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43 Cards in this Set
- Front
- Back
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Financial Statements |
are the means by which the information accumulated and processed in financial accounting is periodically communicated to the users.
are the end product or main output of the financial accounting process.
are a structured financial representation of the financial position and financial performance of an entity. are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs. shall be presented at least annually. |
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objective of financial statements |
is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. |
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Statement of financial position |
is a formal statement showing the three elements comprising financial position namely, assets, liabilities and equity. investors, creditors and other statement users analyze this to evaluate such factors as liquidity, solvency and the need of the entity for additional financing. |
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Asset |
is an economic resource controlled by an entity as a result of past event. |
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current assets noncurrent assets |
assets are classified only into two, namely: |
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operating cycle |
of an entity, is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. |
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Property, plant and equipment |
tangible assets which are held by an entity for use in production or supply of goods and services, for rental to others, or for administrative purposes, and are expected to be used during more than one period. |
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investment |
an asset held by an entity for the accretion of wealth through capital distribution, such as interest, royalties, dividends and rentals, for capital appreciation or for other benefits to the investing entity such as those obtained through trading relationships. |
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intangible assets |
an identifiable nonmonetary asset without physical substance. |
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other noncurrent assets |
are those assets that do not fit into the definition of the noncurrent assets. |
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Liability |
is a present obligation of an entity to transfer an economic resource as a result of past event. |
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Covenants |
are often attached to borrowing agreements which represent undertakings by the borrower. are actuallt restrictions on the borrower as to undertaking further borrowings, paying dividends, maintaining specified level of working capital and so forth. |
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equity |
is the residual interest in the assets of the entity after deducting all of its liabilities. means "net assets" or total assets minus liabilities. |
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shareholder's equity |
is a residual interest of owners in the net assets of a corporation measured by the excess of assets over liabilities. |
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Notes to financial statements |
provide narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for recognition. are used to report information that does not fit into the body of the financial statements in order to enhance the understandability of the financial statements. |
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report form account form |
there are two customary forms in presenting the statement of financial position, namely: |
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report form |
this form sets forth the three major section in a downward sequence of assets, liabilities and equity. |
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account form |
the assets are shown on the left side and the liabilities and equity on the right side of the statement of financial position. |
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b. statement of changes in financial position |
The major financial statements include all, except a. statement of financial position b. statement of changes in financial position c. statement of comprehensive income d. statement of changes in equity. |
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a. to provide information about the financial position, financial performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions. |
What is the objective of financial statements? a. to provide information about the financial position, financial performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions. b. to present a statement of financial position and a statement of comprehensive income. c. to present relevant, reliable, comparable and understandable information to investors. d. to present financial statements in accordance with all applicable standards. |
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d. nature of business activities |
To meet the objective of financial reporting, financial statements should provide information about all of the following, except a. assets, liabilities and equity b. income and expenses, including gains and losses c. contributions by and distribution to owners in their capacity as owners. d. nature of business activities |
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a. annually |
Financial statements must be prepared at least a. annually b. quarterly c. semiannually d. every two years |
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d. the fact that similar entities have done so |
When entity changed the end of reporting period longer or shorter than one year, the entity shall disclose all, except a. period covered by the financial statements b. the reason for using a longer or shorter period c. the fact that amounts presented are not entirely comparable d. the fact that similar entities have done so |
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c. twelve months |
When there is much variability, the operating cycle is measured at a. the mean value b. the median value c. twelve months d. three years |
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a. is the time between the acquisition of materials entering into a process and their realization in cash |
The operating cycle of an entity a. is the time between the acquisition of materials entering into a process and their realization in cash b. is the period of time normally elapsed in converting trade receivables back into cash c. is a period of one year d. refers to the seasonal variation experienced by entities. |
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d. the asset is cash or a cash equivalent that is restricted to settled a liability for more than twelve months after the reporting period. |
An entity shall classify an asset as current under all of the following conditions, except a. the entity expects to realize the asset or intends to sell or consume it within the entity's normal operating cycle b. the entity holds the asset for the purpose of trading c. the entity expects to realize the asset within twelve months after the reporting period. d. the asset is cash or a cash equivalent that is restricted to settled a liability for more than twelve months after the reporting period. |
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d. the entity has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. |
An entity shall classify a liability as current when under all of the following conditions, except a. the entity expects to settle the liability within the entity's normal operating cycle. b. the entity holds the liability primarily for the purpose of trading. c. the liability is due to be settled within twelve months after the reporting period. d. the entity has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. |
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a. trade payables and accruals for employees and other operating cost |
Which obligations are classified as current even if these are due to be settled after more than twelve months from the end of the reporting period? a. trade payables and accruals for employees and other operating cost b. current portion of interest-bearing liabilities c. bank overdrafts d. dividends payable |
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a. supplies goods or services within a clearly identifiable operating cycle. |
Current and noncurrent presentation of assets and liabilities provides useful information when the entity a. supplies goods or services within a clearly identifiable operating cycle. b. is a financial institution c. is a public utility d. is a nonprofit organization |
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a. financial institution |
A presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current and noncurrent presentation for a. financial institution b. public utility c. manufacturing entity d. service provider |
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a. current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities. |
In the Philippines, the common practice is to present in the statement of financial position a. current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities. b. noncurrent assets before current assets, noncurrent liabilities before current liabilities and equity after liabilities. c. current assets before noncurrent assets, noncurrent liabilities before current liabilities and equity after liabilities. d. noncurrent assets before current assets, current liabilities before noncurrent liabilities and equity after liabilities. |
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d. when it is refinanced on a long-term basis on or before the end of reporting period. |
A financial liability is due within twelve months after the reporting period shall be classified as noncurrent a. when it is refinanced on a long-term basis before the issue of financial statements. b. when the entity has no discretion to refinance for at least twelve months c. when it is refinanced on a long-term basis after the end of reporting period d. when it is refinanced on a long-term basis on or before the end of reporting period. |
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c. current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach |
When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as a. current under all circumstances b. noncurrent under all circumstances c. current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach d. noncurrent if the lender has agreed after the reporting period to provide a grace period for at least twelve months after the reporting period. |
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d. must make the current and noncurrent presentation, except when a presentation based on liquidity provides information that is reliable and more relevant. |
In presenting a statement of financial position, an entity a. must make the current and noncurrent presentation b. must present assets and liabilities in order of liquidity c. must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation d. must make the current and noncurrent presentation, except when a presentation based on liquidity provides information that is reliable and more relevant. |
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a. current assets |
Assets to be sold, consumed or realized as part of the normal operating cycle are a. current assets b. noncurrent assets c. classified as current or noncurrent in accordance with other criteria d. noncurrent investment |
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c. current liabilities |
Liabilities that an entity expects to settle within the normal operating cycle are classified as a. noncurrent liabilities b. current or noncurrent liabilities in accordance with other criteria c. current liabilities d. equity |
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d. noncurrent assets |
In which section of the statement of financial position should cash that is restricted for the settlement of a liability due 18 months after the reporting period be presented? a. current assets b. equity c. noncurrent liabilities d. noncurrent assets |
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a. current liabilities |
In which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time be presented? a. current liabilities b. current assets c. noncurrent liabilities d. noncurrent assets |
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c. noncurrent liabilities |
An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented? a. current liabilities b. current assets c. noncurrent liabilities d. noncurrent assets |
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a. investment property |
Which of the following must be included on the face of the statement of financial position? a. investment property b. number of shares authorized c. contingent asset d. shares in an entity owned by that entity |
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d. contingent liability |
Which of the following is not required to be presented as minimum information on the face of the statement of financial position? a. investment property b. investment accounted under the equity method c. biological assets d. contingent liability |
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d. deferred tax liability |
Which of the following must be included as a line item in the statement of financial position? a. contingent asset b. property, plant and equipment analyzed by class c. share capital and reserves analyzed by class d. deferred tax liability |
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d. a revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement. |
Which statement about the statement of financial position is not true? a. biological assets should be reported in the statement of financial position b. the number of shares authorized for issue should be reported in the statement of financial position or the statement of changes in equity or in notes c. provisions should be recognized in the statement of financial position d. a revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement. |
