Question 1

Costs of providing useful information include:

Accepted Answer

A)  collection and processing costs. 
B)  dissemination costs. 
C)  verification costs. 
D)  All of these options are costs of providing useful information. 
A)  collection and processing costs. 
B)  dissemination costs. 
C)  verification costs. 
D)  All of these options are costs of providing useful information. D

Question 2

The two recognition criteria for the elements of financial statements are:

Accepted Answer

A)  Faithful representation and Existence of economic benefits. 
B)  Existence of economic benefits and Control. 
C)  relevant and faithful representation. 
D)  Probability of occurrence and Control. 
A)  Faithful representation and Existence of economic benefits. 
B)  Existence of economic benefits and Control. 
C)  relevant and faithful representation. 
D)  Probability of occurrence and Control. C

Question 3

Which of the following is not a chapter in the IASB's Conceptual Framework?

Accepted Answer

A)  measurement. 
B)  qualitative characteristics of useful financial reporting. 
C)  the objective of general purpose financial reporting. 
D)  the issues with financial reporting. 
A)  measurement. 
B)  qualitative characteristics of useful financial reporting. 
C)  the objective of general purpose financial reporting. 
D)  the issues with financial reporting. D

Question 4

Which of the following statements is incorrect about the physical capital concept?

Accepted Answer

A)  The general price level accounting system follows the physical capital concept. 
B)  Capital is seen as the operating capability of the entity's assets. 
C)  Profit is earned after an entity has set aside enough capital to maintain the operating capability of the entity's assets. 
D)  Physical capital may be measured under a current value system. 
A)  The general price level accounting system follows the physical capital concept. 
B)  Capital is seen as the operating capability of the entity's assets. 
C)  Profit is earned after an entity has set aside enough capital to maintain the operating capability of the entity's assets. 
D)  Physical capital may be measured under a current value system.

Question 5

An example of an expense, as defined in the Conceptual Framework, is:

Accepted Answer

A)  Payment to a supplier for purchases made on credit. 
B)  Dividends paid to shareholders. 
C)  Cash purchase of office equipment. 
D)  Wages paid on a weekly-basis to employees. 
A)  Payment to a supplier for purchases made on credit. 
B)  Dividends paid to shareholders. 
C)  Cash purchase of office equipment. 
D)  Wages paid on a weekly-basis to employees.

Question 6

For information to be considered material:

Accepted Answer

A)  it must be complete. 
B)  it must not include any bias. 
C)  its omission or misstatement could influence users' decision-making. 
D)  it has a predictive or confirmatory value. 
A)  it must be complete. 
B)  it must not include any bias. 
C)  its omission or misstatement could influence users' decision-making. 
D)  it has a predictive or confirmatory value.

Question 7

Which of the following are the three essential criteria in the definition of an asset: $\begin{array}{llll}
\text { I. } & \text { Future sacrifices of economic } & \text { IV. } & \text { Past event. } \
&\text { benefits } & & \
\text { II. } & \text { Future economic benefits. } & \text { V. } & \text { Ownership. } \
\text { III. } & \text { Present obligation. } & \text { VI. } & \text { Control. }
\end{array}$

Accepted Answer

A)  I, III, VI. 
B)  II, IV, VI. 
C)  II, III, VI. 
D)  I, III, V. 
A)  I, III, VI. 
B)  II, IV, VI. 
C)  II, III, VI. 
D)  I, III, V.

Question 8

The two fundamental qualitative characteristics of useful information are:

Accepted Answer

A)  materiality and timeliness. 
B)  understandability and verifiability. 
C)  faithful representation and comparability. 
D)  relevance and faithful representation. 
A)  materiality and timeliness. 
B)  understandability and verifiability. 
C)  faithful representation and comparability. 
D)  relevance and faithful representation.

Question 9

Bruce's Bouquets rents a small shop located in the outskirts of Melbourne. In accordance with the Conceptual Framework, Bruce's Bouquets should recognise the monthly payment for the shop rental as:

Accepted Answer

A)  an increase in income and a decrease in liabilities. 
B)  a decrease in assets and an increase in equity. 
C)  a decrease in assets and a decrease in income. 
D)  a decrease in assets and an increase in expense. 
A)  an increase in income and a decrease in liabilities. 
B)  a decrease in assets and an increase in equity. 
C)  a decrease in assets and a decrease in income. 
D)  a decrease in assets and an increase in expense.

Question 10

Which of the following statements about the Conceptual Framework is true?

Accepted Answer

A)  The Conceptual Framework deals only with the objective of special purpose financial statements. 
B)  The Conceptual Framework for Financial Reporting provides guidelines intended to meet the information needs of a range of users who are able to command that reports be prepared to their own particular needs. 
C)  The Conceptual Framework deals only with the objective of general purpose financial statements. 
D)  the Conceptual Framework for Financial Reporting, SAC 1, and SAC 2 provides guidelines on the preparation of financial statements for a specific group of users. 
A)  The Conceptual Framework deals only with the objective of special purpose financial statements. 
B)  The Conceptual Framework for Financial Reporting provides guidelines intended to meet the information needs of a range of users who are able to command that reports be prepared to their own particular needs. 
C)  The Conceptual Framework deals only with the objective of general purpose financial statements. 
D)  the Conceptual Framework for Financial Reporting, SAC 1, and SAC 2 provides guidelines on the preparation of financial statements for a specific group of users.

Question 11

Which of the following statements is correct?

Accepted Answer

A)  Equity is defined as 'the residual interest in the assets of the entity after deducting all its expenses'. 
B)  Equity is increased by profit and owner contributions. 
C)  Equity is decreased by an entity's income. 
D)  Equity cannot be sub-classified in the statement of financial position. 
A)  Equity is defined as 'the residual interest in the assets of the entity after deducting all its expenses'. 
B)  Equity is increased by profit and owner contributions. 
C)  Equity is decreased by an entity's income. 
D)  Equity cannot be sub-classified in the statement of financial position.

Question 12

Which of the following is not an example of a settlement of a liability?

Accepted Answer

A)  cash payment. 
B)  provision of services. 
C)  owner contribution. 
D)  creditor waiving their rights to the obligation. 
A)  cash payment. 
B)  provision of services. 
C)  owner contribution. 
D)  creditor waiving their rights to the obligation.

Question 13

If different independent observers could reach the same general conclusions that the information represents then the quality of the information has achieved:

Accepted Answer

A)  neutrality. 
B)  understandability. 
C)  verifiability. 
D)  comparability. 
A)  neutrality. 
B)  understandability. 
C)  verifiability. 
D)  comparability.

Question 14

In measuring the value of a liability, which measurement base uses the discounted future net cash outflows that are expected to settle the obligation in the normal course of business?

Accepted Answer

A)  Realisable value. 
B)  Current cost. 
C)  Historical cost. 
D)  Present value. 
A)  Realisable value. 
B)  Current cost. 
C)  Historical cost. 
D)  Present value.

Question 15

Georgetown Ltd purchased a block of land on 31 March and paid $400 000 cash to the land owner. An independent evaluation reveals that the land is worth $500 000. Using historical cost as a measurement base, how should Georgetown Ltd recognise this purchase of land in its financial statements?

Accepted Answer

A)  $400 000 recognised as an asset (land) and $100 000 as a liability. 
B)  $400 000 recognised as an asset (land). 
C)  $500 000 recognised as an asset (land). 
D)  The land should not be recognised as an asset as it cannot be reliably measured. 
A)  $400 000 recognised as an asset (land) and $100 000 as a liability. 
B)  $400 000 recognised as an asset (land). 
C)  $500 000 recognised as an asset (land). 
D)  The land should not be recognised as an asset as it cannot be reliably measured.

Question 16

In order to comply with the Australian Accounting Standards, which of the following assets cannot be recorded at its historical cost?

Accepted Answer

A)  inventories. 
B)  buildings. 
C)  motor vehicles. 
D)  land. 
A)  inventories. 
B)  buildings. 
C)  motor vehicles. 
D)  land.

Question 17

Which of the following statements is false?

Accepted Answer

A)  The IFRS Advisory Council is directly accountable to the Monitoring Board. 
B)  Australia adopted international accounting standards issued on or after 1 January 2005. 
C)  The IASB and IFRS Interpretations Committee are appointed and overseen by a geographically and professionally diverse group called the IFRS Foundation Trustees. 
D)  The IASB is an independent standard-setting board that develops and approves International Financial Reporting Standards. 
A)  The IFRS Advisory Council is directly accountable to the Monitoring Board. 
B)  Australia adopted international accounting standards issued on or after 1 January 2005. 
C)  The IASB and IFRS Interpretations Committee are appointed and overseen by a geographically and professionally diverse group called the IFRS Foundation Trustees. 
D)  The IASB is an independent standard-setting board that develops and approves International Financial Reporting Standards.

Question 18

The only financial statement element which cannot be defined independently of the other elements under the Conceptual Framework is:

Accepted Answer

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

Question 19

With regards to the Australian accounting standards, IASB stands for:

Accepted Answer

A)  International Auditing Standards Board. 
B)  International Accounting Securities Body. 
C)  International Accounting Standards Board. 
D)  International Accounting Statements Body. 
A)  International Auditing Standards Board. 
B)  International Accounting Securities Body. 
C)  International Accounting Standards Board. 
D)  International Accounting Statements Body.

Question 20

Which of the following statements about income is not true?

Accepted Answer

A)  Income includes capital contributed by owners of the entity. 
B)  Income can be in the form of decreases of liabilities. 
C)  Income arises when there is control over the increase in economic benefits. 
D)  Income results in increases in economic benefits. 
A)  Income includes capital contributed by owners of the entity. 
B)  Income can be in the form of decreases of liabilities. 
C)  Income arises when there is control over the increase in economic benefits. 
D)  Income results in increases in economic benefits.

Exam 1: Accounting Regulation and the Conceptual Framework

Costs of providing useful information include:

The two recognition criteria for the elements of financial statements are:

Which of the following is not a chapter in the IASB's Conceptual Framework?

Which of the following statements is incorrect about the physical capital concept?

An example of an expense, as defined in the Conceptual Framework, is:

For information to be considered material:

Which of the following are the three essential criteria in the definition of an asset: I. Future sacrifices of economic IV. Past event. benefits II. Future economic benefits. V. Ownership. III. Present obligation. VI. Control.

The two fundamental qualitative characteristics of useful information are:

Bruce's Bouquets rents a small shop located in the outskirts of Melbourne. In accordance with the Conceptual Framework, Bruce's Bouquets should recognise the monthly payment for the shop rental as:

Which of the following statements about the Conceptual Framework is true?

Which of the following statements is correct?

Which of the following is not an example of a settlement of a liability?

If different independent observers could reach the same general conclusions that the information represents then the quality of the information has achieved:

In measuring the value of a liability, which measurement base uses the discounted future net cash outflows that are expected to settle the obligation in the normal course of business?

Georgetown Ltd purchased a block of land on 31 March and paid $400 000 cash to the land owner. An independent evaluation reveals that the land is worth $500 000. Using historical cost as a measurement base, how should Georgetown Ltd recognise this purchase of land in its financial statements?

In order to comply with the Australian Accounting Standards, which of the following assets cannot be recorded at its historical cost?

Which of the following statements is false?

The only financial statement element which cannot be defined independently of the other elements under the Conceptual Framework is:

With regards to the Australian accounting standards, IASB stands for:

Which of the following statements about income is not true?

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Recording

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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