Question 1

As identified by the IASB's Conceptual Framework, which of the following groups are the prime users of financial reports?

Accepted Answer

A)  Investors and their advisors 
B)  Governments, regulatory bodies and parties performing an overseeing function 
C)  Existing and potential investors and creditors 
D)  The public and consumers of goods and services 
A)  Investors and their advisors 
B)  Governments, regulatory bodies and parties performing an overseeing function 
C)  Existing and potential investors and creditors 
D)  The public and consumers of goods and services C

Question 2

In relation to the conceptual framework, SAC stands for:

Accepted Answer

A)  Sensible Accounting Constructs. 
B)  Standard Auditing Controls. 
C)  Statements from Accounting Committees. 
D)  Statements of Accounting Concepts. 
A)  Sensible Accounting Constructs. 
B)  Standard Auditing Controls. 
C)  Statements from Accounting Committees. 
D)  Statements of Accounting Concepts. D

Question 3

In accordance with the Conceptual Framework, income includes both:

Accepted Answer

A)  gains and losses. 
B)  returns and profits. 
C)  revenue and gains. 
D)  gains and profits. 
A)  gains and losses. 
B)  returns and profits. 
C)  revenue and gains. 
D)  gains and profits. C

Question 4

Under the current Conceptual Framework which of the following is not an essential characteristic of an asset?

Accepted Answer

A)  It must have physical substance. 
B)  The resource must be controlled by the entity. 
C)  It must have the potential to contribute to the flow of cash and cash equivalents to the entity. 
D)  The event giving rise to the entity's control over the resource must have occurred. 
A)  It must have physical substance. 
B)  The resource must be controlled by the entity. 
C)  It must have the potential to contribute to the flow of cash and cash equivalents to the entity. 
D)  The event giving rise to the entity's control over the resource must have occurred.

Question 5

Which of the following have been a significant influence on the development of modern accounting principles?
I. Global warming
II. Globalisation
III. Series of high-profile company failures
IV. The rise of the multinational corporation

Accepted Answer

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

Question 6

Accounting information that is representative of the real-world is likely to meet the Conceptual Framework's criteria of:

Accepted Answer

A)  relevance. 
B)  comparability. 
C)  understandability. 
D)  faithful representation. 
A)  relevance. 
B)  comparability. 
C)  understandability. 
D)  faithful representation.

Question 7

Which statement relating to the Conceptual Framework's concept of understandability is incorrect?

Accepted Answer

A)  Information about complex matters should be included in the reports if it is considered relevant to decision making. 
B)  It is expected that users of financial statements will be willing to study the information with reasonable diligence. 
C)  The financial reports are required to be simple to read and understand. 
D)  It is assumed that readers of financial reports have a reasonable knowledge of business and economic activities. 
A)  Information about complex matters should be included in the reports if it is considered relevant to decision making. 
B)  It is expected that users of financial statements will be willing to study the information with reasonable diligence. 
C)  The financial reports are required to be simple to read and understand. 
D)  It is assumed that readers of financial reports have a reasonable knowledge of business and economic activities.

Question 8

If an entity receives a deposit in advance of goods or services being supplied, the deposit is initially classified as:

Accepted Answer

A)  an asset. 
B)  revenue. 
C)  a liability. 
D)  an expense. 
A)  an asset. 
B)  revenue. 
C)  a liability. 
D)  an expense.

Question 9

Under the Conceptual Framework, 'increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants', is the definition of:

Accepted Answer

A)  income. 
B)  equity. 
C)  assets. 
D)  contributions. 
A)  income. 
B)  equity. 
C)  assets. 
D)  contributions.

Question 10

According to the Conceptual Framework information that is free from material error and bias has greater:

Accepted Answer

A)  relevance. 
B)  faithful representation. 
C)  decision making usefulness. 
D)  verifiability. 
A)  relevance. 
B)  faithful representation. 
C)  decision making usefulness. 
D)  verifiability.

Question 11

Which of the following statements concerning the definition of expenses in the Conceptual Framework is incorrect?

Accepted Answer

A)  An expense arises whenever the economic benefits in an asset are consumed or lost. 
B)  All expenses must be matched with their associated income in the same financial period. 
C)  An expense occurs simultaneously with a decrease in an asset or an increase in a liability. 
D)  An expense is recognised when the decrease in future economic benefits can be measured reliably. 
A)  An expense arises whenever the economic benefits in an asset are consumed or lost. 
B)  All expenses must be matched with their associated income in the same financial period. 
C)  An expense occurs simultaneously with a decrease in an asset or an increase in a liability. 
D)  An expense is recognised when the decrease in future economic benefits can be measured reliably.

Question 12

Which of these is not a characteristic of equity as specified in the Conceptual Framework?

Accepted Answer

A)  It ranks after liabilities as a claim on assets. 
B)  It must be controlled by the entity. 
C)  It is diminished by unprofitable operations. 
D)  It cannot be calculated independently of assets and liabilities. 
A)  It ranks after liabilities as a claim on assets. 
B)  It must be controlled by the entity. 
C)  It is diminished by unprofitable operations. 
D)  It cannot be calculated independently of assets and liabilities.

Question 13

Under the Conceptual Framework, which of the following is not a characteristic of a liability?

Accepted Answer

A)  It must be a legal debt. 
B)  It must result from a past transaction or event. 
C)  It must be a present obligation of the entity. 
D)  It is expected to result in an outflow of economic resources. 
A)  It must be a legal debt. 
B)  It must result from a past transaction or event. 
C)  It must be a present obligation of the entity. 
D)  It is expected to result in an outflow of economic resources.

Question 14

What are the enhancing qualitative characteristics for financial reporting contained in the Conceptual Framework?
$$\begin{array} { | l | l | l | l | } 
\hline \text { I } & \text { Comparability } & \text { V } & \text { Faithful representation } \
\hline \text { II } & \text { Materiality } & \text { VI } & \text { Reliability } \
\hline \text { III } & \text { Timeliness } & \text { VII } & \text { Understandability } \
\hline \text { IV } & \text { Relevarce } & \text { VII } & \text { Verifiability } \
\hline
\end{array}$$

Accepted Answer

A)  I, III, VII and VIII 
B)  II, IV, VI and VIII 
C)  IV, V, VI and VII 
D)  I, III, V and VII 
A)  I, III, VII and VIII 
B)  II, IV, VI and VIII 
C)  IV, V, VI and VII 
D)  I, III, V and VII

Question 15

Which of the following is not a cost of financial reporting?

Accepted Answer

A)  Cost of preparing the annual report. 
B)  Cost of complying with accounting standards. 
C)  Cost of preparing the organisation's annual budgets for all departments. 
D)  Loss of competitive position as a result of the disclosure of financial information outside the business. 
A)  Cost of preparing the annual report. 
B)  Cost of complying with accounting standards. 
C)  Cost of preparing the organisation's annual budgets for all departments. 
D)  Loss of competitive position as a result of the disclosure of financial information outside the business.

Question 16

The Conceptual Framework characterises equity as:

Accepted Answer

A)  a result of a profitable business operation. 
B)  being influenced by the measurement systems adopted for assets and liabilities. 
C)  a residual. 
D)  All of these options 
A)  a result of a profitable business operation. 
B)  being influenced by the measurement systems adopted for assets and liabilities. 
C)  a residual. 
D)  All of these options

Question 17

Which organisation is concerned with improving disclosure in financial reports of companies listed on the various exchanges throughout Australia?

Accepted Answer

A)  Australian Securities Exchange 
B)  Australian Stock Exchange 
C)  Accounting Standards Board 
D)  Australian Companies Exchange 
A)  Australian Securities Exchange 
B)  Australian Stock Exchange 
C)  Accounting Standards Board 
D)  Australian Companies Exchange

Question 18

Materiality is an aspect of the fundamental characteristic of relevance and:

Accepted Answer

A)  means exercising due care and caution. 
B)  means attention to detail. 
C)  is linked to the qualitative characteristic of faithful representation. 
D)  provides a cut-off point in determining whether information is relevant. 
A)  means exercising due care and caution. 
B)  means attention to detail. 
C)  is linked to the qualitative characteristic of faithful representation. 
D)  provides a cut-off point in determining whether information is relevant.

Question 19

Which of the following pairs of qualitative characteristics are most likely to be in conflict?

Accepted Answer

A)  Comparability and verifiability 
B)  Relevance and comparability 
C)  Understandability and timeliness 
D)  Relevance and faithful representation 
A)  Comparability and verifiability 
B)  Relevance and comparability 
C)  Understandability and timeliness 
D)  Relevance and faithful representation

Question 20

The primary reason for developing a conceptual framework was to:

Accepted Answer

A)  assist in the development of the accounting standards. 
B)  reduce the number of accounting standards needed. 
C)  provide an alternative view to the accounting standards. 
D)  enable regulators to develop accounting standards that are consistent and logically formulated. 
A)  assist in the development of the accounting standards. 
B)  reduce the number of accounting standards needed. 
C)  provide an alternative view to the accounting standards. 
D)  enable regulators to develop accounting standards that are consistent and logically formulated.

Exam 10: Regulation and the Conceptual Framework

As identified by the IASB's Conceptual Framework, which of the following groups are the prime users of financial reports?

In relation to the conceptual framework, SAC stands for:

In accordance with the Conceptual Framework, income includes both:

Under the current Conceptual Framework which of the following is not an essential characteristic of an asset?

Which of the following have been a significant influence on the development of modern accounting principles? I. Global warming II. Globalisation III. Series of high-profile company failures IV. The rise of the multinational corporation

Accounting information that is representative of the real-world is likely to meet the Conceptual Framework's criteria of:

Which statement relating to the Conceptual Framework's concept of understandability is incorrect?

If an entity receives a deposit in advance of goods or services being supplied, the deposit is initially classified as:

Under the Conceptual Framework, 'increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants', is the definition of:

According to the Conceptual Framework information that is free from material error and bias has greater:

Which of the following statements concerning the definition of expenses in the Conceptual Framework is incorrect?

Which of these is not a characteristic of equity as specified in the Conceptual Framework?

Under the Conceptual Framework, which of the following is not a characteristic of a liability?

What are the enhancing qualitative characteristics for financial reporting contained in the Conceptual Framework? I Comparability V Faithful representation II Materiality VI Reliability III Timeliness VII Understandability IV Relevarce VII Verifiability

Which of the following is not a cost of financial reporting?

The Conceptual Framework characterises equity as:

Which organisation is concerned with improving disclosure in financial reports of companies listed on the various exchanges throughout Australia?

Materiality is an aspect of the fundamental characteristic of relevance and:

Which of the following pairs of qualitative characteristics are most likely to be in conflict?

The primary reason for developing a conceptual framework was to:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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