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

Ms Marple is an accounting cadet for one of the big accounting firms.She is a bit confused as to which of the following Anss should be applied first in dealing with an accounting issue. I.Industry Practice II.Accounting Standards III.Conceptual Framework IV.International Financial Reporting Interpretations Committee (IFRIC) Which ordering would you recommend?

Which of the following statement(s)is/are true of general-purpose financial reports?

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

The accountant of Broken Bay Ltd decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets.This action is consistent ____________.

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:

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

Prudence is exercised in the preparation and presentation of financial statements when asset values are never shown in excess of their realisable values but could be understated,and liabilities are never to be understated.

Bowen Pty Ltd is a small proprietary company with seven directors.Four of the seven directors own 75% of the ordinary shares and the remaining shares are owned by family members of the directors.The company also has 15 trade creditors and an open line of credit with one state bank.Is Bowen Pty Ltd a reporting entity and hence required to prepare general-purpose financial reports?

The Australian Accounting Standards Board (AASB)retained the use of its own conceptual framework even after harmonisation:

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

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

One of the uses of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues:

When preparing financial reports "users are assumed to have a reasonable knowledge of the business and economic activities and accounting and a willingness to study the information with reasonable diligence".This statement is consistent with the qualitative characteristic of:

Which of the following items is not considered an asset?

Which of the following are considered in the AASB Framework as primary qualitative characteristics?

The Framework identifies two aspects to financial information that is "relevant".These are.

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?

The AASB Framework serves as a guide to the Australian Accounting Standards Board (AASB)in developing accounting standards:

Which of the following statement(s)is/are true of the qualitative characteristic "reliability"?

Which of the following actions are consistent with the notion of "prudence"?