Question 1

The authority responsible for enforcing accounting and other corporate rules for companies in Australia is:

Accepted Answer

A) the AASB. 
B) the FRC. 
C) the ASIC. 
D) both A and C 
A) the AASB. 
B) the FRC. 
C) the ASIC. 
D) both A and C

Question 2

The Financial Reporting Council (FRC)was established by the Federal government to oversee the Australian standard- setting process.

Accepted Answer

A) True 
 B)False

Question 3

Management relies much more on special purpose reports rather than the general- purpose information needed by external users.

Accepted Answer

A) True 
 B)False

Question 4

The Australian Accounting Standards Board produce Australian accounting standards based on international standards.

Accepted Answer

A) True 
 B)False

Question 5

Accounting principles initially drew their authority from acceptance by the business community.

Accepted Answer

A) True 
 B)False

Question 6

The underlying basis for the use of historical cost is the:

Accepted Answer

A) relevance principle. 
B) matching principle. 
C) comparability principle. 
D) reliability principle. 
A) relevance principle. 
B) matching principle. 
C) comparability principle. 
D) reliability principle.

Question 7

Under AASB 101, which of the following is not required to be disclosed in the annual reports of stock exchange listed companies?

Accepted Answer

A) information on executives' remuneration 
B) comparative figures for the previous financial year 
C) provision for doubtful debts deducted from debtors 
D) None of the above, i.e. all are required to be disclosed. 
A) information on executives' remuneration 
B) comparative figures for the previous financial year 
C) provision for doubtful debts deducted from debtors 
D) None of the above, i.e. all are required to be disclosed.

Question 8

The body that is responsible for the issue of accounting standards in Australia is the:

Accepted Answer

A) Institute of Chartered Accountants in Australia. 
B) CPA Australia. 
C) Australian Securities and Investments Commission. 
D) Australian Accounting Standards Board. 
A) Institute of Chartered Accountants in Australia. 
B) CPA Australia. 
C) Australian Securities and Investments Commission. 
D) Australian Accounting Standards Board.

Question 9

In 2013, Amana sold 10 refrigerators that cost $825 each, for a price of $1 285 each. Payments are made in 10 equal instalments, with no down payment. During 2014, Amana collected $10 285 on the 2013 sales. Using the instalment method and assuming an interest rate of 10%, how much gross profit will Amana recognise in 2014?

Accepted Answer

A) $129 
B) $460 
C) $790 
D) None; it is all recognised in 2013. 
A) $129 
B) $460 
C) $790 
D) None; it is all recognised in 2013.

Question 10

Professionals such as solicitors may use the to record income if the receipt of fees is regarded as very uncertain.

Accepted Answer

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

Question 11

Luke's Construction receives a contract to build a bridge for $6 000 000, with an estimated cost of $4 000 000. Over the three- year construction period, the costs are estimated to be $500 000 in Year 1, $3 200 000 in Year 2 and $300 000 in Year 3. How much construction revenue would be reported in Year 2 using the percentage of completion method?

Accepted Answer

A) $4 800 000 
B) $3 200 000 
C) $2 800 000 
D) $2 300 000 
A) $4 800 000 
B) $3 200 000 
C) $2 800 000 
D) $2 300 000

Question 12

Which of these items must be disclosed in general purpose financial reports under AASB 101?

Accepted Answer

A) interest on borrowings 
B) comparative figures 
C) different categories of receivables 
D) all of the above 
A) interest on borrowings 
B) comparative figures 
C) different categories of receivables 
D) all of the above

Question 13

The term 'revenue recognition' means the recording of revenue in the accounting records and its reporting in the income statement.

Accepted Answer

A) True 
 B)False

Question 14

Under AASB 108 a change in the useful life of a fixed asset which affects the depreciation charge is regarded as a change in accounting policy, not a change in an accounting estimate.

Accepted Answer

A) True 
 B)False

Question 15

The total contract price to build an office building is $4 200 000, with estimated costs of $2 800 000. The construction firm's costs for Year 1 were $800 000. Under the percentage of completion method, gross profit reported in Year 1 is:

Accepted Answer

A) $2 200 000. 
B) $400 000. 
C) $1 200 000. 
D) none of the above 
A) $2 200 000. 
B) $400 000. 
C) $1 200 000. 
D) none of the above

Question 16

Which of the following parties is NOT a frequent contributor in the consultation phase of the standard setting process?

Accepted Answer

A) Industry groups 
B) The professional accounting bodies, CPAA and ICAA 
C) Academics 
D) ASIC 
A) Industry groups 
B) The professional accounting bodies, CPAA and ICAA 
C) Academics 
D) ASIC

Question 17

Accounting standard AASB 101 requires that a summary of accounting policies should be included:

Accepted Answer

A) on the first page of the annual report. 
B) in a schedule attached to the annual report. 
C) in the initial section of the notes to the financial statements. 
D) as a footnote to the balance sheet. 
A) on the first page of the annual report. 
B) in a schedule attached to the annual report. 
C) in the initial section of the notes to the financial statements. 
D) as a footnote to the balance sheet.

Question 18

In most businesses profit is recognised at the point of sale.

Accepted Answer

A) True 
 B)False

Question 19

The pair of general principles of reporting that often result in a trade off are:

Accepted Answer

A) timeliness and reliability. 
B) materiality and relevance. 
C) understandability and reliability. 
D) comparability and materiality. 
A) timeliness and reliability. 
B) materiality and relevance. 
C) understandability and reliability. 
D) comparability and materiality.

Question 20

On 1 April, 2013 Babies Unlimited sold a crib with accessories, which cost $1 000, for $1 500. It was sold for 10% deposit, with the balance to be paid in 6 equal payments beginning on 1 May, 2013. How much sales revenue is recognised in the calendar year 2013 under the instalment method?

Accepted Answer

A) $1 500 
B) $150 
C) $1 350 
D) $300 
A) $1 500 
B) $150 
C) $1 350 
D) $300

Exam 17: The Framework of Accounting

The authority responsible for enforcing accounting and other corporate rules for companies in Australia is:

The Financial Reporting Council (FRC)was established by the Federal government to oversee the Australian standard- setting process.

Management relies much more on special purpose reports rather than the general- purpose information needed by external users.

The Australian Accounting Standards Board produce Australian accounting standards based on international standards.

Accounting principles initially drew their authority from acceptance by the business community.

The underlying basis for the use of historical cost is the:

Under AASB 101, which of the following is not required to be disclosed in the annual reports of stock exchange listed companies?

The body that is responsible for the issue of accounting standards in Australia is the:

Professionals such as solicitors may use the to record income if the receipt of fees is regarded as very uncertain.

Which of these items must be disclosed in general purpose financial reports under AASB 101?

The term 'revenue recognition' means the recording of revenue in the accounting records and its reporting in the income statement.

Under AASB 108 a change in the useful life of a fixed asset which affects the depreciation charge is regarded as a change in accounting policy, not a change in an accounting estimate.

The total contract price to build an office building is $4 200 000, with estimated costs of $2 800 000. The construction firm's costs for Year 1 were $800 000. Under the percentage of completion method, gross profit reported in Year 1 is:

Which of the following parties is NOT a frequent contributor in the consultation phase of the standard setting process?

Accounting standard AASB 101 requires that a summary of accounting policies should be included:

In most businesses profit is recognised at the point of sale.

The pair of general principles of reporting that often result in a trade off are:

On 1 April, 2013 Babies Unlimited sold a crib with accessories, which cost $1 000, for $1 500. It was sold for 10% deposit, with the balance to be paid in 6 equal payments beginning on 1 May, 2013. How much sales revenue is recognised in the calendar year 2013 under the instalment method?

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