FINANCIAL ACCOUNTING AND REPORTING 1
UDE1003
Tutorial 2
NAME:LIEW XIN CI
MATRIX NUMBER：UDE210199
For question 1 – 8, please state the relevant concept used in the situation. Please
explain your answer.
Question 1
Lee Motor is a car dealer. It receives orders from customers in advance against 20%
downpayment. The company delivers the cars to the respective customer within 30
days upon which it receives the remaining 80% of the list price.
● The Accrual Basis
● The accrual basis holds that the revenues are recognized when they are
earned,not when cash is received and the expenses are recognized when they
are incurred,not when they are paid.
Question 2
A machine is leased to Company A for the entire duration of its useful life. Although
Company A is not the legal owner of the machine, it may be recognized as an asset in
its balance sheet since the Company has control over the economic benefits that would
be derived from the use of the asset.
● The Objectivity Concept
● Objective means that it is [Link] it can easily be measured,chances
are,it would be more agreeable to different parties.
Question 3
Assets are normally shown at cost price in the balance sheet, and the cost is the basis for all
subsequent accounting for the asset.
● Going Concern
● Going concern assumption states that an accountant is entitled to work out the Final
Accounts of a business,on the basis that the business will continue for the foreseeable
future.
Question 4
Everything is recorded in terms of money. Items which cannot be recorded in terms of money
are ignored and not included. It follows that the financial statements only give a partial picture of
the state of a business.
● Money Measurement Concept
● Accounting is only concerned with those facts which can be measured in monetary
terms and the money value of the transaction is agreeable to most people.
Question 5
Profit is the difference between revenue and expenses not cash received and paid. Expenses
are matched to revenues, for example if rent has been set as a percentage of sales (a turnover
rent), then the rent is accrued in the accounts is the same period as the sales and not when the
rent is actually paid.
● The Realization Concept
● One of the pertinent issues in financial accounting is when to take credit or [Link]
be consistent with the prudence concept,in general,profit is taken or realized only when
the customer incurs liability for [Link] revenue is recorded when good at sales only.
Question 6
There are two sides to accounting, one represented by the assets and the other represented by
the liabilities against them.
● The Dual Aspect Concept
● The concept stipulates that these two aspects are always equal to each [Link] dual
aspect concept is therefore,the underlying basis of "double entry bookkeeping system”
and also known as the accounting equation.
Question 7
For accounting purpose, the business is treated as a separate entity from the owner. The
accounting records show transactions of the business not the owner.
● The Separate Entity Concept
● The accounting records are kept for the transactions entered by the business entity and
not the transactions entered by the owner himself.
Question 8
Profit is earned at the time the goods or services are passed to the customer and the customer
incurs liability for them.
● The Realization Concept
● One of the pertinent issues in financial accounting is when to take credit of [Link]
be consistent with the prudence concept,in general,profit is taken or realized only when
the customer incurs liability for [Link] is recorded when good at sales only.
Question 9
Among the all concepts under generally accepted accounting principles (GAAP), which two (2)
are the most importance concept that you think company should focus more. Elaborate your
opinion.
● The Time Interval [Link] accountant prepares the final accounts of a business at
regular intervals in the financial year.
● The Materiality [Link] is important to affect our judgment of the true position of the
[Link] any misstatement which affects the decision of a reasonable user of the
statements is deemed to be material.
Question 10
Differentiate between conceptual framework and standards.
Conceptual framework for financial reporting provides a general guide on how financial
statements should be prepared while financial reporting standards provide guidance on a very
specific issue related to financial reporting,e.g. how to account for inventories,how financial
statements should be presented and how to apply fair value [Link]
framework also sets up principals which are general concepts while financial reporting
standards apply concepts set out in the Conceptual Framework.