Title: 1.1
terms and concepts discussed in the chapter. Students may wish to consult the glossary at
inflows (for example, contributions) with outflows. While these statements might
QA_Edit: The auditor is the one who base on his professional conclusions together with the
conclusion on the accounting system and financial reports (Whether the accounting system is able to
Title: 1.5
QA_Ori: Management, under the oversight of the firm’s governing board, prepares the financial
statements.
QA_Edit: Under the oversight of the firm’s governing board, management prepares the financial
statements.
Title: 1.6
QA_Ori: Employees and suppliers of goods such as raw materials or merchandise often provide
the services or goods before they are paid. The firm has the benefit of consuming or
QA_Edit: Commonly, the firm has the advantage of using services or goods (raw materials,
merchandise) provided by employees and suppliers before payment. The duration from the day
goods and services provided to the day of payment is the length of the financing period.
Title: 1.7
QA_Ori: Accounts receivable represent amounts owed by customers for goods and services they
QA_Edit: Amounts customers have to pay for the goods and services they received from the
Title: 1.8
QA_Ori: Both kinds of capacity represent investments in long-lived assets, with useful lives (or
service lives) that can extend for several or many years. They differ in that land,
buildings, and equipment represent physical capital, while patents and licenses represent
intangible or intellectual capital.
QA_Edit: Investments in long-lived assets is represented by both kinds of capacity. Particularly,
Title: 1.9
QA_Ori: A calendar year ends on December 31. A fiscal year ends on a date that is determined by
QA_Edit: The length of both calendar years and fiscal years are 12 months. However, the end dates
Title: 1.10
QA_Ori: Most firms report the amounts in their financial statements using the currency of the
QA_Edit: Normally, the currency of the country where all the business activities taken place is
Title: 1.11
QA_Ori: A current item is expected to result in a cash receipt (assets such as accounts receivable)
or a cash payment (liabilities such as accounts payable) within approximately one year
QA_Edit:
Current item Noncurrent item
Function Result in cash receipt or cash payment
Generate and use cash
The above comparison is used to distinguish between short-term cash flows and long-term cash
flows, which is a very useful source of information for users of financial statements.
Title: 1.12
QA_Ori: Historical amounts reflect the amounts at which items entered the firm’s balance sheet,
for example, the acquisition cost of inventory. Historical amounts reflect economic
QA_Edit:
Historical amounts Current amounts
Reflect -The amounts at which items
were first recorded in the
-Values at the balance sheet
date
Example The amount the firm paid to
The amount for which the firm
Title: 1.13
QA_Ori: An income statement connects two successive balance sheets through its effect on
retained earnings. Net income that is not paid to shareholders as dividends increases
retained earnings. A statement of cash flows connects two successive balance sheets
QA_Edit: Two successive balance sheets are combined by both an income statement and a statement
of cash flows. However, the means of connections differ from the two statements. For an income
statement, it is through the effects on retained earnings. Net income that is not paid to shareholders
Title: 1.14
QA_Ori: The U.S. Securities and Exchange Commission (SEC) is the government agency that
enforces the securities laws of the United States, including those that apply to financial
reporting. The Financial Accounting Standards Board (FASB) is the private-sector
QA_Edit:
-More than 100 countries require or permit the use of IFRS, or standards based on or adapted from
-The U.S. Securities and Exchange Commission (SEC) is the government agency that enforces the
Title: 1.15
QA_Ori: U.S. GAAP must be used by U.S. SEC registrants and may be used by other firms as
QA_Edit: U.S. SEC registrants have to use U.S.GAAP
Reporting Standard (IFRS) or U.s. GAAP
Title: 1.16
QA_Ori: The purpose of the IASB’s and FASB’s conceptual frameworks is to guide
standard-setting decisions of the two Boards. For example, the conceptual framework
QA_Edit: IASB and FASB provide conceptual framework for the board member to use as a guide
standard when they are involved in accounting issues. For instance, this conceptual structure propose
the target of financial reporting together with clarify this purpose by qualitative characteristics of
financial information
Title: 1.17
QA_Ori: The accrual basis of accounting is based on assets and liabilities, not on cash receipts and
disbursements. It provides a better basis for measuring performance because it is based
QA_Edit: The accrual basis of accounting supports performance measurement better due to the
following reasons:
First, the accrual basis of accounting is based on revenues (inflows of assets from customers), not
Title: 1.18
QA_Ori: (Palmer Coldgate, a consumer products firm; understanding the balance sheet.) (amounts
in millions of US$)
a. Property, plant, and equipment, net = $3,015.2 million.
QA_Edit:
(Palmer Coldgate, a consumer products firm; understanding the balance sheet.) (amounts in
millions of US$)
a. Property, plant, and equipment, net = $3,015.2 million.
b. Noncurrent assets = $6,493.5 (= $3,015.2 + $2,272.0 + $844.8 +
$361.5).
Tite: 1.19
QA_Ori: (Capcion, a paper and packaging firm; understanding the income statement.) (amounts in
thousands of euros)
a. Cost of goods sold = €1,331,292.1 thousand.
QA_Edit:
(Capcion, a paper and packaging firm; understanding the income statement.) (amounts in
thousands of euros)
a. Cost of goods sold = €1,331,292.1 thousand.
Title: 1.20
QA_Ori: (Seller Redbud, a retailer; understanding the statement of cash f
lows.
)
(amounts in thousands of US$)
a. Cash inflow from operating activities = $614,536 thousand.
b. Cash inflow from investing activities = $101,698 thousand.
QA_Edit:
(Seller Redbud, a retailer; understanding the statement of cash f
lows.
)
(amounts in thousands of US$)
a. Cash inflow from operating activities = $614,536 thousand.
b. Cash inflow from investing activities = $101,698 thousand.
Title: 1.21
QA_Ori: (EuroTel, a communications firm; balance sheet relations.) (amounts in millions of
euros [€])
Noncurrent liabilities total €16,399 million.
QA_Edit:
(EuroTel, a communications firm; balance sheet relations.) (amounts in millions of euros [€])
Noncurrent liabilities total €16,399 million.
Title: 1.22
QA_Ori: (GoldRan, a mining company; balance sheet relations.)
(amounts in millions of South African rand [R])
Shareholders’ equity = R37,106.4 million.
QA_Edit: (GoldRan, a mining company; balance sheet relations.)
(amounts in millions of South African rand [R])
QA_Edit: The auditor is the one who base on his professional conclusions together with the
conclusion on the accounting system and financial reports (Whether the accounting system is able to
Title: 1.5
QA_Ori: Management, under the oversight of the firm’s governing board, prepares the financial
statements.
QA_Edit: Under the oversight of the firm’s governing board, management prepares the financial
statements.
Title: 1.6
QA_Ori: Employees and suppliers of goods such as raw materials or merchandise often provide
the services or goods before they are paid. The firm has the benefit of consuming or
QA_Edit: Commonly, the firm has the advantage of using services or goods (raw materials,
merchandise) provided by employees and suppliers before payment. The duration from the day
goods and services provided to the day of payment is the length of the financing period.
Title: 1.7
QA_Ori: Accounts receivable represent amounts owed by customers for goods and services they
QA_Edit: Amounts customers have to pay for the goods and services they received from the
Title: 1.8
QA_Ori: Both kinds of capacity represent investments in long-lived assets, with useful lives (or
service lives) that can extend for several or many years. They differ in that land,
buildings, and equipment represent physical capital, while patents and licenses represent
intangible or intellectual capital.
QA_Edit: Investments in long-lived assets is represented by both kinds of capacity. Particularly,
Title: 1.9
QA_Ori: A calendar year ends on December 31. A fiscal year ends on a date that is determined by
QA_Edit: The length of both calendar years and fiscal years are 12 months. However, the end dates
Title: 1.10
QA_Ori: Most firms report the amounts in their financial statements using the currency of the
QA_Edit: Normally, the currency of the country where all the business activities taken place is
Title: 1.11
QA_Ori: A current item is expected to result in a cash receipt (assets such as accounts receivable)
or a cash payment (liabilities such as accounts payable) within approximately one year
QA_Edit:
Current item Noncurrent item
Function Result in cash receipt or cash payment
Generate and use cash
The above comparison is used to distinguish between short-term cash flows and long-term cash
flows, which is a very useful source of information for users of financial statements.
Title: 1.12
QA_Ori: Historical amounts reflect the amounts at which items entered the firm’s balance sheet,
for example, the acquisition cost of inventory. Historical amounts reflect economic
QA_Edit:
Historical amounts Current amounts
Reflect -The amounts at which items
were first recorded in the
-Values at the balance sheet
date
Example The amount the firm paid to
The amount for which the firm
Title: 1.13
QA_Ori: An income statement connects two successive balance sheets through its effect on
retained earnings. Net income that is not paid to shareholders as dividends increases
retained earnings. A statement of cash flows connects two successive balance sheets
QA_Edit: Two successive balance sheets are combined by both an income statement and a statement
of cash flows. However, the means of connections differ from the two statements. For an income
statement, it is through the effects on retained earnings. Net income that is not paid to shareholders
Title: 1.14
QA_Ori: The U.S. Securities and Exchange Commission (SEC) is the government agency that
enforces the securities laws of the United States, including those that apply to financial
reporting. The Financial Accounting Standards Board (FASB) is the private-sector
QA_Edit:
-More than 100 countries require or permit the use of IFRS, or standards based on or adapted from
-The U.S. Securities and Exchange Commission (SEC) is the government agency that enforces the
Title: 1.15
QA_Ori: U.S. GAAP must be used by U.S. SEC registrants and may be used by other firms as
QA_Edit: U.S. SEC registrants have to use U.S.GAAP
Reporting Standard (IFRS) or U.s. GAAP
Title: 1.16
QA_Ori: The purpose of the IASB’s and FASB’s conceptual frameworks is to guide
standard-setting decisions of the two Boards. For example, the conceptual framework
QA_Edit: IASB and FASB provide conceptual framework for the board member to use as a guide
standard when they are involved in accounting issues. For instance, this conceptual structure propose
the target of financial reporting together with clarify this purpose by qualitative characteristics of
financial information
Title: 1.17
QA_Ori: The accrual basis of accounting is based on assets and liabilities, not on cash receipts and
disbursements. It provides a better basis for measuring performance because it is based
QA_Edit: The accrual basis of accounting supports performance measurement better due to the
following reasons:
First, the accrual basis of accounting is based on revenues (inflows of assets from customers), not
Title: 1.18
QA_Ori: (Palmer Coldgate, a consumer products firm; understanding the balance sheet.) (amounts
in millions of US$)
a. Property, plant, and equipment, net = $3,015.2 million.
QA_Edit:
(Palmer Coldgate, a consumer products firm; understanding the balance sheet.) (amounts in
millions of US$)
a. Property, plant, and equipment, net = $3,015.2 million.
b. Noncurrent assets = $6,493.5 (= $3,015.2 + $2,272.0 + $844.8 +
$361.5).
Tite: 1.19
QA_Ori: (Capcion, a paper and packaging firm; understanding the income statement.) (amounts in
thousands of euros)
a. Cost of goods sold = €1,331,292.1 thousand.
QA_Edit:
(Capcion, a paper and packaging firm; understanding the income statement.) (amounts in
thousands of euros)
a. Cost of goods sold = €1,331,292.1 thousand.
Title: 1.20
QA_Ori: (Seller Redbud, a retailer; understanding the statement of cash f
lows.
)
(amounts in thousands of US$)
a. Cash inflow from operating activities = $614,536 thousand.
b. Cash inflow from investing activities = $101,698 thousand.
QA_Edit:
(Seller Redbud, a retailer; understanding the statement of cash f
lows.
)
(amounts in thousands of US$)
a. Cash inflow from operating activities = $614,536 thousand.
b. Cash inflow from investing activities = $101,698 thousand.
Title: 1.21
QA_Ori: (EuroTel, a communications firm; balance sheet relations.) (amounts in millions of
euros [€])
Noncurrent liabilities total €16,399 million.
QA_Edit:
(EuroTel, a communications firm; balance sheet relations.) (amounts in millions of euros [€])
Noncurrent liabilities total €16,399 million.
Title: 1.22
QA_Ori: (GoldRan, a mining company; balance sheet relations.)
(amounts in millions of South African rand [R])
Shareholders’ equity = R37,106.4 million.
QA_Edit: (GoldRan, a mining company; balance sheet relations.)
(amounts in millions of South African rand [R])