FDNACCT - Unit 2 - GAAP

A qualitative characteristic of useful financial information that states that information should be available before the business decision is needed.

• Timeliness

• Predictive value

• Completeness

• Verifiability

What is being described here? When an information validates an expectation, a financial information becomes useful.

• Predictive value

• Confirmatory value

• Free from error

• Understandability

A useful financial information should provide an agreement between the report presented and the phenomenon it claims to represent.

• Materiality

• Faithful representation

• Neutrality

• Uniformity

What GAAP is applied?

A company is a multi-million peso manufacturing business. It purchased some small tools at a cost of P12,000. Even though the tools will be used for several years, the company recorded the small tools as an expense.

• Monetary

• Materiality

• Revenue recognition

What GAAP is violated?

A company pays the monthly mortgage on the home of the owner of the business and charges the amount as Miscellaneous Expense.

• Entity

• Full Disclosure

• Expense recognition

What GAAP is applied?

An accountant of a business chose an accounting method that will give a lower amount of income to the business.

• Comparability

• Consistency

• Conservatism

What GAAP is applied?

During the Covid-19 pandemic, liquidation values are not normally reported in financial statements even though many companies do go out of business.

• Full Disclosure

• Industry Practice

• Going concern

What GAAP is violated?

A merchandising business purchased goods for P250,000. At the end of the calendar year, the company revalued the amount of the purchased goods to its current worth amounting to P220,000.

• Time period

• Historical cost

• Going Concern

What GAAP is violated?

A corporation did not report that is a defendant in a material lawsuit because the trial is still in progress.

• Entity

• Full Disclosure

• Conservatism

What GAAP is violated?

A company adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the peso.

• Monetary

• Materiality

• Neutrality