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ch02 - CHAPTER 2 Conceptual Framework Underlying Financial...

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2-1 CHAPTER 2 Conceptual Framework Underlying Financial Accounting ASSIGNMENT CLASSIFICATION TABLE Topics Questions Brief Exercises Exercises Cases 1. Conceptual framework–general. 1, 21 1, 2 2. Objectives of financial reporting. 2, 5 3 3. Qualitative characteristics of accounting. 3, 4, 6, 24 1, 2 1, 2 4 4. Elements of financial statements. 7, 8, 9 3, 9, 10 3 5. Basic assumptions. 10, 11, 12 4 4, 5 6. Basic principles: a. Historical cost. b. Revenue recognition. c. Expense matching. d. Full disclosure. 13, 14, 15 16, 17, 18 19 20, 21, 22 5 4, 5 5 4, 5 4, 5, 6 5, 6 5, 6, 7, 8, 9, 10, 11 7. Accounting principles–comprehensive. 7, 8 8. Constraints. 23, 24, 25, 26 6, 7 1 9. Comprehensive assign- ments on assumptions, principles, and constraints. 8 4, 5
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2-2 ASSIGNMENT CHARACTERISTICS TABLE Item Description Level of Difficulty Time (minutes) E2-1 Qualitative characteristics. Moderate 25-30 E2-2 Qualitative characteristics. Simple 15-20 E2-3 Elements of financial statements. Simple 15-20 E2-4 Assumptions, principles, and constraints. Simple 15-20 E2-5 Assumptions, principles, and constraints. Moderate 20-25 E2-6 Full disclosure principle. Complex 20-25 E2-7 Accounting principles–comprehensive. Moderate 20-25 E2-8 Accounting principles–comprehensive. Moderate 20-25 C2-1 Conceptual framework–general. Simple 20-25 C2-2 Conceptual framework–general. Simple 25-35 C2-3 Objectives of financial reporting. Moderate 25-35 C2-4 Qualitative characteristics. Moderate 30-35 C2-5 Revenue recognition and matching principle. Complex 25-30 C2-6 Revenue recognition and matching principle. Moderate 30-35 C2-7 Matching principle. Complex 20-25 C2-8 Matching principle. Moderate 20-25 C2-9 Matching principle. Moderate 20-30 C2-10 Qualitative characteristics. Moderate 20-30 C2-11 Matching–ethics Moderate 20-25
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2-3 ANSWERS TO QUESTIONS 1. A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements. A conceptual framework is necessary in financial accounting for the following reasons: 1. It will enable the FASB to issue more useful and consistent standards in the future. 2. New issues will be more quickly soluble by reference to an existing framework of basic theory. 3. It will increase financial statement users' understanding of and confidence in financial reporting. 4. It will enhance comparability among companies' financial statements. 2. The primary objectives of financial reporting are as follows: 1. Provide information useful in investment and credit decisions for individuals who have a reasonable understanding of business. 2. Provide information useful in assessing future cash flows. 3. Provide information about enterprise resources, claims to these resources, and changes in them.
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