/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Question 2BE Match the qualitative characteri... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: Question 2BE (page 63)

Match the qualitative characteristics below with the following statements.1. Timeliness 5. Faithful representation2. Completeness 6. Relevance3. Free from error 7. Neutrality4. Understandability 8. Confirmatory value

  1. Quality of information that assures users that information represents the economic phenomena that it purports to represent.
  2. Information about an economic phenomenon that corrects past or present expectations based on previous evaluations.
  3. The extent to which information is accurate in representing the economic substance of a transaction.
  4. Includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent.
  5. Quality of information that allows users to comprehend its meaning.

Short Answer

Expert verified

The matching for qualitative characteristics are as follows:

  • Faithful representation
  • Confirmatory value
  • Free from error
  • Completeness
  • Understandability

Step by step solution

01

Meaning of Faithful Representation

The termfaithful representationhelps users offinancial statements to obtain valuable business-related information, which in turn helps in making sound business decisions.

02

Explanation for Statement ‘a’

Faithful representation in accounting means that the accounting transactions and events are to be recorded in such a way that it presents the true economic condition of the business.

Financial reports should be faithfully represented so that the economic decisions become useful. Good financial reports also help in the allocation of resources.

Hence, faithful representation is the correct answer for the statement 鈥榓鈥�.

03

Explanation for Statement ‘b’

Confirmatory value means that the information gives feedback on earlier evaluations. It allows users to make changes in their opinion on such evaluations.

Therefore, the confirmatory value is the correct answer for the statement 鈥榖.鈥�

04

Explanation for Statement ‘c’

Free from error in accounting means that there are no errors incurred in the process by which the financial information was produced.

The financial statements should be error-free so that the information present within them shows the true and fair view of the organization.

Hence, free from error is the correct answer for the statement 鈥榗.鈥�

05

Explanation for Statement ‘d’

Completeness in accounting means that the financial statements are well equipped with every item that should be included in the statement for a particular accounting period.

Thus, completeness is the correct answer for the statement 鈥榙鈥�.

06

Explanation for Statement ‘e’

The term understandability in accountingrefers to the way of representation of financial information that is easily understandable to the users.

In order to make the financial information to be easily understandable by the users, the information should be complete, concise, clear, and well organized.

Hence, understandability is the correct answer for the statement 鈥榚.鈥�

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Discuss whether the changes described in each of the cases below require recognition in the CPA鈥檚 audit report as to consistency. (Assume that the amounts are material).

  1. The company changed its inventory method to FIFO from weighted-average, which had been used in prior years.
  2. The company disposed of one of the two subsidiaries that had been included in its consolidated statements for prior years.
  3. The estimated remaining useful life of plant property was reduced because of obsolescence.

How is materiality (or immateriality) related to the proper presentation of financial statements? What factors and measures should be considered in assessing the materiality of a misstatement in the presentation of a financial statement?

Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information.

Instructions

a) Describe briefly the following characteristics of useful accounting information.

1. Relevance (4) Comparability

2. Faithful representation (5) Consistency

3. Understandability

b)For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other.

1. Relevance and faithful representation.

2. Relevance and consistency.

3. Comparability and consistency.

4. Relevance and understandability.

c) What criterion should be used to evaluate trade-offs between information characteristics?

The Financial Accounting Standards Board (FASB) has developed a conceptual framework for financial accounting and reporting. The FASB has issued eight Statements of Financial Accounting Concepts. These statements are intended to set forth the objective and fundamentals that will be the basis for developing financial accounting and reporting standards. The objective identifies the goals and purposes of financial reporting. The fundamentals are the underlying concepts of financial accounting that guide the selection of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties.

The purpose of the statement on qualitative characteristics is to examine the characteristics that make accounting information useful. These characteristics or qualities of information are the ingredients that make information useful and the qualities to be sought when accounting choices are made.

Instructions

(a) Identify and discuss the benefits that can be expected to be derived from the FASB鈥檚 conceptual framework.

(b) What is the most important quality for accounting information as identified in the conceptual framework? Explain why it is the most important.

(c) Statement of Financial Accounting Concepts No.8 describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.

Describe the basic assumptions of accounting.
See all solutions

Recommended explanations on Business Studies Textbooks

Startups

Read Explanation

Human 91影视

Read Explanation

Corporate Finance

Read Explanation

Strategic Analysis

Read Explanation

Business Data Analytics

Read Explanation

Strategy

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.