Question 1

Dividends declared after the reporting period:

Accepted Answer

A) meet the criteria for recognition as a liability. 
B) satisfy the criteria for recognition as an expense. 
C) are recognised in the statement of financial position as they meet the definition of equity. 
D) do not meet the AASB 132 recognition criteria for liabilities. 
A) meet the criteria for recognition as a liability. 
B) satisfy the criteria for recognition as an expense. 
C) are recognised in the statement of financial position as they meet the definition of equity. 
D) do not meet the AASB 132 recognition criteria for liabilities.

Question 2

According to AASB 101,an entity will classify a liability as current when:

Accepted Answer

A) it expects to settle the liability outside its normal operating cycle. 
B) it expects to settle the liability within its normal operating cycle. 
C) the entity has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date. 
D) the liability is due to be settled more than 12 months after the reporting date. 
A) it expects to settle the liability outside its normal operating cycle. 
B) it expects to settle the liability within its normal operating cycle. 
C) the entity has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date. 
D) the liability is due to be settled more than 12 months after the reporting date.

Question 3

According to the Conceptual Framework,an entity is not permitted to change its accounting policies.

Accepted Answer

A) True 
 B)False

Question 4

For a company,retained earnings represent:

Accepted Answer

A) contributed capital from shareholders. 
B) profits retained by the company before tax is paid to the government. 
C) net cash retained by the company before any payment of dividends to shareholders. 
D) profits retained by the company after payment of dividends,and after any transfer to and from reserves. 
A) contributed capital from shareholders. 
B) profits retained by the company before tax is paid to the government. 
C) net cash retained by the company before any payment of dividends to shareholders. 
D) profits retained by the company after payment of dividends,and after any transfer to and from reserves.

Question 5

According to the Conceptual Framework,measurement involves determining the monetary amounts at which the elements are to be recognised and carried at in the financial statements.

Accepted Answer

A) True 
 B)False

Question 6

The Conceptual Framework applies a balance sheet focus to defining income,with income arising from changes in assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 7

Nominal or face value is the most common method used for measuring liabilities.

Accepted Answer

A) True 
 B)False

Question 8

Items which have only sentimental or spiritual benefits are not assets for accounting purposes.

Accepted Answer

A) True 
 B)False

Question 9

The statement of profit or loss and other comprehensive income shows both the company's income (revenues and gains)less expenses for the year,to determine the company's profit,to which is added other items of comprehensive income.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is not correct in relation to cumulative preference shares?

Accepted Answer

A) Holders of cumulative preference shares are guaranteed a dividend every year. 
B) Undeclared cumulative preference share dividends accumulate,or carry forward,to future periods. 
C) The accumulated amount of any cumulative preference share dividend plus the current year's preference dividend must be paid before any dividend can be paid to ordinary shareholders. 
D) Cumulative preference share dividends that are not declared in the year they are due are called dividends in arrears. 
A) Holders of cumulative preference shares are guaranteed a dividend every year. 
B) Undeclared cumulative preference share dividends accumulate,or carry forward,to future periods. 
C) The accumulated amount of any cumulative preference share dividend plus the current year's preference dividend must be paid before any dividend can be paid to ordinary shareholders. 
D) Cumulative preference share dividends that are not declared in the year they are due are called dividends in arrears.

Question 11

To be recognised in a statement of profit and loss and other comprehensive income,an item must by nature be:

Accepted Answer

A) either income,an expense or item of other comprehensive income. 
B) both income and a liability. 
C) either an asset or a liability. 
D) both a liability and a direct adjustment to equity. 
A) either income,an expense or item of other comprehensive income. 
B) both income and a liability. 
C) either an asset or a liability. 
D) both a liability and a direct adjustment to equity.

Question 12

Which of the following statements is correct in relation to the recognition of expenses?

Accepted Answer

A) Under the Conceptual Framework,the recognition of expenses is based on the matching process. 
B) The recognition of expenses is not subject to the same degree of regulation as revenue. 
C) Under the Conceptual Framework,recognition of expenses is not tied to the matching process. 
D) Individual accounting standards do not need to be consulted to determine the appropriate treatment for particular types of expenses. 
A) Under the Conceptual Framework,the recognition of expenses is based on the matching process. 
B) The recognition of expenses is not subject to the same degree of regulation as revenue. 
C) Under the Conceptual Framework,recognition of expenses is not tied to the matching process. 
D) Individual accounting standards do not need to be consulted to determine the appropriate treatment for particular types of expenses.

Question 13

In the absence of an Australian accounting standard specifically applying to a transaction,accounting policies must be selected on the basis that they provide relevant and reliable information to users of the financial report.

Accepted Answer

A) True 
 B)False

Question 14

The recognition criteria for assets,liabilities,revenues and expenses in the Conceptual Framework are the same.

Accepted Answer

A) True 
 B)False

Question 15

Outflows outside the ordinary course of business (eg costs incurred from a natural disaster)are classified as losses,rather than expenses.

Accepted Answer

A) True 
 B)False

Question 16

Information in a company's financial statements is considered to be reliable when it:
I is relevant to the decision making needs of users.
II represents faithfully the financial position,financial performance and cash flows of the entity.
III is neutral.
IV is prudent.
V reflects the economic substance of transactions,other events and conditions.

Accepted Answer

A) I,II,III and IV only 
B) II,III,IV and V only 
C) II,III and IV only 
D) I,II,III,IV and V 
A) I,II,III and IV only 
B) II,III,IV and V only 
C) II,III and IV only 
D) I,II,III,IV and V

Question 17

Which of the following statements is not one of the four main financial statements that companies are required to prepare?

Accepted Answer

A) A statement of cash flows 
B) A statement of changes in equity 
C) A statement of retained earnings 
D) A statement of financial position 
A) A statement of cash flows 
B) A statement of changes in equity 
C) A statement of retained earnings 
D) A statement of financial position

Question 18

The recognition criteria for assets in the Conceptual Framework refers to the probability of future economic benefits flowing to an entity.Probable means more than a 75% chance of occurring.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following categories of revenue is not included in AASB 118 Revenue?

Accepted Answer

A) Revenues from services rendered 
B) Gains from asset revaluations 
C) Royalties 
D) Dividends 
A) Revenues from services rendered 
B) Gains from asset revaluations 
C) Royalties 
D) Dividends

Question 20

In the context of liabilities,present obligations may be:

Accepted Answer

A) constructive. 
B) legal. 
C) both a and b 
D) formative. 
A) constructive. 
B) legal. 
C) both a and b 
D) formative.

Exam 3: Company Operations

Dividends declared after the reporting period:

According to AASB 101,an entity will classify a liability as current when:

According to the Conceptual Framework,an entity is not permitted to change its accounting policies.

For a company,retained earnings represent:

According to the Conceptual Framework,measurement involves determining the monetary amounts at which the elements are to be recognised and carried at in the financial statements.

The Conceptual Framework applies a balance sheet focus to defining income,with income arising from changes in assets and liabilities.

Nominal or face value is the most common method used for measuring liabilities.

Items which have only sentimental or spiritual benefits are not assets for accounting purposes.

The statement of profit or loss and other comprehensive income shows both the company's income (revenues and gains)less expenses for the year,to determine the company's profit,to which is added other items of comprehensive income.

Which of the following statements is not correct in relation to cumulative preference shares?

To be recognised in a statement of profit and loss and other comprehensive income,an item must by nature be:

Which of the following statements is correct in relation to the recognition of expenses?

In the absence of an Australian accounting standard specifically applying to a transaction,accounting policies must be selected on the basis that they provide relevant and reliable information to users of the financial report.

The recognition criteria for assets,liabilities,revenues and expenses in the Conceptual Framework are the same.

Outflows outside the ordinary course of business (eg costs incurred from a natural disaster)are classified as losses,rather than expenses.

Which of the following statements is not one of the four main financial statements that companies are required to prepare?

The recognition criteria for assets in the Conceptual Framework refers to the probability of future economic benefits flowing to an entity.Probable means more than a 75% chance of occurring.

Which of the following categories of revenue is not included in AASB 118 Revenue?

In the context of liabilities,present obligations may be:

Nature and Regulation of Companies

Financing Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Disclosure: Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

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