Answer to Question #245534 in Accounting for Magdalena

Question

Select from the following list the qualitative characteristic (Predictive value, Confirmatory value, Materiality, Completeness, Neutrality, Freedom from error, Verifiability, Comparability) of useful information that best describes each of the following items:

1.In order to keep the financial statements simple, Carlaw Consulting shows three items on its income statement: Revenue, Expenses and Net income

2.The financial statements of Belbach Industries are audited on an annual basis by public accountants.

3.Rydell Corporation is contemplating an investment in Fryan Ltd. Rydell has requested a copy of the company’s year-end financial statements to assist them in their investment decision

4.Chemical Reaction Inc. operates in both the US and Canada and restates its US financial statements according to Canadian GAAP for its Canadian investors

5.The Controller for Location Inc. emphasizes that factual and unbiased information prevails in the preparation of the company financial statements.

Answer 1

Solution:

1.In order to keep the financial statements simple, Carlaw Consulting shows three items on its income statement: Revenue, Expenses and Net income – Materiality.

2.The financial statements of Belbach Industries are audited on an annual basis by public accountants – Verifiability.

3.Rydell Corporation is contemplating an investment in Fryan Ltd. Rydell has requested a copy of the company’s year-end financial statements to assist them in their investment decision – Predictive value.

4.Chemical Reaction Inc. operates in both the US and Canada and restates its US financial statements according to Canadian GAAP for its Canadian investors – Comparability.

5.The Controller for Location Inc. emphasizes that factual and unbiased information prevails in the preparation of the company financial statements – Neutrality.