Question 1

Which of the following use of measurement concepts is not correct according to the international accounting standards?

Accepted Answer

A) Measurement of provisions is determined by the expected present value method 
B) The residual value of an asset should be calculated as its discounted value 
C) Property,plant and equipment may be valued at historical cost or revalued amount 
D) Financial statements of an entity that operates in a hyperinflationary economy are adjusted using a general price level index 
A) Measurement of provisions is determined by the expected present value method 
B) The residual value of an asset should be calculated as its discounted value 
C) Property,plant and equipment may be valued at historical cost or revalued amount 
D) Financial statements of an entity that operates in a hyperinflationary economy are adjusted using a general price level index B

Question 2

Which of the following is not what IAS 16 / AASB 116 prescribes in relation to asset measurement?

Accepted Answer

A) IAS 16 /AASB 116 allows companies to choose between a cost model and a current cost model 
B) On acquisition the cost price of the asset is its fair value 
C) All assets within a class must be valued under the same principles but not all classes must use the same valuation model 
D) Assets have to be revalued in a specified period 
A) IAS 16 /AASB 116 allows companies to choose between a cost model and a current cost model 
B) On acquisition the cost price of the asset is its fair value 
C) All assets within a class must be valued under the same principles but not all classes must use the same valuation model 
D) Assets have to be revalued in a specified period D

Question 3

Are holding gains a component of accounting profit? Discuss.

Accepted Answer

Holding gains are not typically considered a component of accounting profit. Accounting profit is generally calculated based on the difference between revenues and expenses during a specific period, and does not typically include gains from holding assets such as stocks, bonds, or real estate.

Holding gains are more commonly associated with the concept of unrealized gains, which are increases in the value of an asset that have not yet been realized through a sale or other transaction. While holding gains can contribute to an increase in the overall value of a company or individual's assets, they are not typically factored into accounting profit calculations.

However, it's important to note that the treatment of holding gains can vary depending on the specific accounting standards and regulations being followed. For example, in certain circumstances, holding gains may be recognized as part of comprehensive income or other financial reporting measures. Additionally, for certain types of investments or financial instruments, holding gains may be recognized in the financial statements in accordance with specific accounting rules.

In summary, while holding gains are an important aspect of overall financial performance and wealth accumulation, they are not typically considered a component of accounting profit in the traditional sense. However, it's important for individuals and businesses to understand how holding gains are treated in their specific financial reporting and accounting practices.

Question 4

Exit price accounting has been criticised for it does not recognise the possibility of selling assets as one package.

Accepted Answer

A) True 
 B)False

Question 5

Which of these best describes the second era of accounting phases as suggested by MacNeal?

Accepted Answer

A) There are numerous shareholders who own the company 
B) The need to ensure that financial statements were reliable established public accounting as a profession 
C) Doing business is very risky and ventures are usually concluded within few years 
D) Providing financial reports for external users became an important function of accounting 
A) There are numerous shareholders who own the company 
B) The need to ensure that financial statements were reliable established public accounting as a profession 
C) Doing business is very risky and ventures are usually concluded within few years 
D) Providing financial reports for external users became an important function of accounting

Question 6

The statement that is true with respect to current cost accounting is:

Accepted Answer

A) Gains are recorded only when the assets are disposed of 
B) Holding gains are not included in current operating profits 
C) Current operating profit is the excess of the current value of the output sold over the current cost of the related inputs 
D) None of the above is true 
A) Gains are recorded only when the assets are disposed of 
B) Holding gains are not included in current operating profits 
C) Current operating profit is the excess of the current value of the output sold over the current cost of the related inputs 
D) None of the above is true

Question 7

Exit price accounting can be seen as a short-term approach as it focuses on disposition and liquidation values.

Accepted Answer

A) True 
 B)False

Question 8

What was the main recommendation of SAP 1 Current Cost Accounting,issued in Australia in November 1983?

Accepted Answer

A) That companies disclosed information on profit from continuing operations on a current cost basis for the current financial year 
B) That companies are not required to report historical cost information if they have disclosed current cost information 
C) That companies presented supplementary current cost accounting statements in addition to historical cost financial statements 
D) That companies used current cost for the main financial statements and historical cost as supplementary data 
A) That companies disclosed information on profit from continuing operations on a current cost basis for the current financial year 
B) That companies are not required to report historical cost information if they have disclosed current cost information 
C) That companies presented supplementary current cost accounting statements in addition to historical cost financial statements 
D) That companies used current cost for the main financial statements and historical cost as supplementary data

Question 9

The three major income and capital measurement systems in accounting are based on historical cost,input values and exit values.

Accepted Answer

A) True 
 B)False

Question 10

The argument that is descriptive of exit price accounting is:

Accepted Answer

A) It takes into account the opportunity cost of holding assets 
B) The values of non-monetary assets are adjusted to measure changes in the market selling prices of those assets 
C) When considering the financial position of the firm and the results of the firm's operations changes in the general purchasing power of money is taken into account 
D) All of the above 
A) It takes into account the opportunity cost of holding assets 
B) The values of non-monetary assets are adjusted to measure changes in the market selling prices of those assets 
C) When considering the financial position of the firm and the results of the firm's operations changes in the general purchasing power of money is taken into account 
D) All of the above

Question 11

Which measurement was agreed as the best basis of measurement by the IASB and the FASB?

Accepted Answer

A) Historical cost 
B) Fair value 
C) Exit price 
D) Current cost 
A) Historical cost 
B) Fair value 
C) Exit price 
D) Current cost

Question 12

Current cost profit is defined as the difference between the present (discounted)value of expected net cash flows of a firm at two points in times,excluding additional investments by and distributions to owners.

Accepted Answer

A) True 
 B)False

Question 13

The difference between the physical capital concept and the financial capital concept is that holding gains are included in profit under the physical capital concept.

Accepted Answer

A) True 
 B)False

Question 14

Outline and discuss the arguments for and against the adoption of the continuously contemporary accounting system.

Accepted Answer

The continuously contemporary accounting

Question 15

'While proponents of current cost accounting are convinced that it provides more useful information than historic accounting,they do not agree on all issues.In general supporters can be divided into two camps; (1)those who believe in the financial capital concept,and (2)those who believe in the physical concept.' J.Godfrey,et el,'Accounting Theory',7th Ed.p.205.
Explain the differences between the two concepts and the arguments for and against each viewpoint stating which you approach you believe is the most valid.

Accepted Answer

The financial capital concept in current

Question 16

Sterling defines profit as the difference between capital at two points in time.

Accepted Answer

A) True 
 B)False

Question 17

The statement in relation to historical cost that is true is:

Accepted Answer

A) The stewardship objective of historical cost accounting emphasises the contractual relationship between a firm and those who provide resources to it 
B) Historical cost understates profit in a time of rising prices 
C) Historical cost is more subjective than alternative systems about what is really going on in a company's business 
D) A and B are true 
A) The stewardship objective of historical cost accounting emphasises the contractual relationship between a firm and those who provide resources to it 
B) Historical cost understates profit in a time of rising prices 
C) Historical cost is more subjective than alternative systems about what is really going on in a company's business 
D) A and B are true

Question 18

Which of these is not true with respect to the assumptions of the value-in-use and the value-in-exchange approaches?

Accepted Answer

A) Additivity of economic phenomena is made in the same unit,adjusted for inflation and price movements 
B) Up-to-date observations of market prices are more relevant for financial decision making 
C) Valuation does not depend on a subjective allocation 
D) Historical cost accounting is a fairly reliable valuation method 
A) Additivity of economic phenomena is made in the same unit,adjusted for inflation and price movements 
B) Up-to-date observations of market prices are more relevant for financial decision making 
C) Valuation does not depend on a subjective allocation 
D) Historical cost accounting is a fairly reliable valuation method

Question 19

Each accounting measurement model creates the same type of misstatement risk for an auditor.

Accepted Answer

A) True 
 B)False

Question 20

Which of these is a criticism of the physical capital concept?

Accepted Answer

A) It is not meaningful if the firm does not continue to replace identical units 
B) When costs are decreasing a profit may still be recorded when a company sells a product for less than purchase price 
C) When a company buys and sells in the same market it will record zero profit 
D) All of the above 
A) It is not meaningful if the firm does not continue to replace identical units 
B) When costs are decreasing a profit may still be recorded when a company sells a product for less than purchase price 
C) When a company buys and sells in the same market it will record zero profit 
D) All of the above

Which of the following use of measurement concepts is not correct according to the international accounting standards?

Which of the following is not what IAS 16 / AASB 116 prescribes in relation to asset measurement?

Are holding gains a component of accounting profit? Discuss.

Exit price accounting has been criticised for it does not recognise the possibility of selling assets as one package.

Which of these best describes the second era of accounting phases as suggested by MacNeal?

The statement that is true with respect to current cost accounting is:

Exit price accounting can be seen as a short-term approach as it focuses on disposition and liquidation values.

What was the main recommendation of SAP 1 Current Cost Accounting,issued in Australia in November 1983?

The three major income and capital measurement systems in accounting are based on historical cost,input values and exit values.

The argument that is descriptive of exit price accounting is:

Which measurement was agreed as the best basis of measurement by the IASB and the FASB?

Current cost profit is defined as the difference between the present (discounted)value of expected net cash flows of a firm at two points in times,excluding additional investments by and distributions to owners.

The difference between the physical capital concept and the financial capital concept is that holding gains are included in profit under the physical capital concept.

Outline and discuss the arguments for and against the adoption of the continuously contemporary accounting system.

Sterling defines profit as the difference between capital at two points in time.

The statement in relation to historical cost that is true is:

Which of these is not true with respect to the assumptions of the value-in-use and the value-in-exchange approaches?

Each accounting measurement model creates the same type of misstatement risk for an auditor.

Which of these is a criticism of the physical capital concept?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Measurement

Assets

Liabilities and Owners Equity

Revenue

Expenses

Positive Theory of Accounting Policy and Disclosure

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters

Exam 6: Accounting Measurement Systems

Which of the following use of measurement concepts is not correct according to the international accounting standards?

Which of the following is not what IAS 16 / AASB 116 prescribes in relation to asset measurement?

Are holding gains a component of accounting profit? Discuss.

Exit price accounting has been criticised for it does not recognise the possibility of selling assets as one package.

Which of these best describes the second era of accounting phases as suggested by MacNeal?

The statement that is true with respect to current cost accounting is:

Exit price accounting can be seen as a short-term approach as it focuses on disposition and liquidation values.

What was the main recommendation of SAP 1 Current Cost Accounting,issued in Australia in November 1983?

The three major income and capital measurement systems in accounting are based on historical cost,input values and exit values.

The argument that is descriptive of exit price accounting is:

Which measurement was agreed as the best basis of measurement by the IASB and the FASB?

Current cost profit is defined as the difference between the present (discounted)value of expected net cash flows of a firm at two points in times,excluding additional investments by and distributions to owners.

The difference between the physical capital concept and the financial capital concept is that holding gains are included in profit under the physical capital concept.

Outline and discuss the arguments for and against the adoption of the continuously contemporary accounting system.

Sterling defines profit as the difference between capital at two points in time.

The statement in relation to historical cost that is true is:

Which of these is not true with respect to the assumptions of the value-in-use and the value-in-exchange approaches?

Each accounting measurement model creates the same type of misstatement risk for an auditor.

Which of these is a criticism of the physical capital concept?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Measurement

Assets

Liabilities and Owners Equity

Revenue

Expenses

Positive Theory of Accounting Policy and Disclosure

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters