Question 1

AASB 110 refers to subsequent events that relate to conditions that have arisen after the reporting date. Such events, if they could influence decision making:

Accepted Answer

A) must be disclosed in a footnote to the financial statements. 
B) need not be accounted for. 
C) must be referred to in a special mail- out to shareholders. 
D) require adjustments to the figures in the financial statements. 
A) must be disclosed in a footnote to the financial statements. 
B) need not be accounted for. 
C) must be referred to in a special mail- out to shareholders. 
D) require adjustments to the figures in the financial statements.

Question 2

Information is regarded as material if its omission or misstatement could influence the economic decisions made by users of financial reports.

Accepted Answer

A) True 
 B)False

Question 3

Under the AASB Framework which of the following is NOT a primary qualitative characteristic of financial reporting?

Accepted Answer

A) conservatism 
B) understandability 
C) reliability 
D) relevance 
A) conservatism 
B) understandability 
C) reliability 
D) relevance

Question 4

Which type of business would be most likely to use the instalment method to record revenue?

Accepted Answer

A) pharmacy 
B) medical practitioner 
C) construction firm 
D) real estate developer 
A) pharmacy 
B) medical practitioner 
C) construction firm 
D) real estate developer

Question 5

The Australian Accounting Standard dealing with hyperinflation is:

Accepted Answer

A) AASB 2000. 
B) AASB 101. 
C) AASB 129. 
D) There is no Australian accounting standard dealing with hyperinflation. 
A) AASB 2000. 
B) AASB 101. 
C) AASB 129. 
D) There is no Australian accounting standard dealing with hyperinflation.

Question 6

A system of due process is neccesary in standard setting to ensure a wider range of choices in accounting procedures.

Accepted Answer

A) True 
 B)False

Question 7

Inventory has a cost of $475 000 and a current selling price of $435 000. What amount should be reported on the financial statements and what concept or principle applies?

Accepted Answer

A) $475 000, going concern 
B) $435 000, going concern 
C) $475 000, cost 
D) $435 000, conservatism 
A) $475 000, going concern 
B) $435 000, going concern 
C) $475 000, cost 
D) $435 000, conservatism

Question 8

Which business would be most likely to use the percentage of completion method to record income?

Accepted Answer

A) grocery store 
B) construction firm 
C) plumber 
D) accountant 
A) grocery store 
B) construction firm 
C) plumber 
D) accountant

Question 9

AASB 110 refers to subsequent events that provide evidence about conditions that existed at reporting date. Such events:

Accepted Answer

A) require adjustments to the figures in the financial statements. 
B) do not have any effect on the accounts until the next financial period. 
C) must be referred to in the auditor's report. 
D) must be disclosed in a footnote to the financial statements. 
A) require adjustments to the figures in the financial statements. 
B) do not have any effect on the accounts until the next financial period. 
C) must be referred to in the auditor's report. 
D) must be disclosed in a footnote to the financial statements.

Question 10

According to the IASB Framework, accounting information should meet all of the following qualitative characteristics, except:

Accepted Answer

A) comparability. 
B) reasonableness. 
C) reliability. 
D) relevance. 
A) comparability. 
B) reasonableness. 
C) reliability. 
D) relevance.

Question 11

Since Freda's Alterations has very few transactions each year, financial statements are only prepared for the bank every alternate year. This violates the reliability principle.

Accepted Answer

A) True 
 B)False

Question 12

Information that is free from error and bias has the quality of:

Accepted Answer

A) comparability. 
B) reliability. 
C) usefulness. 
D) relevance. 
A) comparability. 
B) reliability. 
C) usefulness. 
D) relevance.

Question 13

The Global Reporting Initiative (GRI)is a worldwide, network- based organisation that produces a comprehensive sustainability reporting framework that is widely used globally.

Accepted Answer

A) True 
 B)False

Question 14

The qualitative characteristic of comparability states that a business should report consistent information in its financial statements to enable outsiders to make knowledgeable decisions concerning that business.

Accepted Answer

A) True 
 B)False

Question 15

Wilson Hardware sells on the instalment plan. Sales- related figures for Saunders Hardware for 2013 were as follows: Sales, $600 000; down payments on the sales, $60 000; collections on instalments, $250 000; beginning inventory, $90 000; ending inventory $60 000; and purchases, $400 000. What is Saunders Hardware's gross profit using the sales method of income recognition?

Accepted Answer

A) $260 000 
B) $200 000 
C) $190 000 
D) $170 000 
A) $260 000 
B) $200 000 
C) $190 000 
D) $170 000

Question 16

Which profit recognition method is the most conservative?

Accepted Answer

A) collection (receipt of cash)method 
B) percentage of completion method 
C) instalment method 
D) sales method 
A) collection (receipt of cash)method 
B) percentage of completion method 
C) instalment method 
D) sales method

Question 17

Financial information is considered more reliable if it is verified by sources outside the business.

Accepted Answer

A) True 
 B)False

Question 18

Accounting principles:

Accepted Answer

A) explain financial phenomena. 
B) are similar to natural laws, like the law of gravity. 
C) apply only to large business organisations. 
D) should be accepted by people and organisations who need financial information to make decisions. 
A) explain financial phenomena. 
B) are similar to natural laws, like the law of gravity. 
C) apply only to large business organisations. 
D) should be accepted by people and organisations who need financial information to make decisions.

Question 19

The objective of financial reporting is to provide useful information to investors, creditors and others to aid in making and evaluating decisions about the allocation of scarce resources.

Accepted Answer

A) True 
 B)False

Question 20

A conceptual framework of accounting is intended to eliminate the need for detailed accounting standards.

Accepted Answer

A) True 
 B)False

Exam 17: The Framework of Accounting

AASB 110 refers to subsequent events that relate to conditions that have arisen after the reporting date. Such events, if they could influence decision making:

Information is regarded as material if its omission or misstatement could influence the economic decisions made by users of financial reports.

Under the AASB Framework which of the following is NOT a primary qualitative characteristic of financial reporting?

Which type of business would be most likely to use the instalment method to record revenue?

The Australian Accounting Standard dealing with hyperinflation is:

A system of due process is neccesary in standard setting to ensure a wider range of choices in accounting procedures.

Inventory has a cost of $475 000 and a current selling price of $435 000. What amount should be reported on the financial statements and what concept or principle applies?

Which business would be most likely to use the percentage of completion method to record income?

AASB 110 refers to subsequent events that provide evidence about conditions that existed at reporting date. Such events:

According to the IASB Framework, accounting information should meet all of the following qualitative characteristics, except:

Since Freda's Alterations has very few transactions each year, financial statements are only prepared for the bank every alternate year. This violates the reliability principle.

Information that is free from error and bias has the quality of:

The Global Reporting Initiative (GRI)is a worldwide, network- based organisation that produces a comprehensive sustainability reporting framework that is widely used globally.

The qualitative characteristic of comparability states that a business should report consistent information in its financial statements to enable outsiders to make knowledgeable decisions concerning that business.

Which profit recognition method is the most conservative?

Financial information is considered more reliable if it is verified by sources outside the business.

Accounting principles:

The objective of financial reporting is to provide useful information to investors, creditors and others to aid in making and evaluating decisions about the allocation of scarce resources.

A conceptual framework of accounting is intended to eliminate the need for detailed accounting standards.

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

Filters