Deck 3: The Nature and Objectives of Financial Accounting

Question 1

Bookkeeping is:

A) Preparing a set of financial statements from the final books of account
B) Preparing invoices for customers
C) Collecting and recording transactions in the books of account
D) Communicating an entity's results to users.

Answer 1

Collecting and recording transactions in the books of account

Question 2

Information on the financial adaptability of an entity is obtained from the entity's?

A) Statement of Comprehensive Income
B) Statement of Financial Position
C) Statement of Cash Flows
D) Statement of Changes in Equity

Answer 2

Statement of Cash Flows

Question 3

Information on the financial performance of an entity is obtained from an entity's?

A) Statement of Comprehensive Income
B) Statement of Financial Position
C) Statement of Cash Flows
D) Statement of Changes in Equity

Answer 3

Statement of Comprehensive Income

Question 4

According to the IASB's Framework for the preparation and presentation of financial statements, which of the following is not an objective of financial statements?

A) Providing information regarding the financial position of a business
B) Providing information regarding the performance of a business
C) Providing information on the financial adaptability of a business
D) Helping to assess the going concern status of a business

Question 5

Which of the following statements gives the best definition of the objective of accounting?

A) To calculate the taxation due to the government
B) To calculate the dividend to pay to the equity holders
C) To provide useful information for users
D) To record, categorise and summarise financial transactions

Question 6

The framework for the preparation and presentation of financial statements identifies several user groups. Which of the following is not specifically referred to as a user of financial statement?

A) The public
B) Government
C) Management
D) Suppliers

Question 7

Investor's are defined in the framework as:

A) Providers of share capital
B) Providers of risk capital
C) Providers of debt capital
D) Providers of bank loans

Question 8

Which of the following user groups is mentioned in the framework as one of the main stakeholders in an entity?

A) The analyst-advisor group
B) Competitors
C) The public
D) Takeover bidders

Question 9

Which of the following are not considered to influence the required disclosures in the financial statements of a plc in the UK?

A) Local authorities
B) The Companies Act 2006
C) The rules of the London Stock Exchange
D) The International Accounting Standards

Question 10

Which of the following is provided voluntarily by management to satisfy the needs of users?

A) The directors report
B) The statement of value added
C) The notes to the financial statements
D) The remuneration report

Question 11

Which of the following reports is required by the regulatory framework of accounting in the UK?

A) An employee report
B) An environmental report
C) Simplified financial statements
D) A director's report

Question 12

Which of the following user groups are deemed to be the most important (in the context of providing information to satisfy their needs) according to the Framework?

A) Management
B) Employees
C) Investors
D) The business contact group

Question 13

What is the custodial role of business enterprises?

A) This refers to the entity's policies in relation to holding cash on site
B) This refers to the entity's internal controls
C)This refers to the entity's responsibility to safeguard assets and to use them appropriately for the benefit of the owners
D) This refers to the role of customs and the procedures in place to ensure efficient communication channels are in place with customs and revenue.

Question 14

The main aim of accounting is:

A) To provide sufficient information to prepare a trial balance
B) To record all the bank and cash transactions that occur in a business
C) To enable a business to see the amounts owing to it from customers
D) To provide financial information to the users

Question 15

What is the other term used to describe 'true and fair view'

A) Fair presentation
B) Correct presentation
C) Valid presentation
D) Prudent presentation

Question 16

Which of the following are not purposes of financial statements?
To help management make decisions
To calculate taxable income
To allow users to make economic decisions
To determine the amount which is legally distributable to equity shareholders

A) 1, 2 and 3
B) 1, 2 and 4
C) 1, 3 and 4
D) 2, 3 and 4