E2-4 (L03) Qualitative Characteristics) The qualitative characteristics that make accounting information useful for deci sion-making purposes are as follows. Relevance Neutrality Verifiability Faithful representation Completeness Understandability Predictive value Timeliness Comparability Confirmatory value Materiality Free from error Instructions Identify the appropriate qualitative characteristics) to be used given the information provided below. (a) Qualitative characteristic being employed when companies in the same industry are using the same accounting principles. (b) Quality of information that confirms users' earlier expectations (c) Imperative for providing comparisons of a company from period to period (d) Ignores the economic consequences of a standard or rule le) Requires a high degree of consensus among individuals on a given measurement Predictive value is an ingredient of this fundamental quality of information (s) Four qualitative characteristics that are related to both relevance and faithful representation ch) An item is not recorded because its effect on income would not change a decision. 0 Neutrality is an ingredient of this fundamental quality of accounting information ) Two fundamental qualities that make accounting information useful for decision-making purposes () Issuance of interim reports is an example of what enhancing quality of relevance? E2-5 (L04) (Elements of Financial Statements) Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below. Assets Llabilities Equity Investments by owners Distributions to owners Comprehensive income Revenues Expenses Gains Losses Instructions Identify the element or elements associated with the 12 items below. (a) Arises from peripheral or incidental transactions. (b) Obligation to transfer resources arising from a past transaction (d) Increases ownership interest. (d) Declares and pays cash dividends to owners. le) Increases in net assets in a period from nonowner sources. In Items characterized by service potential or future economic benefit. Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting invest ments by owners. th) Arises from income statement activities that constitute the entity's ongoing major or central operations Residual interest in the assets of the enterprise after deducting its liabilities Increases assets during a period through sale of product d) Decreases assets during the period by purchasing the company's own stock Includes all changes in equity during the period, except those resulting from investments by owners and distributions to owners