B) Reduced complexity C) Enhanced comparability D) All of the above

A

D) All of the above

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25
What is the significance of the conceptual framework in accounting?
It provides the foundation for the development of accounting standards.
26
Fill in the blank: Under IFRS, assets must be recognized when it is probable that future _____ will flow to the entity.
economic benefits
27
What does the cost principle state?
Assets should be recorded at their cost at the time of acquisition.
28
True or False: The historical cost principle is emphasized in IFRS.
False
29
What is the role of the Financial Accounting Standards Board (FASB)?
To establish and improve GAAP in the United States.
30
Who is responsible for setting IFRS?
The International Accounting Standards Board (IASB).
31
Multiple Choice: Which of the following is NOT a qualitative characteristic of financial statements? A) Understandability B) Timeliness C) Objectivity D) Relevance
C) Objectivity
32
What is the primary focus of the IASB?
To develop a single set of high-quality global accounting standards.
33
Fill in the blank: Under GAAP, liabilities are recorded at their _____ value.
settlement
34
What does the term 'conservatism' refer to in accounting?
The practice of recognizing expenses and liabilities as soon as possible but revenues only when they are assured.
35
True or False: IFRS does not allow for the reversal of impairment losses.
False
36
What is the difference between current and non-current assets?
Current assets are expected to be converted to cash within one year, while non-current assets are not.
37
Multiple Choice: Which of the following is an example of a non-current liability? A) Accounts Payable B) Notes Payable C) Bonds Payable D) Unearned Revenue
C) Bonds Payable
38
What is the definition of 'materiality' in accounting?
The principle that financial information is material if omitting it would influence the decisions of users.
39
Fill in the blank: Under IFRS, the _____ model can be used for investment property.
fair value
40
What is the purpose of the notes to financial statements?
To provide additional details and context to the financial statements.
41
True or False: Under GAAP, all companies must prepare their financial statements on an accrual basis.
True
42
What is the accrual basis of accounting?
Recognizing revenues and expenses when they are incurred, regardless of when cash is exchanged.
43
Multiple Choice: Which accounting principle emphasizes that all transactions should be recorded in the financial statements? A) Economic Entity Assumption B) Full Disclosure Principle C) Revenue Recognition Principle D) Matching Principle
B) Full Disclosure Principle
44
What does the economic entity assumption state?
The business's financial activities must be kept separate from the owner's personal financial activities.
45
Fill in the blank: Under IFRS, companies must assess the _____ of their assets at each reporting date.
recoverable amount
46
What is the primary goal of harmonizing accounting standards globally?
To enhance comparability and transparency in financial reporting.
47
True or False: GAAP and IFRS are completely identical in all respects.
False
48
What is the significance of the statement of changes in equity?
It shows the movement in equity from transactions with owners and other events during a period.
49
Multiple Choice: Which of the following is a required financial statement under both GAAP and IFRS? A) Income Statement B) Statement of Financial Position C) Statement of Cash Flows D) All of the above
D) All of the above
50
What is the definition of 'revenue' in accounting?
The inflow of resources resulting from the sale of goods or services.
51
Fill in the blank: Under IFRS, the principle of _____ allows for the recognition of a revenue before cash is received.
control
52
What is the purpose of auditing financial statements?
To provide assurance that the financial statements are free from material misstatement.
53
True or False: The IFRS framework includes a definition of 'assets'.
True
54
What is the definition of 'liabilities' in accounting?
Obligations of the entity arising from past transactions that are expected to result in an outflow of resources.
55
Multiple Choice: Which of the following is NOT an asset? A) Cash B) Accounts Receivable C) Accounts Payable D) Inventory
C) Accounts Payable
56
Fill in the blank: The _____ principle states that assets should be recorded at the amount paid to acquire them.
cost
57
What is the difference between tangible and intangible assets?
Tangible assets have physical substance, while intangible assets do not.
58
True or False: Under IFRS, goodwill is not subject to systematic amortization.
True
59
What is the purpose of the management discussion and analysis (MD&A)?
To provide an overview of the company’s performance and future outlook.
60
Multiple Choice: Which of the following is a common method for valuing inventory under GAAP? A) FIFO B) LIFO C) Weighted Average C) All of the above
D) All of the above
61
What does the term 'financial position' refer to?
The financial condition of a company at a specific point in time.
62
Fill in the blank: The _____ statement shows a company's revenues and expenses over a specific period.
income
63
What is the primary purpose of financial reporting?
To provide information useful for making economic decisions.
64
True or False: IFRS allows companies to choose between different accounting policies.
True
65
What does the principle of 'substance over form' mean?
Transactions should be accounted for based on their economic reality rather than their legal form.
66
Multiple Choice: Which of the following is a characteristic of a liability? A) Future sacrifice of economic benefits B) Present obligation C) Result of past transactions D) All of the above
D) All of the above
67
Fill in the blank: The _____ principle requires that financial statements reflect the true economic reality of the company.
substance over form
68
What is the significance of the cash basis of accounting?
It recognizes revenues and expenses only when cash is exchanged.
69
True or False: The cash basis of accounting is not allowed under GAAP.
True
70
What is the role of the International Financial Reporting Standards Foundation?
To oversee the International Accounting Standards Board and promote the adoption of IFRS.
71
Multiple Choice: Which of the following is NOT a financial statement? A) Balance Sheet B) Profit and Loss Statement C) Statement of Changes in Equity D) Journal
D) Journal
72
What is the purpose of a trial balance?
To ensure that total debits equal total credits in the accounting records.
73
Fill in the blank: The _____ principle requires that all expenses be recognized in the period they are incurred.
matching
74
True or False: Under both GAAP and IFRS, the statement of cash flows is mandatory.
True
75
What is the significance of the auditor's report?
It provides an independent assessment of the fairness of the financial statements.
76
Multiple Choice: Which of the following is a key benefit of using GAAP? A) Consistency B) Flexibility C) Complexity D) Ambiguity
A) Consistency
77
What is the difference between retained earnings and dividends?
Retained earnings are profits reinvested in the company, while dividends are payments made to shareholders.
78
Fill in the blank: The _____ principle emphasizes that financial statements should be prepared with a clear understanding of the users' needs.
user-oriented
79
What is the role of the Financial Reporting Council?
To oversee the development of accounting and auditing standards in the UK.
80
True or False: IFRS allows the use of the fair value model for biological assets.
True
81
What is the significance of the accounting cycle?
It outlines the steps in the accounting process from transaction identification to financial statement preparation.
82
Multiple Choice: Which of the following is NOT a part of the accounting cycle? A) Journalizing B) Posting C) Auditing D) Financial Statement Preparation
C) Auditing
83
Fill in the blank: The _____ principle requires that financial statements be prepared on a consistent basis.
consistency
84
What is the impact of adopting IFRS on financial reporting?
It enhances comparability and transparency across international borders.
85
True or False: A company's financial statements must reflect both qualitative and quantitative information.
True
86
What is the definition of 'equity' in accounting?
The residual interest in the assets of the entity after deducting liabilities.
87
Multiple Choice: Which of the following accounts is classified as an asset? A) Accounts Receivable B) Accounts Payable C) Revenue D) Expense
A) Accounts Receivable
88
Fill in the blank: The _____ principle requires that the economic reality of transactions be reflected in financial statements.
substance over form
89
What is the main purpose of the statement of financial position?
To provide a snapshot of a company's assets, liabilities, and equity at a specific point in time.
90
True or False: The statement of cash flows is divided into operating, investing, and financing activities.
True
91
What is the purpose of the income statement?
To show a company’s profitability over a specific period.

Accounting Grade 12 (5 decks)

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