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January 24, 2019, 06:18:09 pm

Author Topic: Qualitative characteristic/Assumption Question  (Read 136 times)  Share 

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Seamus Wong

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Qualitative characteristic/Assumption Question
« on: January 07, 2019, 08:06:27 pm »
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Hi,
Could anyone who has done well in accounting take a look at my answer to a question and give me feedback. I'm not too sure as to how to structure my answers well and I really want some advice on how to improve.

Question: "For the following situation, identify the relevant Qualitative Characteristic and the Accounting Assumption, and explain how it should be applied" - 'Markus Gigliotti is the owner of Brunswick Party Hire. On 10 June he bought 100 chairs costing a total of $3000. On 15 June he bought an office desk for the family home at a cost of $1000.'

Answer: Entity Assumption / Relevance
The 100 chairs purchased for the business should be the only item recorded by Brunswick Party Hire. The $3000 spent on chairs by Marcus was for direct use by his business (entity), and the recording of this transaction would assist his decision making now, and in the future (Relevance). However, the $1000 spent for his family's home neither relates to the business nor does it's recording influence any decision he may make in the future.

Thanks

JohnnyBarko

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Re: Qualitative characteristic/Assumption Question
« Reply #1 on: January 09, 2019, 06:55:34 pm »
+1
New study design in 2019 - not sure how applicable what I'm saying is, but I think it's still valid advice.

Don't put the characteristics/assumptions in brackets, its better to just say them directly.
For example: The $3000 spent on chairs should be recorded within the business records, because it was a transaction between the business and another firm, where the firm has gained an asset. This information is useful for decision making, hence recording the transaction upholds relevance.
The $1000 spent on the office desk for his family home on 15 June, should not be recorded in the firm's books, as it is a transaction by the owner, which is not relevant to the business, as the owner and the business are separate as per the entity principle. Recording this transaction in the firm's books would breach the entity principle, and the information would not be useful for decision making, breaching relevance.
2018: Accounting [44] | Mathematical Methods [42]
2019: English [] | Specialist Mathematics [] | Physics [] | Chemistry []

Seamus Wong

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Re: Qualitative characteristic/Assumption Question
« Reply #2 on: January 10, 2019, 08:41:45 pm »
+1
Wow, I can really notice the difference in the quality of your answer relative to mine. Thanks for the help, really appreciate it.

JohnnyBarko

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Re: Qualitative characteristic/Assumption Question
« Reply #3 on: January 11, 2019, 10:42:39 pm »
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You've got the whole year to improve - my theory answers weren't perfect initially either. gl  :)
2018: Accounting [44] | Mathematical Methods [42]
2019: English [] | Specialist Mathematics [] | Physics [] | Chemistry []