Deck 5: The Conceptual Framework of Accounting

Question 1

Non-Current assets are:

A) held in the business for resale
B) never removed from the business
C) always shown in the balance sheet at their original cost
D) used in the business

Answer 1

used in the business

Question 2

The IASB Framework for the Preparation and Presentation of Financial Statements identified user groups. Which of the following is not an information need for the 'investor' group?

A) Taking decisions regarding holding investments
B) Assessment of repayment ability of an entity
C) Taking buy/sell decisions
D) Measuring performance, risk and return

Answer 2

Assessment of repayment ability of an entity

Question 3

Which of the following is not a qualitative characteristic of financial information according to the IASB Framework for the preparation and presentation of financial information?

A) Prudence
B) Consistency
C) Materiality
D) Accruals

Answer 3

Accruals

Question 4

Which of the following best reflects a liability?

A) A possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control
Of the entity
B) A probable obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation
C) A present obligation arising from past events the settlement of which is expected to result in and outflow of economic benefits
D) A liability of uncertain timing or amount

Question 5

Which of the following is most correct? Information that is relevant has:

A) Confirmatory value, is material and is complete
B) Predictive value, is material and is complete
C) Confirmatory value, is material and has predictive value
D) Predictive value, is material and is free from bias.

Question 6

Accounting policies allow the user to determine if the information in the financial statement is:

A) Understandable
B) Reliable
C) Classified properly
D) Consistent

Question 7

The concept of capital maintenance is important for:

A) The source of finance
B) The measurement of profit
C) The purchase of non-current assets
D) The relationship of debt to equity

Question 8

Which of the following is not listed in the IASB's Framework for the Preparation and Presentation of Financial Information's list of qualitative characteristics of financial information to be included in financial statements?

A) Relevance
B) Understandability
C) Prudence
D) Comparability

Question 9

Which of the following is correct?

A) Relevance overrides reliability
B) Reliability overrides relevance
C) Prudence overrides relevance
D) Relevance and reliability must be maximised, with a trade off when the conflict

Question 10

Which of the following is most correct?
Consistency refers to the consistent use of accounting policies and principles:

A) Within an accounting period
B) Among firms
C) Within industries
D) Across accounting periods

Question 11

Which of the following is not relevant when determining the materiality of an item?

A) The size of the item
B) The transaction that gave rise to the item
C) The sensitivity and legal nature of the item
D) The prudent treatment of the item

Question 12

Which of the following is most correct?
When assets acquired using finance leases, which have to be maintained and insured by the entity are capitalised in the financial statements, this is an example of:

A) An element
B) The application of substance over form
C) The prudence concept
D) A measurement basis

Question 13

Which of the following is not a quality of reliability?

A) Prudence
B) Free from material error
C) Neutrality
D) Faithful presentation

Question 14

Which of the following bodies was the first to introduce a conceptual framework of accounting?

A) The IASC
B) The IASB
C) The FASB
D) The ASB

Question 15

Which of the following statement is the most correct? The conceptual framework is:

A) A set of broad, internally consistent fundamentals and definitions of key terms
B) A set of rules for accountants to follow
C) A set of recommended practices for accountants to follow
D) A set of recommended practices for auditors to follow

Question 16

Which of the following is not a quality of understandability?

A) Users ability
B) Aggregation
C) Classification
D) Confirmatory value