48 Ingredients of relevance are a Predictive value b feedback value c

48 ingredients of relevance are a predictive value b

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48. Ingredients of relevance are: a. Predictive value b. feedback value c. Timeliness 49. Reliability ingredients: a. Faithful representation-actual effects of transaction should be properly accounted for and reported b. Substance over form- c. Neutrality d. Conservatism or prudence e. Completeness- Standard of adequate disclosure(notes to FS) 50. Understandability- Users are assumed to have a reasonable knowledge of the economic activities and accounting and a willingness to study the information with reasonable diligence 51. Accounting constraints: a. Timeliness b. Cost-benefit c. Materiality d. Balance between relevance and reliability 52. Materiality- doctrine of convenience. Quantitative threshold
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FINANCIAL ACCOUNTING VOL1 SUMMARY _VALIX jkycpa 53. An example of trade-off between relevance and reliability is when entity reports quoted equity instruments at 54. . Information is relevant but not reliable. On the other hand, if entity reports an instrument at cost, information is reliable but may not be relevant. 54. Installment method- revenue is recognized at the point of collection. Revenue is determined by multiplying the gross profit by amount of collection 55. Immediate recognition of expense- reflects conservatism or prudence. Revenue expenditure 56. Financial performance is determined using 2 approaches: a. capital maintenance- net income occurs if capital is maintained(single entry) b. transaction approach- traditional preparation of income statement 57. 2 concepts of capital maintenance: a. financial capital- based on historical host b. physical capital-current cost Cash and cash equivalents 1. Cash not just include currency and coins but also those that are acceptable by bank for deposit or immediate encashment such as checks, bank drafts and money orders. 2. Cash is measured at face value. Cash in foreign currency is measured at current exchange rate 3. If the financial institution holding the funds of an entity is in bankruptcy or financial difficulty, cash should be written down to estimated realizable value if the amount recoverable is estimated to be lower than face value 4. excess cash should be invested in revenue-earning investment 5. deposits in foreign investment which are subject to foreign exchange restriction, if material, should be classified separately among noncurrent assets and the restriction clearly indicated. 6. Details comprising cash and cash equivalents should be disclosed in the notes to financial statements 7. the credit balance in the cash in bank account results from the issuance of checks in excess of the deposits—overdraft 8. Overdraft is not permitted in the Philippines 9. if entity maintains two or more accounts in one bank and one account results in an overdraft, such overdraft can be offset against the other bank account with debit balance in order to show, cash, net of bank overdraft 10. An overdraft can also be offset against the other bank account if the amount is immaterial 11. if the deposit is legally restricted because of a formal compensating balance agreement, the
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  • Fall '17
  • Abel
  • Balance Sheet, Generally Accepted Accounting Principles, VOL1 SUMMARY _VALIX, ACCOUNTING VOL1 SUMMARY, FINANCIAL ACCOUNTING VOL1

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