Question 1

The key characteristic used by the Framework to define an asset is:

Accepted Answer

A)  saleability 
B)  type of item 
C)  ability to generate future economic benefits 
D)  ability to generate future cash flows 
A)  saleability 
B)  type of item 
C)  ability to generate future economic benefits 
D)  ability to generate future cash flows C

Question 2

Discuss the different theories concerning how liabilities should be measured.

Accepted Answer

Paton and Littleton wrote,for example,that: Liabilities,like assets,represent bargained prices … In other words,the standard of recorded cost applies on both sides of the balance sheet (statement of ﬁnancial position)[words in brackets added].26Bennett,Grant and Parker stated: the amount of a liability in the balance sheet (statement of ﬁnancial position)ought to represent … the present value of the future cash payment to which … the company would not be committed if the debentures had not been issued … The interest rate should be the current market rate of interest for securities of a similar type [words in brackets added].27Sprouse and Moonitz suggested: to measure a liability is to determine the 'weight' or 'burden' of the obligation on the balance sheet (statement of ﬁnancial position)date.This 'burden' is the lowest amount for which the obligation could be effectively discharged [words in brackets added].28 Chambers suggested: it is possible to compute the current cash equivalent of these obligations by discounting the sum payable in the future to a present sum using the rate of interest payable for the immediate use of the money necessary to enable settlement to be made.

Question 3

How is the concept of aggregation best summarised?

Accepted Answer

A)  as the property that provides relevant information that is a faithful representation 
B)  different properties are measured and different scales are used 
C)  the measurement scale can be defined by several different bases 
D)  comparable characteristics of all elements should be measured using the same scale 
A)  as the property that provides relevant information that is a faithful representation 
B)  different properties are measured and different scales are used 
C)  the measurement scale can be defined by several different bases 
D)  comparable characteristics of all elements should be measured using the same scale D

Question 4

Under the Framework,the purchase of inventory by an entity is:

Accepted Answer

A)  an expense as it decreases equity 
B)  an expense as it arises from carrying out the major activities of the entity 
C)  an expense because it is a flow 
D)  not an expense 
A)  an expense as it decreases equity 
B)  an expense as it arises from carrying out the major activities of the entity 
C)  an expense because it is a flow 
D)  not an expense

Question 5

Measuring and reporting assets using historical cost is most relevant in satisfying:

Accepted Answer

A)  the stewardship objective of financial reporting 
B)  the decision usefulness objective of financial reporting 
C)  the objectives of relevance and reliability in financial reporting 
D)  both A and B 
A)  the stewardship objective of financial reporting 
B)  the decision usefulness objective of financial reporting 
C)  the objectives of relevance and reliability in financial reporting 
D)  both A and B

Question 6

In accounting,'value' can mean:

Accepted Answer

A)  historical cost 
B)  market value 
C)  replacement cost 
D)  any of the above 
A)  historical cost 
B)  market value 
C)  replacement cost 
D)  any of the above

Question 7

The Framework definition of revenue (income)differs in which important aspect from the FASB definition?

Accepted Answer

A)  In some circumstances it includes contributions by owners as revenue 
B)  It includes a reduction in liabilities as one of the forms that revenue can take 
C)  It defines revenue as an inflow 
D)  It does not identify the sources of the revenue 
A)  In some circumstances it includes contributions by owners as revenue 
B)  It includes a reduction in liabilities as one of the forms that revenue can take 
C)  It defines revenue as an inflow 
D)  It does not identify the sources of the revenue

Question 8

In the Framework,'the present obligation of the entity arising from past events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits' is the definition of:

Accepted Answer

A)  revenues 
B)  assets 
C)  expenses 
D)  liabilities 
A)  revenues 
B)  assets 
C)  expenses 
D)  liabilities

Question 9

List and explain the four types of measurement scales.

Accepted Answer

nominal scales - The use of a nominal sc

Question 10

Which of the following is not considered an element of the statement of financial position?

Accepted Answer

A)  Liabilities 
B)  Equity 
C)  Expenses 
D)  Assets 
A)  Liabilities 
B)  Equity 
C)  Expenses 
D)  Assets

Question 11

In the Framework's definition of expenses:

Accepted Answer

A)  there is no distinction between expenses and losses 
B)  expenses must be matched against income 
C)  the causes of expenses are specifically identified 
D)  if the definition is satisfied the item must be recognised in the financial statements 
A)  there is no distinction between expenses and losses 
B)  expenses must be matched against income 
C)  the causes of expenses are specifically identified 
D)  if the definition is satisfied the item must be recognised in the financial statements

Question 12

Under the Framework,profit is defined as:

Accepted Answer

A)  an increase in 'well-offness' 
B)  a matter of display 
C)  an increase in wealth 
D)  including all changes in equity occurring during a period 
A)  an increase in 'well-offness' 
B)  a matter of display 
C)  an increase in wealth 
D)  including all changes in equity occurring during a period

Question 13

Which of the following provides an example of measurement based on a nominal scale?

Accepted Answer

A)  Postcode 
B)  Temperature using centigrade 
C)  Temperature using Fahrenheit 
D)  The outcome of an election process 
A)  Postcode 
B)  Temperature using centigrade 
C)  Temperature using Fahrenheit 
D)  The outcome of an election process

Question 14

The estimated current net market value of an asset in the ordinary course of business is known as:

Accepted Answer

A)  opportunity cost 
B)  replacement cost 
C)  current cash equivalent 
D)  discounted value of future cash flows 
A)  opportunity cost 
B)  replacement cost 
C)  current cash equivalent 
D)  discounted value of future cash flows

Question 15

What is the term for the action or process of recording a transaction or event in an entity's accounting records?

Accepted Answer

A)  Recording 
B)  Valuation 
C)  Aggregating 
D)  Recognition 
A)  Recording 
B)  Valuation 
C)  Aggregating 
D)  Recognition

Question 16

The recognition of an element of a financial statement is:

Accepted Answer

A)  a description of the element in the notes to the financial statement 
B)  an action or process to record the transaction or event in the accounting records 
C)  a statement identifying the characteristics that an element must have 
D)  both A and C 
A)  a description of the element in the notes to the financial statement 
B)  an action or process to record the transaction or event in the accounting records 
C)  a statement identifying the characteristics that an element must have 
D)  both A and C

Question 17

Which of the following is not an advantage of the contract-price method?

Accepted Answer

A)  It is simple to apply 
B)  It ignores the time value of money 
C)  It recognizes the interest obligation as a liability 
D)  It relies on readily verifiable documentary evidence 
A)  It is simple to apply 
B)  It ignores the time value of money 
C)  It recognizes the interest obligation as a liability 
D)  It relies on readily verifiable documentary evidence

Question 18

Under the Framework,which of these is not an essential characteristic of an expense?

Accepted Answer

A)  It must result in a decrease in equity 
B)  It must represent a flow 
C)  It must be associated with the earning of revenue 
D)  It must take the form of a decrease in an asset or an increase in a liability 
A)  It must result in a decrease in equity 
B)  It must represent a flow 
C)  It must be associated with the earning of revenue 
D)  It must take the form of a decrease in an asset or an increase in a liability

Question 19

Explain and discuss three essential characteristics of an asset as defined by the Framework.

Accepted Answer

The essential characteristics

Question 20

Under the Framework,assets should be recognised in the balance sheet when:

Accepted Answer

A)  future economic benefits can probably be measured reliably 
B)  future economic benefits are relevant, reliable and material 
C)  future economic benefits are probable and cost or value can be measured reliably 
D)  future economic benefits are relevant and can be measured reliably 
A)  future economic benefits can probably be measured reliably 
B)  future economic benefits are relevant, reliable and material 
C)  future economic benefits are probable and cost or value can be measured reliably 
D)  future economic benefits are relevant and can be measured reliably

Exam 3: The Conceptual Framework: Definition, recognition and Measurement of the Elements in General Purpose Financial Statements

The key characteristic used by the Framework to define an asset is:

Discuss the different theories concerning how liabilities should be measured.

How is the concept of aggregation best summarised?

Under the Framework,the purchase of inventory by an entity is:

Measuring and reporting assets using historical cost is most relevant in satisfying:

In accounting,'value' can mean:

The Framework definition of revenue (income)differs in which important aspect from the FASB definition?

In the Framework,'the present obligation of the entity arising from past events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits' is the definition of:

List and explain the four types of measurement scales.

Which of the following is not considered an element of the statement of financial position?

In the Framework's definition of expenses:

Under the Framework,profit is defined as:

Which of the following provides an example of measurement based on a nominal scale?

The estimated current net market value of an asset in the ordinary course of business is known as:

What is the term for the action or process of recording a transaction or event in an entity's accounting records?

The recognition of an element of a financial statement is:

Which of the following is not an advantage of the contract-price method?

Under the Framework,which of these is not an essential characteristic of an expense?

Explain and discuss three essential characteristics of an asset as defined by the Framework.

Under the Framework,assets should be recognised in the balance sheet when:

Institutional Arrangements for Setting Accounting Standards in Australia

The Conceptual Framework: Purpose, reporting Entity, the Objective of Financial Reporting, and Qualitative Characteristics

Fair Value Measurement

The Choice of Accounting Methods

The Statement of Financial Position

Accounting for Current Assets

Accounting for Property, plant and Equipment

Accounting for Company Income Tax

Accounting for Intangible Assets

Accounting for Leases

Accounting for Employee Benefits

Accounting for Financial Instruments

The Statement of Comprehensive Income

Revenue

The Statement of Cash Flows

Financial Reporting: Segment Reporting and Highlights Statements

Further Financial Reporting Issues

Accounting for Extractive Industry

Accounting for Agricultural Activity

Accounting for Superannuation Entities

Accounting for Insurance

International Accounting Standards, harmonisation and Convergence

Foreign Currency Translation

Accounting for Corporate

Ethics in Accounting

Filters