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Chapter 3: Q1ISTQ (page 150)

Which statement is correct regarding IFRS?

(a) IFRS reverses the rules of debits and credits, that is, debits are on the right and credits are on the left.

(b) IFRS uses the same process for recording transactions as GAAP.

(c) The chart of accounts under IFRS is different because revenues follow assets.

(d) None of the above statements are correct.

Short Answer

Expert verified

The correct option is “b”.

Step by step solution

01

Explanation to correct option

The process of recording the transactions is similar under both GAAP and IFRS. In both the method journal, ledger, and chart of accounts are similar.

It includes the following procedures.

  1. Record transactions in appropriate journals.
  2. Posting journals to ledgers.
  3. Prepare unadjusted trial balance
  4. Adjusting journal entries recording
  5. Prepare adjusted trial balance
  6. Prepare financial statements from adjusted trial balance
  7. Recording closing journal entries
  8. Prepare post-closing trial balance (Optional)
  9. Recording of reversing entries and posting them to ledgers (Optional)
02

Explanation of incorrect options

Option a) Under the IFRS, debits are on the left side and credits are on the right side.

Option c) The chart of accounts under IFRS is similar to GAAP.

Option d) Transactions recording procedures are similar under GAAP and IFRS, hence Option b is correct.

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Most popular questions from this chapter

What are closing entries and why are they necessary?

BE3-10 (L03) At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment \(30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be \)2,000. Prepare the adjusting entry for depreciation at December 31, and indicate the balance sheet presentation for the equipment at December 31.

E3-3 (L02) (Corrected Trial Balance) The following trial balance of Blues Traveler Corporation does not balance.

BLUES TRAVELER CORPORATION

TRIAL BALANCE

APRIL 30, 2017
Debit Credit

Cash \( 5,912Accounts Receivable 5,240Supplies 2,967Equipment 6,100Accounts Payable \) 7,044Common Stock 8,000Retained Earnings 2,000Service Revenue 5,200Office Expense 4,320

Total \(24,539 \)22,244

An examination of the ledger shows these errors.1. Cash received from a customer on account was recorded (both debit and credit) as \(1,380 instead of \)1,830.2. The purchase on account of a computer costing \(3,200 was recorded as a debit to Office Expense and a credit to AccountsPayable.3. Services were performed on account for a client, \)2,250, for which Accounts Receivable was debited \(2,250 and ServiceRevenue was credited \)225.4. A payment of \(95 for telephone charges was entered as a debit to Office Expense and a debit to Cash.5. The Service Revenue account was totaled at \)5,200 instead of $5,280.InstructionsFrom this information prepare a corrected trial balance.

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