Introduction To Accounting, Regulatory Framework And Accounting Conventions

The business entity concept is a fundamental accounting principle that states that a business is considered a separate entity from its owners. This means that the business's financial transactions and records are kept separate from the personal finances of the owners. This concept allows for the accurate recording and reporting of the business's financial performance and position, without any confusion or mixing of personal and business assets and liabilities.

A trade receivable is an example of an asset because it represents the amount of money owed to a business by its customers for goods or services provided on credit. It is an economic resource that the business has a right to receive in the future and has a monetary value. As such, it contributes to the overall value and financial position of the business.

The content of financial statements of companies can be specified by national company law. This means that certain regulations or requirements set by the government may dictate what information should be included in financial statements. These laws ensure transparency and standardization in financial reporting, allowing stakeholders to make informed decisions based on accurate and consistent information. Therefore, it is true that some of the content of financial statements can be specified by national company law.

The role of IFRIC is to issue guidance on the application of International Financial Reporting Standards (IFRS). This means that IFRIC provides clarification and interpretation on specific accounting issues that may arise when applying IFRS. This guidance helps ensure consistent and appropriate application of the standards across different jurisdictions and industries. It serves as a resource for entities and professionals in navigating complex accounting requirements and making informed financial reporting decisions.

A loan of $30,000 from a bank repayable in 3 years' time is classified as a non-current liability. This is because it represents a debt that is not expected to be settled within the next year. Non-current liabilities are long-term obligations that are not due for settlement in the short term. In this case, since the loan repayment period extends beyond one year, it falls under the category of non-current liability.

Cost of re-decorating is revenue expenditure because it is a form of maintenance and repair work.

The correct answer is 1 and 3 only. Sole traders' financial statements are private, while a company's financial statements are sent to shareholders and publicly filed. Additionally, a sole trader is fully and personally liable for any losses that the business might make, while a company's shareholders are not personally liable for any losses that the company might make.

The correct answer is 2 only. This is because the purchase of a property is considered a capital expenditure as it involves acquiring a long-term asset that will provide benefits over multiple periods. On the other hand, computer repair and short-term hire of machinery are considered revenue expenditures as they are necessary for the day-to-day operations of the business and do not result in the acquisition of a long-term asset.

If there is an undue delay in reporting financial information, the information might lose its relevance. This is because the longer it takes for the information to be reported, the less useful it becomes for making informed decisions. Timeliness is a key factor in maintaining the relevance of financial information, as it allows stakeholders to have access to up-to-date and accurate data for decision-making purposes. Therefore, any delay in reporting can diminish the relevance of the information.

International accounting standards are primarily written with regards to the information needs of investors. These standards aim to provide investors with accurate and reliable financial information about a company, enabling them to make informed decisions regarding their investments. By following these standards, companies can ensure transparency, comparability, and consistency in their financial reporting, which is crucial for investors to assess the financial performance and position of a company. This information helps investors evaluate the profitability, risk, and growth potential of an investment, and make decisions accordingly.

Financial information is considered reliable when it possesses certain characteristics. The characteristics of completeness, prudence, neutrality, and faithful representation all contribute to the reliability of financial information. Completeness ensures that all necessary information is included, leaving no gaps or omissions. Prudence involves the cautious approach of recognizing potential losses and expenses but not gains until they are realized. Neutrality refers to the absence of bias or favoritism in the information. Lastly, faithful representation means that the information accurately represents the economic phenomena it intends to portray. Therefore, all four characteristics contribute to the reliability of financial information.

The given answer is correct because faithful representation, neutrality, and prudence are all examples of qualitative characteristics in accounting. Faithful representation means that the information is complete, neutral, and free from error. Neutrality means that the information is unbiased and free from any bias or favoritism. Prudence means that the information is conservative and cautious in its approach, taking into account potential risks and uncertainties. These characteristics are important in ensuring that financial information is reliable, relevant, and useful for decision-making purposes.

2/6 x $42,000 = $14,000

The correct answer is "3 only". This is because the money measurement concept states that only items capable of being measured in monetary terms can be recognized in financial statements. The other statements are not true. Materiality does not mean that only items with physical existence are recognized as assets, and the substance over form convention means that the commercial effect of a transaction should be shown in financial statements, even if it differs from the legal form.

In times of rising prices, the historical cost concept means that assets are recorded at their original purchase price, rather than their current market value. This results in asset values being understated because they do not reflect the increase in prices over time. However, profits are overstated because the cost of producing goods or services is based on historical costs, which are lower than the current market prices. As a result, the company's profits appear higher than they actually are.

(5/12 x 600,000) + (7/12 x 660,000) = $635,000

Prudence would require that expenses should not be understated.

Faithful representation is a characteristic of reliable information. Not fair presentation.