Test bank solution manual of ch02 the accounting information system (2)
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Test bank solution manual of ch02 the accounting information system (2)
2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)ow from the objective of financial reporting—to provide information that IS useful in making business and economic decisions. The conceptual framework supports the development of generally accepted accounting principles (GAAP) and provides a consistent body of thought for financial reporting. An und Test bank solution manual of ch02 the accounting information system (2)erstanding of the conceptual framework will provide a logical structure to financial accounting that will help in understanding complex accounting staTest bank solution manual of ch02 the accounting information system (2)
ndards.2The conceptual framework identifies two fundamental qualitative characteristics—relevance and faithful representation Relevant information is 2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)n is also material. Faithfully represented information portrays the economic event it intends to portray. Faithfully represented information should be complete (includes all necessary information for the user to understand the economic event), neutral (unbiased), and free from error (as accurate as Test bank solution manual of ch02 the accounting information system (2)possible).In addition to the fundamental qualitative characteristics, the FASB has identified four enhancing characteristics—comparability, verifiabilTest bank solution manual of ch02 the accounting information system (2)
ity, timeliness, and understandability. Comparable information allows external users to Identify similarities and differences between two or more item2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)able information describes a situation in which independent parties can reach a consensus on the measurement of the activity Information is timely if it is available to users before it loses its ability to influence decisions. Finally, if users who have a reasonable knowledge of accounting and busin Test bank solution manual of ch02 the accounting information system (2)ess can. with reasonable study effort, comprehend the meaning of the information, it is considered understandable.3Tradeoffs are often necessary betweTest bank solution manual of ch02 the accounting information system (2)
en the qualitative characteristics. For example, the most relevant information may not be able to be faithfully represented. Similarly, a change in ac2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)information that can be faithfully represented.4Comparability refers to the ability to compare information across different companies or with similar information about the same company for another time period. Consistency refers to the use of the same accounting principles for the same items, either Test bank solution manual of ch02 the accounting information system (2) from one time period to another time period within a company or in a single period across companies.5The cost constraint limits the ability of a compTest bank solution manual of ch02 the accounting information system (2)
any to provide useful information. The cost constraint refers to the idea that some information that is useful would be too expensive for the company 2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)tinuity (goingconcern) assumption, time-period assumption, and monetary unit assumption. The economic entity assumption requires that a company be accounted for separately from Its owners. The continuity assumption assumes that a company will continue to operate long enough to carry out its existing Test bank solution manual of ch02 the accounting information system (2) commitments. The time-period assumption allows the life of a company to be divided into artificial time periods so net income can be measured for a sTest bank solution manual of ch02 the accounting information system (2)
pecific period of time. The monetary unit assumption requires that a company account for and report its financial results in monetary terms44958c 20142THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)R 2 The Accounting Infonnation System7There are four principles used to measure and record business transactions. First, the historical cost principle requires ưansactions to be recorded at their cost—the exchange price at the time the activity occurs. Second, the revenue recognition principle deter Test bank solution manual of ch02 the accounting information system (2)mines when revenue IS recorded and reported by a company. Under this principle, revenue must be earned and the collection of cash must be reasonably aTest bank solution manual of ch02 the accounting information system (2)
ssured in order to record and report revenue. Third, the expense recognition (or matching) principle requires that an expense be recorded and reported2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2) states that accountants should take care to avoid overstating assets or income8The financial statements summarize the economic performance and status of a business and are issued at least annually. Generally accepted accounting principles (GAAP) are the rules and conventions that guide the preparat Test bank solution manual of ch02 the accounting information system (2)ion of financial statements. GAAP provides a ‘common ground' that makes It easier to use financial statements over time and across companies.9Many eveTest bank solution manual of ch02 the accounting information system (2)
nts occur that affect the financial position and the operations of a business, but only those that qualify for recognition as transactions are recorde2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)ity, stockholders' equity, revenue, or expense) and. thus.the company's financial statements In addition, the event must be able to be faithfully represented10Faithful representation refers to information faithfully representing the economic event that It is intending to portray. Faithfully presente Test bank solution manual of ch02 the accounting information system (2)d information should be complete, neutral, and free from error. If information IS not faithfully represented, it may mislead decision-makers. These deTest bank solution manual of ch02 the accounting information system (2)
cision-makers would find it extremely difficult if not impossible, to use information that is incomplete or subject to significant error and/or bias.12THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)ts to determine which transactions should be recognized in the accounting system If the transaction is to be recorded in the accounting system, the transaction must then be analyzed to determine the effects it will have on the fundamental accounting equation. This analysis involves three steps: (1) Test bank solution manual of ch02 the accounting information system (2)write down the accounting equation: (2) identify the financial statement elements that are affected by the transaction: and (3) determine whether theTest bank solution manual of ch02 the accounting information system (2)
element increased or decreased.12Yes. it IS possible for a transaction to affect only one side of the accounting equation. While the accounting equati2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2) accounting equation. An example of this is when a customer pays cash for an accounts receivable. Both cash and accounts receivable are asset accounts (on the left side of the equation). One asset, accounts receivable, is decreasing, while another asset, cash, is increasing by the same amount. This Test bank solution manual of ch02 the accounting information system (2)results in the accounting equation remaining in balance, even though only one side of the equation 'was affected13When a firm earns revenue, its net iTest bank solution manual of ch02 the accounting information system (2)
ncome is increased. When a firm incurs an expense its net income is decreased. At the end of the accounting period, net income is added to retained ea2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)rs equity. Likewise, an increase in expense decreases stockholders' equity and a decrease in expense increases stockholders equity.44959c 2014 Cengage Learning Al) Rights Reser.ed May not be scimed. ccpxd or draphcated. or posted to a publicly accessible website, in whole or in panCHAPTER 2 The Acco Test bank solution manual of ch02 the accounting information system (2)unting Infonnation System1415161718A T-account is a two-column record that consists of a title and two sides divided by a vertical line. A T-account gTest bank solution manual of ch02 the accounting information system (2)
ets its name because it resembles the capital letter T' The left side is referred to as the debit side, and the right side is referred to as the credi2THE ACCOUNTING INFORMATION SYSTEMDISCUSSION QUESTIONS1The conceptual framework of accounting IS the collection of general concepts that logically flo Test bank solution manual of ch02 the accounting information system (2)count. Neither debit nor credit has direct positive or negative connotations. Only when the terms debit and credit are associated with a particular account can a debit or a credit be identified as an increase or a decrease. For example, a debit increases an asset account but decreases a liability ac Test bank solution manual of ch02 the accounting information system (2)count.To debit an account means to add an amount to the left side of that account. A debit balance is a balance on the left side of an account. To creTest bank solution manual of ch02 the accounting information system (2)
dit an account means to add an amount to the right side of that account. A credit balance is a balance on the right side of an account. Debits and creGọi ngay
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