Question 1

The criterion that is not true regarding the Framework's definition of expenses is:

Accepted Answer

A) The definition makes clear the distinction between monetary and physical events 
B) The definition clearly defines expenses as outflows to indicate the concept of value 
C) Expenses do not include reductions in assets or increases in liabilities relating to distributions to owners 
D) The definition remains independent of assumptions regarding measurement 
A) The definition makes clear the distinction between monetary and physical events 
B) The definition clearly defines expenses as outflows to indicate the concept of value 
C) Expenses do not include reductions in assets or increases in liabilities relating to distributions to owners 
D) The definition remains independent of assumptions regarding measurement A

Question 2

For an outflow to be recognised as an expense it must be probable that the outflow of future economic benefits has occurred or the expense must be able to be measured with reliability.

Accepted Answer

A) True 
 B)False  False

Question 3

IAS1/AASB 101 distinguishes between expenses and losses by categorising items as abnormal or extraordinary in the income statement.

Accepted Answer

A) True 
 B)False  False

Question 4

The statements concerning the matching concept that is correct is:
i.The matching concept forms the basis of historical cost accounting
ii.The matching concept forms the basis of accrual accounting
iii.In practice proper matching is a relatively easy task
iv.In practice proper matching is a relatively difficult task

Accepted Answer

A) i.iii 
B) ii.iii 
C) i.iv 
D) ii.iv 
A) i.iii 
B) ii.iii 
C) i.iv 
D) ii.iv

Question 5

Which of these is an expense that will normally be recognised using the 'immediate recognition' principle?

Accepted Answer

A) Wages expense 
B) Sales commission 
C) Advertising expense 
D) All of the above 
A) Wages expense 
B) Sales commission 
C) Advertising expense 
D) All of the above

Question 6

Treating assets as expenses is a way to overstate profits for a period.

Accepted Answer

A) True 
 B)False

Question 7

Treating expenses as assets:

Accepted Answer

A) Overstates profit and understates equity 
B) Overstates profits and overstates equity 
C) Understates profits and understates equity 
D) Understates profits and overstates equity 
A) Overstates profit and understates equity 
B) Overstates profits and overstates equity 
C) Understates profits and understates equity 
D) Understates profits and overstates equity

Question 8

Which of these is not one of the three basic methods of matching costs and revenue that are commonly relied on?

Accepted Answer

A) The reducing-balance method 
B) The straight-line method 
C) A and B 
D) None of the above is one the three basic methods of matching costs and revenue that are commonly relied on. 
A) The reducing-balance method 
B) The straight-line method 
C) A and B 
D) None of the above is one the three basic methods of matching costs and revenue that are commonly relied on.

Question 9

If an employee renders services to the firm,without pay,in order to gain experience,an expense must be recorded by the firm.

Accepted Answer

A) True 
 B)False

Question 10

'The matching process has become an essential part of accounting practice.However,there are many criticisms of this approach.' J.Godfrey,et el,'Accounting Theory',7th Ed.p.353.Outline and discuss the criticisms of matching and briefly explain how standard setters have sought to address these criticisms.

Accepted Answer

The matching process in accounting refer

Question 11

The Framework links the definition of expenses to their relationship to revenue.

Accepted Answer

A) True 
 B)False

Question 12

The statement that is correct concerning depreciation is:

Accepted Answer

A) Depreciation means that the market price of the depreciable asset is declining 
B) The straight-line method is the preferred method of depreciation 
C) Depreciation expense as recorded by accountants is a monetary effect of a physical event 
D) Depreciation is mainly caused by physical wear and tear 
A) Depreciation means that the market price of the depreciable asset is declining 
B) The straight-line method is the preferred method of depreciation 
C) Depreciation expense as recorded by accountants is a monetary effect of a physical event 
D) Depreciation is mainly caused by physical wear and tear

Question 13

When the 'percentage-of-completion' method is used for construction contracts,how are expenses recorded?

Accepted Answer

A) The liability account deferred gross profit is proportionately allocated 
B) The total accumulated costs of construction are expensed when the project is completed 
C) For a given period the actual construction costs for that period are expensed 
D) None of the above 
A) The liability account deferred gross profit is proportionately allocated 
B) The total accumulated costs of construction are expensed when the project is completed 
C) For a given period the actual construction costs for that period are expensed 
D) None of the above

Question 14

The Framework in relation to conservatism:

Accepted Answer

A) Explicitly states that conservatism is a bias to be avoided 
B) Requires that no profits be anticipated but all losses must be anticipated 
C) Is not explicit about the application of conservatism 
D) Because of conservatism requires a higher standard of evidence for the recognition of expenses than for revenue 
A) Explicitly states that conservatism is a bias to be avoided 
B) Requires that no profits be anticipated but all losses must be anticipated 
C) Is not explicit about the application of conservatism 
D) Because of conservatism requires a higher standard of evidence for the recognition of expenses than for revenue

Question 15

An example where accountants normally decide that a cause and effect relationship exist between revenue and expenses is:

Accepted Answer

A) Sales revenue and sales commissions 
B) Sales revenue and cost of sales 
C) Sales and sales manager's salary 
D) All of the above 
A) Sales revenue and sales commissions 
B) Sales revenue and cost of sales 
C) Sales and sales manager's salary 
D) All of the above

Question 16

Under the FASB's Concept Statement No 6,the statement that is correct is:

Accepted Answer

A) There is no distinction between expenses and losses 
B) Losses are regarded as always arising outside the course of the ordinary activities of the entity 
C) The treatment of losses is similar to that of the Framework 
D) All of the statements are correct 
A) There is no distinction between expenses and losses 
B) Losses are regarded as always arising outside the course of the ordinary activities of the entity 
C) The treatment of losses is similar to that of the Framework 
D) All of the statements are correct

Question 17

'The interpretation of the matching concept in practice,therefore,is biased by the effect of the convention of conservatism.' J.Godfrey,et el,'Accounting Theory',7th Ed.p.348.
Explain and discuss the above statement.Do you agree or disagree with the statement?

Accepted Answer

The matching concept in accounting refer

Question 18

The treatment of the relationship of losses to expenses in the IASB Framework differs from the treatment by the FASB.Explain the different treatments and discuss whether it is useful in terms of decision-making to distinguish between expenses and losses in financial reports.

Accepted Answer

The treatment of the relationship of los

Question 19

The FASB,the US standard setter,unlike the IASB,distinguished between expenses and losses.

Accepted Answer

A) True 
 B)False

Question 20

Which item is usually not given immediate recognition as an expense?

Accepted Answer

A) Research expenditure 
B) The cost of the goods sold 
C) Advertising expenses 
D) Impairment expenses 
A) Research expenditure 
B) The cost of the goods sold 
C) Advertising expenses 
D) Impairment expenses

The criterion that is not true regarding the Framework's definition of expenses is:

For an outflow to be recognised as an expense it must be probable that the outflow of future economic benefits has occurred or the expense must be able to be measured with reliability.

IAS1/AASB 101 distinguishes between expenses and losses by categorising items as abnormal or extraordinary in the income statement.

Which of these is an expense that will normally be recognised using the 'immediate recognition' principle?

Treating assets as expenses is a way to overstate profits for a period.

Treating expenses as assets:

Which of these is not one of the three basic methods of matching costs and revenue that are commonly relied on?

If an employee renders services to the firm,without pay,in order to gain experience,an expense must be recorded by the firm.

The Framework links the definition of expenses to their relationship to revenue.

The statement that is correct concerning depreciation is:

When the 'percentage-of-completion' method is used for construction contracts,how are expenses recorded?

The Framework in relation to conservatism:

An example where accountants normally decide that a cause and effect relationship exist between revenue and expenses is:

Under the FASB's Concept Statement No 6,the statement that is correct is:

'The interpretation of the matching concept in practice,therefore,is biased by the effect of the convention of conservatism.' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.348. Explain and discuss the above statement.Do you agree or disagree with the statement?

The treatment of the relationship of losses to expenses in the IASB Framework differs from the treatment by the FASB.Explain the different treatments and discuss whether it is useful in terms of decision-making to distinguish between expenses and losses in financial reports.

The FASB,the US standard setter,unlike the IASB,distinguished between expenses and losses.

Which item is usually not given immediate recognition as an expense?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Measurement

Accounting Measurement Systems

Assets

Liabilities and Owners Equity

Revenue

Positive Theory of Accounting Policy and Disclosure

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters

Exam 10: Expenses

The criterion that is not true regarding the Framework's definition of expenses is:

For an outflow to be recognised as an expense it must be probable that the outflow of future economic benefits has occurred or the expense must be able to be measured with reliability.

IAS1/AASB 101 distinguishes between expenses and losses by categorising items as abnormal or extraordinary in the income statement.

Which of these is an expense that will normally be recognised using the 'immediate recognition' principle?

Treating assets as expenses is a way to overstate profits for a period.

Treating expenses as assets:

Which of these is not one of the three basic methods of matching costs and revenue that are commonly relied on?

If an employee renders services to the firm,without pay,in order to gain experience,an expense must be recorded by the firm.

The Framework links the definition of expenses to their relationship to revenue.

The statement that is correct concerning depreciation is:

When the 'percentage-of-completion' method is used for construction contracts,how are expenses recorded?

The Framework in relation to conservatism:

An example where accountants normally decide that a cause and effect relationship exist between revenue and expenses is:

Under the FASB's Concept Statement No 6,the statement that is correct is:

'The interpretation of the matching concept in practice,therefore,is biased by the effect of the convention of conservatism.' J.Godfrey,et el,'Accounting Theory',7th Ed.p.348. Explain and discuss the above statement.Do you agree or disagree with the statement?

The treatment of the relationship of losses to expenses in the IASB Framework differs from the treatment by the FASB.Explain the different treatments and discuss whether it is useful in terms of decision-making to distinguish between expenses and losses in financial reports.

The FASB,the US standard setter,unlike the IASB,distinguished between expenses and losses.

Which item is usually not given immediate recognition as an expense?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Measurement

Accounting Measurement Systems

Assets

Liabilities and Owners Equity

Revenue

Positive Theory of Accounting Policy and Disclosure

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters

'The interpretation of the matching concept in practice,therefore,is biased by the effect of the convention of conservatism.' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.348. Explain and discuss the above statement.Do you agree or disagree with the statement?