Question 1

Which statement is incorrect?

Accepted Answer

A)  Net assets, net worth, shareholders' equity and proprietorship are all synonyms for equity 
B)  The settlement of a liability by the owner from his private funds results in an increase in equity 
C)  Under the Framework equity exists only because there are assets and liabilities 
D)  None of the statements is incorrect, i.e., all are correct

Question 2

What characteristic is emphasised in the definition of income?

Accepted Answer

A)  flow 
B)  change in stock 
C)  presentation 
D)  disclosure

Question 3

Future economic benefits for assets come from:

Accepted Answer

A)  value-in-utility 
B)  value-in-exchange 
C)  value-in-use 
D)  both B and C

Question 4

AASB 137 'Provisions,Contingent Liabilities and Contingent Assets' requires information about contingent liabilities to be disclosed in a note to the financial statements where the probability of a future sacrifice of economic benefit is:

Accepted Answer

A)  higher than remote 
B)  above 20% 
C)  between 25% and 50% 
D)  above 50%

Question 5

Depreciation and wages that have been accrued represent,respectively,expenses resulting from:

Accepted Answer

A)  a decrease in an asset: a decrease in a liability 
B)  the using up of an asset: an increase in a liability 
C)  the using up of a liability: an increase in an asset 
D)  none of the above

Question 6

Under the Framework,a transport company does not regard the road outside its premises as an asset because:

Accepted Answer

A)  it is not owned 
B)  it will not provide future economic benefits 
C)  the amount of future economic benefits is uncertain 
D)  it is not controlled

Question 7

An entity has decided to commit itself to the purchase of a new building in the next financial year.Under the Framework:

Accepted Answer

A)  a liability exists because it is probable that a future sacrifice of economic benefits will be required 
B)  no liability exists because there is no present obligation 
C)  a liability exists because there is a constructive obligation 
D)  a liability exists because there is an equitable obligation

Question 8

Which of these is the strongest argument in favour of current replacement cost as an alternative to historical cost?

Accepted Answer

A)  Current replacement cost provides a more reliable measure of performance 
B)  Current replacement cost provides a more relevant measure of performance 
C)  Current replacement cost provides a more reliable balance sheet 
D)  Current replacement cost provides better information on cash flows

Question 9

In the Framework,'probable' means:

Accepted Answer

A)  greater than 50% certainty 
B)  50% certainty 
C)  greater than 75% certainty 
D)  greater than 95% certainty

Question 10

According to Framework 2014,when should income be recognised?

Accepted Answer

A)  When cash is received 
B)  On the date listed on the statement of financial position 
C)  On a straight-line basis in accordance with fixed assets 
D)  When it is probable that an increase in economic benefits has occurred

Question 11

Under the Framework,which of these statements is correct?

Accepted Answer

A)  A distinction is made between profit and gains 
B)  Profit is not defined independently of income and expenses 
C)  Profit is defined as the amount that can be distributed as a dividend whilst maintaining capital intact 
D)  None of the statements is correct

Question 12

The Framework defines assets as:

Accepted Answer

A)  resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity 
B)  probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events 
C)  the service potential expected from resources controlled by the reporting entity as a result of past events 
D)  future economic benefits expected from resources controlled by the reporting entity as a result of past events

Question 13

Which of these is not an essential characteristic of a liability under the Framework?

Accepted Answer

A)  Future sacrifice of economic benefits 
B)  Control 
C)  Existence of a present obligation to another entity 
D)  A past transaction or other past event

Question 14

Compare the FASB definition of revenue and the Australian concept of income.In your answer discuss the treatment of gains in both jurisdictions.

Accepted Answer

The answer of Compare the FASB definition of revenue and...

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