Question #1

Which of the following statements is not an objective of financial reporting?

To provide information that is useful in assessing cash flow prospects.

To provide information about entity resources, claims to those resources and changes in
them.
To provide information that is useful in investment and credit decisions.
To provide information on the liquidation value of entity.
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Question #2
Accruing net losses on firm purchase commitments for inventory is an example of the accounting
concept of

Materiality. Conservatism. Consistency. Realization.

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Question #3
Which of the following assumptions means that money is the common denominator of economic
activity and provides an appropriate basis for accounting measurement and analysis?

Going concern. Monetary unit. Periodicity. Economic entity.

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Question #4
Which of the following is true of the qualitative characteristics of 'understandability' in relation
to information in financial statements?

Users are expected to have significant business knowledge

Financial statements should exclude complex matters
Financial statements should be free from material errors.
Users should be willing to study the information with reasonable diligence.
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Question #5
The measurement method most commonly used in the preparation of financial statements is:
 current replacement cost; discounted future cash flows; present value; historical
cost.
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Question #6
The recognition of periodic depreciation expense on company-owned automobiles requires
estimating both salvage and residual value, and the useful life of the vehicles. The use of
estimates in this case is an example of

Providing relevant data at the expense of reliability

Conservatism
Maintaining consistency
Invoking the materiality constraint rather than cost benefit constraint
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Question #7
Which of the following statements in relation to income is true?

Gains and revenue are different in nature and therefore are recognised as separate elements of
the financial statements per The Framework. Gains are normally reported separately from
revenue in the Statement of Profit or Loss and Other Comprehensive Income due to the different
probabilities attached to that type of income. The Framework defines income as an increase
in economic benefits which results in an increase in equity. The Framework requires that all
items of income are reported on a net basis.
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Question #8
Information that is able to confirm or correct past evaluations that have been made by users of
financial information is an example of information that satisfies which of the following
characteristics of financial information identified in The Framework?

Reliability Comparability Relevance Understandability

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Question #9
When a company estimates its bad debt expense using the percent of net credit sales method,
which of the following statements is true?
 Substance over form is being followed. Matching is being followed. Matching is not
being followed. Going concern is not being followed.
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Question #10
The qualitative characteristics that make financial information useful for decision-making
include:
I II III IV
comparabilit Yes Yes No Yes
y
relevance Yes Yes No Yes
understanda Yes No No Yes
bility
unreliability Yes No No No

III IV I II
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Question #11
General Purpose Financial Statements:

focus on disclosing information relevant to assessing the ability of an entity to generate

future cash flows. are only necessary for users who do not have the power to obtain
information in addition to that contained within the General Purpose Financial Statement.
meet the information needs that are common to all users. provide all the information that
users may need to make economic decisions.
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Question #12
Accounting information that is complete is an example of information that satisfies which of the
following characteristics of financial information identified in The Framework?

Relevance Comparability Reliability Understandability

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Question #13
Recognizing depletion expense is an example of the accounting process of

Allocation (No); Amortization (No) Allocation (No); Amortization (Yes) Allocation

(Yes); Amortization (No) Allocation (Yes); Amortization (Yes)
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Question #14
A company's first PFRS financial statements must include at least how many statements of
financial position?

Five
One
Three
Two
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Question #15
It is committed to developing, in the public interest, a single set of high quality, understandable
and enforceable global accounting standards that require transparent and comparable information
in general purpose financial statements.

The Financial Accounting Standards Board (FASB) The Financial Reporting Standards
Council (FRSC) The International Accounting Standards Board (IASB) The Professional
Regulatory Board of Accountancy (BOA)
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Question #16
Which of the following statements is incorrect in relation to the recognition criteria for elements
of the financial statements?

Liabilities are recognised when it is probable that an outflow of resources embodying

economic benefits will result from the settlement of a present obligation and the amount at which
settlement will take place can be measured reliably. Assets are recognised when it is probable
that future economic benefits will flow to the entity and the asset has a cost or value that can be
measured reliably. Because equity is the arithmetic difference between assets and liabilities, a
separate recognition criteria for equity is not needed in The Framework. Income is
recognised when an increase in future economic benefits related to a decrease in an asset or an
increase in a liability that has arisen can be measured reliably.
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Question #17
The international financial reporting standards (IFRS) are

Rules based rather than principles based

Principles based rather than rules based
Based on regulations not concepts
Focused on quantitative rules
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Question #18
Which of the following terms best describes information that influences the economic decisions
of users?

Understandable
Reliable
Relevant
Prospective
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Question #19
Simultaneous recognition of both a revenue and an expense may result from certain transactions
or events. An example of an expense so recognized may be

Transportation to customers. Expired portion of prepaid insurance. Salespersons

monthly salaries. Electricity used to light offices.
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Question #20
If management intends to liquidate the entitys operations, financial statements are prepared on
the basis of

Expected liquidation values Historical cost Historical cost with a note that the entity
is about to liquidate Financial statements do not have to be prepared.

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