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Chapter 3: Q3ISTQ (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 transactionsas GAAP.

(c) The chart of accounts under IFRS is different becauserevenues 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 are 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 it to ledgers (Optional)
02

Explanation to 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 are 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

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’sfirst IFRS financial statements?

Jurassic Park Co. prepares monthly financial statements from a worksheet. Selected portions of the January worksheet showed the following data.

JURASSIC PARK CO.

Worksheet (PARTIAL)

For The Month Ended Jan. 31, 2017



Trial Balance
Adjustment
Adjusted
trial balance

Account Titles

Dr.

Cr.

Dr.

Cr.

Dr.

Cr.

Supplies

3,256

a) 1,500

1,756

Accumulated Depreciation—Equipment

6,682

(b) 257

6,939

Interest Payable

(c) 50

150

Supplies Expense

(a) 1,500

1,500

Depreciation Expense

(b) 257

257

Interest Expense

(c) 50

50

During February, no events occurred that affected these accounts. But at the end of February, the following information was available.

  1. Supplies on hand \(715
  2. Monthly depreciation \)257
  3. Accrued interest $ 50

Instructions

Reproduce the data that would appear in the February worksheet, and indicate the amounts that would be shown in the February income statement.

Question: Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.


CRESTWOOD GOLF CLUB, INC.

TRIAL BALANCE

DECEMBER 31

Debit

Credit

Cash

\(15,000

Accounts receivables

13,000

Allowance for doubtful accounts

\)1,100

Prepaid insurance

9,000

Land

350,000

Building

120,000

Accumulated depreciation – building

38,400

Equipment

150,000

Accumulated depreciation – equipment

70,000

Common stock

400,000

Retained earnings

82,000

Dues revenue

200,000

Green fees revenue

5,900

Rent revenue

17,600

Utilities expenses

54,000

Salaries and wages expenses

80,000

Maintenance and repair expenses

24,000

\(815,000

\)815,000

Instructions

(a) Enter the balances in ledger accounts. Allow five lines for each account.

(b) From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.)

(1) The buildings have an estimated life of 30 years with no salvage value (straight-line method).

(2) The equipment is depreciated at 10% per year.

(3) Insurance expired during the year \(3,500.

(4) The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received.

(5) It is estimated that 12% of the accounts receivable will be uncollectible.

(6) Salaries and wages earned but not paid by December 31, \)3,600.

(7) Dues received in advance from members $8,900 were recorded as Dues Revenue.

(c) Prepare an adjusted trial balance.

(d) Prepare closing entries and post.

When converting to IFRS, a company must:

(a) recast previously issued financial statements inaccordance with IFRS.

(b) use GAAP in the reporting period but subsequentlyuse IFRS.

(c) prepare at least three years of comparative statements.

(d) use GAAP in the transition year but IFRS in thereporting year

What are the characteristics of high-quality information in a company’s first IFRS financial statements?
See all solutions

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