Introduction
ix
In addition to the Review Exercise solutions in the appendix, you will also find a handy chart to
illustrate some key differences between ASPE and IFRS organized by chapter and topic.
436
Appendix III
Review Exercise Solutions
Appendix III
ASPE VS IFRS
Chapter
Topic
Accounting Standards for
Private Enterprises (ASPE)
International Financial Reporting
Standards (IFRS)
3
When to use
• Private organization (sole
proprietorship, partnership,
private corporations)
• No plans to become public in
the near future
• ASPE also used by most
competitors
• Public corporation or owned by a public
company
• Private organization intending to become
public in the near future
• IFRS already adopted by most competitors
• Private enterprises adopting IFRS by choice
for other reasons, such as, in anticipation
of a bank's requirement for IFRS-based
financial statements in loan application
Cost
Less costly and simpler to
implement
Can be costly to implement
Number of disclosure
requirements
Fewer disclosures are required More disclosures are required
Comparability
Less comparable on a global
scale
More relevant, reliable and comparable on a
global scale
Development status ASPE may eventually evolve
into IFRS in the future
IFRS is positioned to be the global
accounting standards for the foreseeable
future
Level of judgments
required
More specific rules; fewer
judgments required
Fewer hard-and-fast rules; more judgments
required
5 Frequency of financial
statement issuance
Companies are required to
prepare financial statements
at least once a year. This
implies that the end-of-period
adjustments process must also
be completed at least once a
year.
Companies are required to prepare financial
statements at least once per quarter. This
implies that the end-of-period adjustments
process must be completed at least four
times a year.
6
Balance Sheet
or Statement of
Financial Position
terminology
The term "Balance Sheet" is
more often used, although the
term "Statement of Financial
Position" is also allowed.
The term "Statement of Financial Position"
is more often used, although the term
"Balance Sheet" is also allowed.
Order of items listed
on the balance sheet
or statement of
financial position
The listing order of items on a
balance sheet is not specified,
although ordering items from
most liquid to least liquid
on the balance sheet is a
common practice among the
companies adopting ASPE.
IFRS also does not prescribe the listing order
of items on a statement of financial position.
However, a common practice among the
companies adopting IFRS, particularly
European companies, is ordering assets
from least liquid to most liquid. Additionally,
equity is commonly presented before long-
term liabilities, followed by current liabilities.
7 Expense classification
on income statement
A company can choose to
present its expenses on an
income statement by nature,
or by function, or even by
using a mixture of nature and
function.
Expenses can be classified either by nature
or by function on an income statement.
Using a mixture of nature and function is
prohibited.
The workbook is comprised of assessment and application questions.
• Assessment questions (AS) are designed to test theory and comprehension of topics.
• Application questions (AP) are split into Group A and Group B problems. These questions test the
ability to perform the accounting functions, such as creating journal entries and financial statements.
Chapter 4
The ACCounTing CyCle: JournAls And ledgers
Assessment Questions
As-1 (
1
)
What does the term debit refer to?
A debit is an entry on the left side of a T-account.
As-2 (
1
)
True or False: A credit will always be an increase to any account.
False: A credit is the right side of the T-account. It can increase or decrease the account,
depending on the type of account.
As-3 (
1
)
Which three types of accounts use the debit side of the T-account to increase their value?
Assets, owner’s drawings and expenses all use debits to increase their values.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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leArning ouTComes
1
Distinguish betwee debits and credits
2
Describe the accounting cycle
3
Explain how to analyze a transaction
4
Record transactions in the general journal
5
Post j urnal entries to the general ledger
6
Prepare a trial balance
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Chapter 4
The Accounting Cycle: Journals and Ledgers
Application Questions group A
AP-1A (
1
3
)
Esteem Fitness provides fitness services for its customers. During June 2016, Esteem Fitness
had the following transactions.
Jun 1
Sold one-month memberships to customers for $4,500 on account.
Jun 3
Received a telephone bill for $250 which will be paid next month.
Jun 6
Paid an employee’s salary of $1,200.
Jun 10
Received $3,000 cash from customers paying in advance for upcoming one-year
memberships.
Jun 15
Paid $6,000 cash in advance for six months of rent.
Jun 20
Received a $10,000 loan from the bank.
Jun 26
Purchased equipment with $8,000 cash.
required
Complete the table to analyze each transaction.
Chapter 4
The Accounting Cycle: Journals and Ledgers
Application Questions group B
AP-1B (
1
3
)
Have‐a‐Bash is owned by Shelly Fisher and provides party planning services. During April
2016, Have‐a‐Bash had the following transactions.
Apr 1
The owner inv sted $5,800 cash into the business.
Apr 4
Planned a party for a customer for $740. The customer will pay later.
Apr 6
Paid $600 cash for rent for the month.
Apr 8
Received a $370 telephone bill which will be paid later.
