INTERMEDIATE ACCOUNTING 4TH EDITION BY
ELIZABETH GORDON COMPREHENSIVE EXAM
SCRIPT WITH SOLUTIONS
◉ Conceptual Framework.
Answer: establishes the concepts that underlie financial reporting.
◉ Relevance (Fundamental Quality).
Answer: accounting information must be capable of making a
difference in a decision. Financial information is capable of making a
difference when it has predictive value, confirmatory value, or both.
◉ Predictive Value.
Answer: if it has value as an input to predictive processes used by
investors to form their own expectations about the future
◉ Confirmatory value.
Answer: relevant information also helps users confirm or correct
prior expectations
◉ Faithful Representation (fundamental quality).
, Answer: means that the numbers and descriptions match what
really existed or happened
◉ Completeness.
Answer: means that all the information that is necessary for faithful
representation is provided
◉ Neutrality.
Answer: means that a company cannot select information to favor
one set of interested parties over another. Unbiased information
must be the overriding consideration.
◉ Free from Error.
Answer: more accurate (faithful representation) of a financial item
◉ Comparability (Enhancing Qualities).
Answer: enables users to identify the real similarities and
differences in economic events between companies.
◉ Consistency.
Answer: when a company applies the same accounting treatment to
similar events, from period to period.
ELIZABETH GORDON COMPREHENSIVE EXAM
SCRIPT WITH SOLUTIONS
◉ Conceptual Framework.
Answer: establishes the concepts that underlie financial reporting.
◉ Relevance (Fundamental Quality).
Answer: accounting information must be capable of making a
difference in a decision. Financial information is capable of making a
difference when it has predictive value, confirmatory value, or both.
◉ Predictive Value.
Answer: if it has value as an input to predictive processes used by
investors to form their own expectations about the future
◉ Confirmatory value.
Answer: relevant information also helps users confirm or correct
prior expectations
◉ Faithful Representation (fundamental quality).
, Answer: means that the numbers and descriptions match what
really existed or happened
◉ Completeness.
Answer: means that all the information that is necessary for faithful
representation is provided
◉ Neutrality.
Answer: means that a company cannot select information to favor
one set of interested parties over another. Unbiased information
must be the overriding consideration.
◉ Free from Error.
Answer: more accurate (faithful representation) of a financial item
◉ Comparability (Enhancing Qualities).
Answer: enables users to identify the real similarities and
differences in economic events between companies.
◉ Consistency.
Answer: when a company applies the same accounting treatment to
similar events, from period to period.
