Question 1

Which of the following statements about the Conceptual Framework's definition of income is correct?

Accepted Answer

A)  Income is always in the form of enhancements of assets. 
B)  Income results in decreases in equity. 
C)  Income includes contributions from owners. 
D)  Income includes gains from non-ordinary business activities. 
A)  Income is always in the form of enhancements of assets. 
B)  Income results in decreases in equity. 
C)  Income includes contributions from owners. 
D)  Income includes gains from non-ordinary business activities. D

Question 2

Information is considered material if:

Accepted Answer

A)  it has predictive value. 
B)  its omission or misstatement could influence users' decision-making. 
C)  it includes all information necessary for faithful representation. 
D)  it is free from errors. 
A)  it has predictive value. 
B)  its omission or misstatement could influence users' decision-making. 
C)  it includes all information necessary for faithful representation. 
D)  it is free from errors. B

Question 3

'Ice-cream R Us' Ltd. just purchased a block of land, on which it will build a new factory for its operations. 'Ice-cream R Us' paid $500,000 cash to the land owner. An independent evaluation reveals that the land is worth $550,000. Using historical cost as a measurement base, how should 'Ice-cream R Us' recognise the land purchase in its financial statements?

Accepted Answer

A)  $500,000 recognised as an asset (land). 
B)  $550,000 recognised as an asset (land). 
C)  $500,000 recognised as an asset (land) and $50,000 as a liability. 
D)  The land should not be recognised as an asset as it cannot be measured with reliability. 
A)  $500,000 recognised as an asset (land). 
B)  $550,000 recognised as an asset (land). 
C)  $500,000 recognised as an asset (land) and $50,000 as a liability. 
D)  The land should not be recognised as an asset as it cannot be measured with reliability. A

Question 4

Section 297 of the Corporations Act states that financial statements must provide a true and fair view of an entity's financial position and performance. However, when compliance with the accounting standards results in financial statements which would not produce a true and fair view, the Corporations Act requires the entity to:

Accepted Answer

A)  not comply with the accounting standards. 
B)  not comply with the accounting standards and write a letter to the shareholders explaining the non-compliance. 
C)  still comply with the accounting standards and provide additional information in the notes to the financial statements to give a true and fair view. 
D)  request an exemption from the AASB. 
A)  not comply with the accounting standards. 
B)  not comply with the accounting standards and write a letter to the shareholders explaining the non-compliance. 
C)  still comply with the accounting standards and provide additional information in the notes to the financial statements to give a true and fair view. 
D)  request an exemption from the AASB.

Question 5

Which of the following statements is false?

Accepted Answer

A)  Members of the IFRIC are appointed by the IASB. 
B)  The IFRS Advisory Council provides strategic advice to the IASB. 
C)  Compliance with IASB standards includes compliance with interpretations issued by IFRIC. 
D)  IFRS Foundation Trustees appoint members of both IASB and IFRS Advisory Council. 
A)  Members of the IFRIC are appointed by the IASB. 
B)  The IFRS Advisory Council provides strategic advice to the IASB. 
C)  Compliance with IASB standards includes compliance with interpretations issued by IFRIC. 
D)  IFRS Foundation Trustees appoint members of both IASB and IFRS Advisory Council.

Question 6

Members of the IASB are appointed by:

Accepted Answer

A)  the Monitoring Board. 
B)  the IFRS Advisory Council. 
C)  the IFRS Foundation Trustees. 
D)  the IFRS Interpretations Committee. 
A)  the Monitoring Board. 
B)  the IFRS Advisory Council. 
C)  the IFRS Foundation Trustees. 
D)  the IFRS Interpretations Committee.

Question 7

The following statements about the AASB are correct, except:

Accepted Answer

A)  The AASB has the authority to issue Australian Accounting Standards. 
B)  The AASB has power to establish committees, advisory panels, and consultative groups. 
C)  Members of the AASB are appointed by the FRC. 
D)  Chair of the AASB is appointed by the FRC. 
A)  The AASB has the authority to issue Australian Accounting Standards. 
B)  The AASB has power to establish committees, advisory panels, and consultative groups. 
C)  Members of the AASB are appointed by the FRC. 
D)  Chair of the AASB is appointed by the FRC.

Question 8

Which measurement base uses the discounted future net cash inflows or net cash savings that are expected to arise in the normal course of business in measuring the value of an asset?

Accepted Answer

A)  Historical cost 
B)  Current cost 
C)  Present value 
D)  Realisable value 
A)  Historical cost 
B)  Current cost 
C)  Present value 
D)  Realisable value

Question 9

A conceptual framework consists of a set of principles with the purpose to:

Accepted Answer

A)  assist users in the interpretation of information in financial statements. 
B)  assist preparers of financial statements in the application of accounting standards and in dealing with topics that are not the subject of existing accounting standards. 
C)  assist standard setters to develop accounting standards. 
D)  all of the options are correct. 
A)  assist users in the interpretation of information in financial statements. 
B)  assist preparers of financial statements in the application of accounting standards and in dealing with topics that are not the subject of existing accounting standards. 
C)  assist standard setters to develop accounting standards. 
D)  all of the options are correct.

Question 10

According to the Australian Accounting Standards, the following assets can be recorded initially at historical cost, except for:

Accepted Answer

A)  land. 
B)  inventory. 
C)  equipment. 
D)  motor vehicle. 
A)  land. 
B)  inventory. 
C)  equipment. 
D)  motor vehicle.

Question 11

A quality of information demonstrated when different independent observers could reach the same general conclusions that the information represents what it purports to represent is:

Accepted Answer

A)  verifiability. 
B)  comparability. 
C)  understandability. 
D)  neutrality 
A)  verifiability. 
B)  comparability. 
C)  understandability. 
D)  neutrality

Question 12

Which of the following statements is incorrect about financial capital concept?

Accepted Answer

A)  The general price level accounting system follows financial capital concept. 
B)  Capital is calculated as total assets less total liabilities. 
C)  Profit is earned after an entity's capital is sufficient to maintain the operating capability of the entity's assets. 
D)  Capital is determined as the purchasing power of equity recorded. 
A)  The general price level accounting system follows financial capital concept. 
B)  Capital is calculated as total assets less total liabilities. 
C)  Profit is earned after an entity's capital is sufficient to maintain the operating capability of the entity's assets. 
D)  Capital is determined as the purchasing power of equity recorded.

Question 13

The definition of equity as given in the Conceptual Framework shows that:

Accepted Answer

A)  Equity = Assets - Expenses 
B)  Equity = Assets - Liabilities 
C)  Equity = Income - Expenses 
D)  Equity = Assets - Liabilities - Expenses 
A)  Equity = Assets - Expenses 
B)  Equity = Assets - Liabilities 
C)  Equity = Income - Expenses 
D)  Equity = Assets - Liabilities - Expenses

Question 14

YinYang Ltd. is a company listed on the ASX, with a total number of 250 non-employee shareholders owning the company's shares and 60 employees working at the company. Which of the following statements about Yinyang Ltd. is incorrect?

Accepted Answer

A)  Yinyang Ltd. is proprietary company. 
B)  Yinyang Ltd. is a disclosing entity. 
C)  Yinyang Ltd is a public company. 
D)  Yinyang Ltd. is required to prepare a financial report. 
A)  Yinyang Ltd. is proprietary company. 
B)  Yinyang Ltd. is a disclosing entity. 
C)  Yinyang Ltd is a public company. 
D)  Yinyang Ltd. is required to prepare a financial report.

Question 15

Some of the implications of adopting the going concern assumption are shown in the following accounting practices, except:

Accepted Answer

A)  justification of using historical cost to measure value of assets. 
B)  depreciation of non-current assets. 
C)  liquidation of an entity's operations. 
D)  inclusion of goodwill in the statement of financial position. 
A)  justification of using historical cost to measure value of assets. 
B)  depreciation of non-current assets. 
C)  liquidation of an entity's operations. 
D)  inclusion of goodwill in the statement of financial position.

Question 16

Which of the followings satisfy the definition of expenses?

Accepted Answer

A)  Cash withdrawal by owner. 
B)  Payment of dividends to shareholders. 
C)  Purchase of equipment. 
D)  Payment of salaries to employees. 
A)  Cash withdrawal by owner. 
B)  Payment of dividends to shareholders. 
C)  Purchase of equipment. 
D)  Payment of salaries to employees.

Question 17

What is the constraint that limits the information provided by financial reporting?

Accepted Answer

A)  Timeliness 
B)  Materiality 
C)  Comparability 
D)  Cost 
A)  Timeliness 
B)  Materiality 
C)  Comparability 
D)  Cost

Question 18

What is the essential factor in identifying whether an entity is a reporting entity?

Accepted Answer

A)  Existence of users dependent on general purpose financial statements to make decisions. 
B)  Existence of users who are able to demand financial statements to meet their specific needs. 
C)  Whether the entity is listed on the ASX or not. 
D)  Total revenue earned. 
A)  Existence of users dependent on general purpose financial statements to make decisions. 
B)  Existence of users who are able to demand financial statements to meet their specific needs. 
C)  Whether the entity is listed on the ASX or not. 
D)  Total revenue earned.

Question 19

An independent body established in 2006 to resolve disputes between ASIC and companies is:

Accepted Answer

A)  APRA 
B)  FRP 
C)  FRC 
D)  ASX 
A)  APRA 
B)  FRP 
C)  FRC 
D)  ASX

Question 20

Which of the followings are the recognition criteria of elements of financial statements?
$\begin{array}{ll}
I.\text { Existence of economic benefits}&III.\text { Probable occurrence }\
II.\text {Reliable measurement }&IV.\text { Control by the entits}\
\end{array}$

Accepted Answer

A)  I and II 
B)  II and III 
C)  II and IV 
D)  I and III 
A)  I and II 
B)  II and III 
C)  II and IV 
D)  I and III

Exam 1: Accounting Regulation and the Conceptual Framework

Which of the following statements about the Conceptual Framework's definition of income is correct?

Information is considered material if:

Which of the following statements is false?

Members of the IASB are appointed by:

The following statements about the AASB are correct, except:

Which measurement base uses the discounted future net cash inflows or net cash savings that are expected to arise in the normal course of business in measuring the value of an asset?

A conceptual framework consists of a set of principles with the purpose to:

According to the Australian Accounting Standards, the following assets can be recorded initially at historical cost, except for:

A quality of information demonstrated when different independent observers could reach the same general conclusions that the information represents what it purports to represent is:

Which of the following statements is incorrect about financial capital concept?

The definition of equity as given in the Conceptual Framework shows that:

YinYang Ltd. is a company listed on the ASX, with a total number of 250 non-employee shareholders owning the company's shares and 60 employees working at the company. Which of the following statements about Yinyang Ltd. is incorrect?

Some of the implications of adopting the going concern assumption are shown in the following accounting practices, except:

Which of the followings satisfy the definition of expenses?

What is the constraint that limits the information provided by financial reporting?

What is the essential factor in identifying whether an entity is a reporting entity?

An independent body established in 2006 to resolve disputes between ASIC and companies is:

Which of the followings are the recognition criteria of elements of financial statements? I. Existence of economic benefits III. Probable occurrence II. Reliable measurement IV. Control by the entits

Application of Accounting Theory

Shareholders Equity: Share Capital and Reserves

Fair Value Measurement

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Translation of the Financial Statements of Foreign Entities

Employee Benefits

Inventories

Property, Plant and Equipment

Leases

Understanding Australian Accounting Standards

Impairment of Assets

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Business Combinations

Consolidation: Principles and Accounting Requirements

Consolidation: Intragroup Transactions

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

Filters