Question 1

In accordance with AASB framework which of the following is consistent with the definition of income?

Accepted Answer

A)  Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. 
B)  Increases in economic benefits during the accounting period in the form of inflows other than those relating to contributions from equity participants. 
C) Increases in economic benefits during the accounting period in the form of cash inflows or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. 
D)  All of the given answers. 
E) None of the given answers. 
A)  Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. 
B)  Increases in economic benefits during the accounting period in the form of inflows other than those relating to contributions from equity participants. 
C) Increases in economic benefits during the accounting period in the form of cash inflows or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. 
D)  All of the given answers. 
E) None of the given answers. A

Question 2

The AASB Framework has the force of law:

Accepted Answer

A) True 
 B)False  False

Question 3

James Cook Ltd bought a piece of land 10 years ago and the market value of this property is now worth 5 times its purchase cost. The accountant suggested that James Cook Ltd should revalue the asset. This notion is consistent with the qualitative characteristic of:

Accepted Answer

A) relevance. 
B)  reliability. 
C)  understandability. 
D)  comparability. 
E) materiality. 
A) relevance. 
B)  reliability. 
C)  understandability. 
D)  comparability. 
E) materiality. A

Question 4

Jackson Ltd is developing computer software for use in its courier delivery service business. So far the company had spent $50,000 but the software is still unfinished and not expected to be finished in time for the preparation of the reports. As a result, the company had to purchase a computer package amounting to $100 000 to finalise its accounts. There is no further use for the unfinished software as it is expected that the package could be used by the entity for another ten years. Which accounting treatment would be consistent with the Framework?

Accepted Answer

A)  Recognise an asset of $150,000. 
B)  Recognise an expense of $150,000. 
C)  Recognise an asset of $100,000 and expense of $50,000. 
D) Recognise an asset of $50,000 and expense of $100,000. 
E)  None of the given answers. 
A)  Recognise an asset of $150,000. 
B)  Recognise an expense of $150,000. 
C)  Recognise an asset of $100,000 and expense of $50,000. 
D) Recognise an asset of $50,000 and expense of $100,000. 
E)  None of the given answers.

Question 5

A separate recognition criteria for equity is not set forth in the Framework because it represents a residual interest in the assets of an entity.

Accepted Answer

A) True 
 B)False

Question 6

The IASB and US FASB are jointly developing a common conceptual framework because this is necessary for the Convergence Project which aims to converge two sets of accounting standards.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statement(s) is/are true with respect to materiality?

Accepted Answer

A)  It refers to the notion that an item need not be recognised in the financial reports. 
B)  It is a primary qualitative characteristic. 
C)  It relates to financial information where its omission or misstatement could influence the economic decisions of users. 
D)  All of the given answers. 
E)  Equipment under lease where the risks and rewards flows into the entity and it relates to financial information where its omission or misstatement could influence the economic decisions of users. 
A)  It refers to the notion that an item need not be recognised in the financial reports. 
B)  It is a primary qualitative characteristic. 
C)  It relates to financial information where its omission or misstatement could influence the economic decisions of users. 
D)  All of the given answers. 
E)  Equipment under lease where the risks and rewards flows into the entity and it relates to financial information where its omission or misstatement could influence the economic decisions of users.

Question 8

Identify the appropriate qualitative characteristic employed in the following information provideD.
Predictive value is a primary quality of this information.
This information is free from material error and bias.
Companies in the same industry employ the same accounting principles.

Accepted Answer

A)  relevance, reliability, consistency. 
B)  reliability, relevance, comparability. 
C)  reliability, relevance, consistency. 
D) relevance, reliability, comparability. 
E)  None of the given answers. 
A)  relevance, reliability, consistency. 
B)  reliability, relevance, comparability. 
C)  reliability, relevance, consistency. 
D) relevance, reliability, comparability. 
E)  None of the given answers.

Question 9

Which of the following transactions does not meet the definition of an asset?

Accepted Answer

A)  Deposit for purchase of equipment. 
B)  Commitment to purchase equipment. 
C)  Finance leased equipment. 
D)  Purchase of equipment on credit. 
E)  None of the given answers. 
A)  Deposit for purchase of equipment. 
B)  Commitment to purchase equipment. 
C)  Finance leased equipment. 
D)  Purchase of equipment on credit. 
E)  None of the given answers.

Question 10

Which of the following statements most accurately reflects the qualitative characteristics of financial information in the Conceptual Framework?

Accepted Answer

A)  These attributes or qualities determine whether an entity is considered to be a reporting entity. 
B) These are attributes or qualities that financial information should possess if it is to be useful for such decision making. 
C) These attributes or qualities satisfy the definition of elements in the financial reports. 
D) All of the given answers. 
E) None of the given answers. 
A)  These attributes or qualities determine whether an entity is considered to be a reporting entity. 
B) These are attributes or qualities that financial information should possess if it is to be useful for such decision making. 
C) These attributes or qualities satisfy the definition of elements in the financial reports. 
D) All of the given answers. 
E) None of the given answers.

Question 11

In accordance with AASB framework which of the following accounts are expenses?

Accepted Answer

A) Dividends paid. 
B) Provision for warranties. 
C)  Entity dumps pollutants in a river adjacent to its factory. 
D) All of the given answers. 
E)  None of the given answers. 
A) Dividends paid. 
B) Provision for warranties. 
C)  Entity dumps pollutants in a river adjacent to its factory. 
D) All of the given answers. 
E)  None of the given answers.

Question 12

The efficiency perspective is consistent with limiting accounting policy choices in the interest of consistency and comparability.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following accounting policies is an example of costs versus benefits constraint being exercised in the disclosure of financial information?

Accepted Answer

A)  Inventory is valued at lower of cost or market. 
B) Property, plant and equipment are appraised and revalued every three years. 
C)  Biological assets are stated at fair value unless the fair value cannot be measured reliably. 
D)  Research and development costs are expensed as incurred. 
E) None of the given answers. 
A)  Inventory is valued at lower of cost or market. 
B) Property, plant and equipment are appraised and revalued every three years. 
C)  Biological assets are stated at fair value unless the fair value cannot be measured reliably. 
D)  Research and development costs are expensed as incurred. 
E) None of the given answers.

Question 14

The Blaxland Ltd filed a lawsuit against D-Mart Machineries for failure to comply with the specifications of the factory equipment that they ordered and received. The solicitors for Blaxland Ltd strongly believe that the company will receive $50,000 to $100,000 if they win the case. Which action is consistent with the Framework?

Accepted Answer

A)  Blaxland Ltd. should recognise a receivable of $75,000, the expected value of the gain. 
B) Blaxland Ltd. should recognise a receivable of $50,000, a conservative estimate of the gain. 
C)  Blaxland Ltd. should not recognise the receivable until it is probable that they have won the case. 
D) Blaxland Ltd. should not recognise the receivable because while the solicitor is expecting to win the case, the receivable cannot be estimated reliably. 
E)  None of the given answers. 
A)  Blaxland Ltd. should recognise a receivable of $75,000, the expected value of the gain. 
B) Blaxland Ltd. should recognise a receivable of $50,000, a conservative estimate of the gain. 
C)  Blaxland Ltd. should not recognise the receivable until it is probable that they have won the case. 
D) Blaxland Ltd. should not recognise the receivable because while the solicitor is expecting to win the case, the receivable cannot be estimated reliably. 
E)  None of the given answers.

Question 15

The Framework suggests that the relevance characteristic outweighs the reliability characteristic if the financial statement is to be rendered useful:

Accepted Answer

A) True 
 B)False

Question 16

Your best friend from high school approaches you to invest in "e-track" an upcoming high-tech company which he is convinced will make huge profits in future. You are sceptical of the business venture and said you would have to look up the financial statements of the company before investing your own money. He sends you the financial report and noticed that the report is unaudited and does not provide prior year's results even though the firm had been operating for the last three years.
Based on the above information, which qualitative characteristics is lacking in e-tech's financial reports?

Accepted Answer

A) relevance and reliability. 
B)  relevance and timeliness. 
C) comparability and consistency. 
D)  reliability and consistency. 
E)  reliability and comparability. 
A) relevance and reliability. 
B)  relevance and timeliness. 
C) comparability and consistency. 
D)  reliability and consistency. 
E)  reliability and comparability.

Question 17

The key characteristics of an asset as defined in the Framework includE.

Accepted Answer

A)  There must be future economic benefits. 
B)  The reporting entity must control the future economic benefits. 
C)  The asset results from past transactions. 
D) All of the given answers. 
E) There must be future economic benefits and the reporting entity must control the future economic benefit. 
A)  There must be future economic benefits. 
B)  The reporting entity must control the future economic benefits. 
C)  The asset results from past transactions. 
D) All of the given answers. 
E) There must be future economic benefits and the reporting entity must control the future economic benefit.

Question 18

Faithful presentation is one on the two primary fundamental qualitative characteristics for financial information to be useful as proposed in the Exposure Draft released as part of the joint initiative of the IASB and US FASB. A financial report is faithfully presented if it is:

Accepted Answer

A) consistent, free from bias and free of material error. 
B) accurate, free from bias and free of material error. 
C) complete, neutral and free of material error. 
D) reliable, neutral and free of material error. 
E)  None of the given answers. 
A) consistent, free from bias and free of material error. 
B) accurate, free from bias and free of material error. 
C) complete, neutral and free of material error. 
D) reliable, neutral and free of material error. 
E)  None of the given answers.

Question 19

In accordance with AASB framework which of the following transaction(s) is/are consistent with a definition of income?

Accepted Answer

A)  Collection of accounts receivable. 
B)  Debt forgiveness. 
C)  Issue of share capital. 
D)  All of the given answers. 
E)  Collection of accounts receivable and debt forgiveness. 
A)  Collection of accounts receivable. 
B)  Debt forgiveness. 
C)  Issue of share capital. 
D)  All of the given answers. 
E)  Collection of accounts receivable and debt forgiveness.

Question 20

The Framework is considered to be an Australian Accounting Standards Board (AASB) standarD.

Accepted Answer

A) True 
 B)False

Exam 2: The Conceptual Framework of Accounting and Its Relevance to Financ

In accordance with AASB framework which of the following is consistent with the definition of income?

The AASB Framework has the force of law:

James Cook Ltd bought a piece of land 10 years ago and the market value of this property is now worth 5 times its purchase cost. The accountant suggested that James Cook Ltd should revalue the asset. This notion is consistent with the qualitative characteristic of:

A separate recognition criteria for equity is not set forth in the Framework because it represents a residual interest in the assets of an entity.

The IASB and US FASB are jointly developing a common conceptual framework because this is necessary for the Convergence Project which aims to converge two sets of accounting standards.

Which of the following statement(s) is/are true with respect to materiality?

Identify the appropriate qualitative characteristic employed in the following information provideD. Predictive value is a primary quality of this information. This information is free from material error and bias. Companies in the same industry employ the same accounting principles.

Which of the following transactions does not meet the definition of an asset?

Which of the following statements most accurately reflects the qualitative characteristics of financial information in the Conceptual Framework?

In accordance with AASB framework which of the following accounts are expenses?

The efficiency perspective is consistent with limiting accounting policy choices in the interest of consistency and comparability.

Which of the following accounting policies is an example of costs versus benefits constraint being exercised in the disclosure of financial information?

The Framework suggests that the relevance characteristic outweighs the reliability characteristic if the financial statement is to be rendered useful:

The key characteristics of an asset as defined in the Framework includE.

Faithful presentation is one on the two primary fundamental qualitative characteristics for financial information to be useful as proposed in the Exposure Draft released as part of the joint initiative of the IASB and US FASB. A financial report is faithfully presented if it is:

In accordance with AASB framework which of the following transaction(s) is/are consistent with a definition of income?

The Framework is considered to be an Australian Accounting Standards Board (AASB) standarD.

An Overview of the Australian External Reporting Environment

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluation and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Lease

Set-Off and Extinguishment of Debt

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in E

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After Balance Sheet Date

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues Ii: Accounting for Minority Interests

Further Consolidation Issues Iii: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

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