Parkville Pizza & Pasta is a small family business that is great at making pizza and cooking great pasta but has little experience in accounting processes and practice.
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Most accounting information is kept on scraps of paper and in an exercise book and no bank statements are stored. When cash is received or paid, Parkville Pizza & Pasta does not record in any source documents.
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As their new accountant, you would suggest to the entity that they are breaching the conceptual framework of
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O Verifability
O Relevance
O Timeliness
O Faithful Representation
OComparability
As their new accountant, you would suggest to Parkville Pizza & Pasta that they are breaching the conceptual framework of:
O Faithful Representation
Their current accounting practices, which involve inadequate record-keeping, no source documents for cash transactions, and a lack of stored bank statements, do not provide a complete and accurate representation of the company's financial position and transactions. This breaches the principle of faithful representation, which requires that financial information should truthfully and fairly depict the underlying economic reality.
