Deck 4: Measurement

Question 1

Which of these is a defence of current cost accounting?

A) It is the most objective of the proposed accounting methods
B) Relevant current events of the accounting period should be accounted for to maintain the usefulness of accounting information for decision-making
C) It specifically recognises future technological changes in profit determination
D) All of the above are defences

Answer 1

B

Question 2

Information produced using current cost as the measurement base is considered

A) Less relevant
B) Less understandable
C) More comparable between different companies
D) All of the above

Answer 2

B

Question 3

Which of these is NOT a criticism of historical cost accounting?

A) It is not objective and is open to manipulation
B) It has been used by business over many centuries
C) Historical cost overstates profit in times of rising prices
D) Cost information is not always available

Answer 3

B

Question 4

Accounting for the environment is a difficult area because

A) It is difficult to measure the accounting consequences of environmental issues
B) Environmental issues extend beyond the entity boundary
C) As a common good it is hard to value the environment
D) All of the above

Question 5

Information produced using historical cost as the measurement base is considered

A) Less relevant
B) Less faithfully represented
C) More comparable
D) All of the above

Question 6

Measurement in an accounting context involves

A) Determining the quantities of assets held by an entity
B) Estimating the amounts to be derived from assets
C) Apportioning costs between items
D) All of the above

Question 7

Deprival value is:

A) The loss that would be incurred if the asset was removed
B) An objective measure of value
C) Considered relevant as theft of business assets is common
D) All of the above

Question 8

Information produced using deprival value as the measurement base is considered

A) Less relevant
B) Less faithfully represented
C) Less understandable
D) All of the above

Question 9

An argument against fair value measurement in accounting is:

A) Market prices are too objective
B) It does not allow enough professional judgement
C) It can lead to volatility in earnings
D) It reflects the value of the item today

Question 10

Information produced using fair value as the measurement base is considered

A) More relevant
B) More faithfully represented
C) Less Neutral
D) All of the above

Question 11

Which of the following is NOT a limitation of measurement in accounting?

A) There is little agreement on what measurement methods should be used
B) Measurement can be quite subjective
C) It is impossible to compare entities over a period of time
D) There are some accounting items that are not easily measured

Question 12

Which measurement system would seem most relevant to investors?

A) Historic cost
B) Fair value
C) Current cost
D) Deprival value

Question 13

Under the Conceptual Framework the preferred measurement model is:

A) Historical Cost
B) Current Cost
C) Present Value
D) None of the above

Question 14

Which of the following is NOT a benefit of measurement in accounting?

A) Dissimilar items can be easily combined into meaningful totals
B) It makes information more decision useful
C) It allows users to assess the performance of the entity
D) It allows users to compare entities

Question 15

Which measurement system would seem most relevant to creditors?

A) Historic cost
B) Fair value
C) Current cost
D) Deprival value

Question 16

The statement in relation to current trends in accounting that is NOT correct is:

A) There is a movement towards a 'fair value' approach
B) There is a movement towards a more traditional approach
C) The concepts of capital and profit have changed and evolved over time.
D) More emphasis is now being placed on the relevance of information rather than its reliability'

Question 17

Which of the following is NOT an argument in favour of exit price accounting?

A) Valuing all elements in the financial statements at their money equivalents provides one rule that can be applied consistently.
B) The financial statements are allocation-free
C) Rather than measuring past events the method measures those that might happen if a firm does something other than what was planned
D) Exit price accounting involves references to real-world examples therefore it is more grounded in reality than historical cost accounting

Question 18

Intangible assets have been identified as one of the hardest area to value because:

A) They are one of the most important assets on the balance sheet
B) There are too many markets to choose from
C) It is difficult to measure an asset with no physical substance
D) All of the above

Question 19

Which of the following is NOT a reason measurement is a controversial accounting issue?

A) It can be quite subjective
B) It is not a political issue
C) It can affect how entities are perceived
D) It does not lead to consistent recording

Question 20

The statement that is true with respect to current cost accounting is:

A) Gains are recorded only when the assets are disposed of
B) Holding gains are not included in current operating profits
C) Current operating profit is the excess of the current value of the output sold over the current cost of the related inputs
D) None of the above is true