ASSIGNMENT -1

Due Date 25th March 2024

1. Match the numbered statements below with the lettered terms. An answer (letter) may be
used more than once, and some terms require more than one answer (letter).
_______1. Key ingredients in quality of relevance.
_______2. Traditional assumptions that influence the FASB’s conceptual framework.
_______3. The idea that information should represent what it purports to represent.
_______4. An important constraint relating to costs and benefits.
_______5. An example of conservatism.
_______6. The availability of information when it is needed.
_______7. Recording an item in the accounting records.
_______8. Determines the threshold for recognition.
_______9. Implies consensus.
_______10. Transactions between independent parties.
(a) Cost effectiveness (h) Timeliness
(b) Representational faithfulness (i) Materiality
(c) Recognition (j) Predictive value
(d) Verifiability (k) Economic entity
(e) Time periods (l) Lower-of-cost-or-market rule
(f) Unrealized (m) Phrenology
(g) Completeness (n) Arm’s-length transactions

2. For each situation listed, indicate by letter the appropriate qualitative characteristic(s) or
accounting concept(s) applied. A letter may be used more than once, and more than one
characteristic or concept may apply to a particular situation.
______1. Goodwill is recorded in the accounts only when it arises from the purchase of
another entity at a price higher than the fair value of the purchased entity’s identifiable
assets.
______2. Land is valued at cost.
______3. All payments out of petty cash are debited to Miscellaneous Expense.
______4. Plant assets are classified separately as land or buildings, with an accumulated
depreciation account for buildings.
______5. Periodic payments of $2,300 per month for services of R. Robertson, who is
the sole proprietor of the company, are reported as withdrawals.
______6. Small tools used by a large manufacturing firm are recorded as expenses when
purchased.
______7. Investments in equity securities are initially recorded at cost.
______8. A retail store estimates inventory rather than taking a complete physical count
for purposes of preparing monthly financial statements.
______9. A note describing the company’s possible liability in a lawsuit is included with
the financial statements even though no formal liability exists at the balance sheet date.
 _____10. Depreciation on plant assets is consistently computed each year by the straight-
line method.
(a) Understandability (g) Going concern
(b) Verifiability (h) Economic entity
(c) Timeliness (i) Historical cost
(d) Representational faithfulness (j) Measurability
(e) Neutrality (k) Materiality
(f) Relevance (l) Comparability

3. For each of the following items, identify the financial statement element being discussed.
1. Changes in equity during a period except those resulting from investments by
owners and distributions to owners.
2. The net assets of an entity.
3. The result of a transaction requiring the future transfer of assets to other entities.
4. An increase in assets from the delivery of goods that constitutes the entity’s ongoing
central operations.
5. An increase in an entity’s net assets from incidental transactions.
6. An increase in net assets through the issuance of stock.
7. Decreases in net assets from peripheral transactions of an enterprise.
8. The payment of a dividend.
9. Outflows of assets from the delivery of goods or services.
10. Items offering future value to an entity.
4. Defined the following items
1. Economic entity assumption 15. Distribution to owners
2. Matching principle 16.Understandability
3. Going concern assumption 17. Gain
4. Full-disclosure principle 18. Faithful representation
5. Periodicity assumption 19. Comprehensive income
6. Cost effectiveness 20. Materiality.
7. Monetary unit assumption 21. Comparability
8. Materiality 22. Neutrality
9. Historical cost principle 23. Recognition
10. Conservatism 24. Consistency
11. Realization principle 25. Verifiability
12. Predictive value.
13. Relevance
14. Timeliness
15. Confirmatory value