Question

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

The correct option is “b”.

Step-by-step solution

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)

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.