CONCEPTUAL FRAMEWORK UNDERLYING
CONCEPTUAL FRAMEWORK UNDERLYING
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
CHAPTER LEARNING OBJECTIVES
CHAPTER LEARNING OBJECTIVES
1.
1. DesDescricribe the usbe the usefuefulneslness of a concs of a concepteptual frual frameameworwork.k. 2.
2. DescDescribe ribe efforefforts tts to co constronstruct uct a coa conceptunceptual fal framewramework.ork. 3.
3. UndUnderserstantand the objd the objectective of five of finainancincial repal reportortinging.. 4.
4. IdentIdentif tif the !ualhe !ualitativitative chare characteracteristicistics of as of accounccounting iting informnformation.ation. ".
". DefinDefine te the bhe basic asic elemelements ents of of financfinancial ial statestatementsments.. #.
#. DesDescricribe the bbe the basiasic assc assumpumptiotions of acns of accoucountinting.ng. $.
$. %&plai%&plain the n the applicapplication ation of tof the bashe basic pric principinciples of les of accouaccounting.nting. '.
TRUE*FALSE
TRUE*FALSE
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+C!n&e,t'a-1.
1. (he conceptual (he conceptual framework framework for accounting for accounting has been has been discovered thrdiscovered through empirical ough empirical research.research. 2.
2. ) conceptu) conceptual framewal framework is a ork is a cohercoherent ssteent sstem of interrelatm of interrelated objectied objectives and fundamenves and fundamentalstals that can lead to consistent standards.
that can lead to consistent standards. 3.
3. (he Inter(he Internationanational )ccountinl )ccounting *tandardg *tandards +oard ,I)*+- uses a conceptus +oard ,I)*+- uses a conceptual framewoal framework basedrk based on individual concepts developed b each
on individual concepts developed b each member of the standardsetting bod.member of the standardsetting bod. 4.
4. ) soundl develop) soundl developed conceptued conceptual frameworal framework enables the Internatik enables the International )ccountonal )ccounting *tandarding *tandardss +oard ,I)*+- to issue more
+oard ,I)*+- to issue more useful and consistent pronouncements over time.useful and consistent pronouncements over time. ".
". ) soundl develop) soundl developed conceptued conceptual frameworal framework enables the Internatik enables the International )ccountonal )ccounting *tandarding *tandardss +oard ,I)*+- to !uickl solve new and emerging practical problems b referencing basic +oard ,I)*+- to !uickl solve new and emerging practical problems b referencing basic theor.
theor. #.
#. (he I)*+ has issue(he I)*+ has issued d a a conconcepceptual fratual framewmework that is ork that is brobroadl conadl consissistentent t witwith h thathat of t of thethe United *tates.
United *tates. $.
$. (he Intern(he International )ccoational )ccounting *tandunting *tandards +oard/s ,I)*+ards +oard/s ,I)*+/s- 0oncept/s- 0onceptual rameworual ramework includesk includes supplementar information.
supplementar information. '.
'. (he Intern(he International )ccoational )ccounting *tandunting *tandards +oard/s ,I)*+ards +oard/s ,I)*+/s- 0oncept/s- 0onceptual rameworual ramework includesk includes the elements of financial statements.
the elements of financial statements.
.. ((hhe 2e 2ndnd
level of the I)*+/s conceptual framework provides the !ualitative characteristics level of the I)*+/s conceptual framework provides the !ualitative characteristics that make accounting information useful and the
that make accounting information useful and the elements of financial statements.elements of financial statements. 1.
1. ne of the challne of the challenges in devenges in developineloping a common concg a common conceptual freptual framewamework will be to agree onork will be to agree on how the framework should be organi5ed since the )*+ and I)*+ conceptual frameworks how the framework should be organi5ed since the )*+ and I)*+ conceptual frameworks are organi5ed in ver different was.
are organi5ed in ver different was. 11.
11. (he first level (he first level of of the concethe conceptuptual al fraframewmework identiork identifiefies s the recognthe recognitiition on and measuand measuremrementent concepts used in establishing accounting standards.
concepts used in establishing accounting standards. 12.
12. DecisDecision usefulion usefulness is the underlness is the underling theme of the conceing theme of the conceptual frptual frameworamework.k. 13.
13. UserUsers of financial ss of financial statemtatements are assents are assumed to have no knowleumed to have no knowledge of businesdge of business and financials and financial accounting matters b financial statement preparers.
accounting matters b financial statement preparers. 14.
14. (he (he foufoundandatiotion n of of the the IntInternernatiationaonal l )cc)ccountounting ing *ta*tandandards rds +oa+oard/rd/s s ,I),I)*+/*+/s- s- 0on0oncepceptualtual ra
ramewmework ork is is foufound nd on on the third the third levlevel el of of the the raramewmework ork and and incincludludes es assassumpumptiotions6ns6 principles6 and constraints.
principles6 and constraints. 1"
1".. )n )n imimplplicicit it asassusumpmptition on of of ththe e InInteternrnatationional al )c)ccocountuntining g *t*tanandardards ds +o+oarard/d/s s ,I,I)*)*+/+/s- s-0o
0oncncepeptutual al rramameweworork k is is ththat at ususerers s neneed ed to to be be e&e&pepertrts s in in bubusisineness ss anand d fifinanancncialial accounting matters to understand the information contained in
accounting matters to understand the information contained in financial statements.financial statements. 1#.
1#. 7el7elevaevance nce and and relreliabiiabilitlit are are the two the two priprimarmar !ual!ualitiities es thathat t makmake e accaccounountinting g infinformormatiationon useful for decision making.
1$.
1$. (he id(he idea of conea of consissistentenc doec doess n!tn!t mean that companies cannot switch from one accounting mean that companies cannot switch from one accounting method to another.
method to another. 1'.
1'. (imel(imeliness and neiness and neutraliutralit are two ingrt are two ingredientedients of relevans of relevance.ce. 1.
1. 8erif8erifiabiliiabilit and predictt and predictive value are two ingreive value are two ingredients of relidients of reliabilitabilit.. 2.
2. (he second leve(he second level of l of the Interthe Internationnational )ccountal )ccounting *tandarding *tandards +oard/s ,I)*+s +oard/s ,I)*+/s- 0oncept/s- 0onceptualual r
ramameweworork k seservrves es as as a a brbridgidge e bebetwtweeeen n ththe e 9w9whh: : of of acaccocoununtiting ng anand d ththe e 9ho9how: w: ofof accounting.
accounting. 21
21.. In In ththe e InInteternrnatiationaonal l )c)ccocoununtiting ng *t*tandandarards ds +o+oarard/d/s s ,I,I)*)*+/+/s- s- 0o0oncncepeptutual al rramameweworork6k6 !ualitative characteristics are considered either relevant or prudent.
!ualitative characteristics are considered either relevant or prudent. 22
22.. In In ththe e InInteternrnatiationaonal l )c)ccocoununtiting ng *t*tandandarards ds +o+oarard/d/s s ,I,I)*)*+/+/s- s- 0o0oncncepeptutual al rramameweworork6k6 !ua
!ualitlitatiative ve chacharacracterterististics ics disdistintinguisguish h betbetter ter infinformormatiation on frfrom om infeinferiorior r infinformormatiation on forfor decisionmaking purposes.
decisionmaking purposes. 23.
23. In In the the IntInternernatiational onal )cc)ccountounting ing *ta*tandandards rds +oar+oard/s d/s ,I),I)*+/*+/s- s- 0on0oncepceptuatual l raramewmeworkork6 6 anan enhancing !ualitative characteristic is predictive value.
enhancing !ualitative characteristic is predictive value. 24.
24. In In the the IntInternernatiational onal )cc)ccountounting ing *ta*tandandards rds +oar+oard/s d/s ,I),I)*+/*+/s- s- 0on0oncepceptuatual l raramewmeworkork6 6 anan ingredient of a fundamental !ualitative characteristic is understandabilit.
ingredient of a fundamental !ualitative characteristic is understandabilit. 2".
2". (o (o be be a a faifaithfthful ul reprepresresententatiation on as as desdescricribed bed b b the the IntInternernatiationaonal l )cc)ccounountinting g *ta*tandarndardsds +oard/s ,I)*+/s- 0onceptual ramework6 information must be confirmator.
+oard/s ,I)*+/s- 0onceptual ramework6 information must be confirmator. 2#.
2#. )n )n enhenhancancing !ualiting !ualit as as desdescricribed bed b b the Interthe Internatnationaional l )cc)ccountounting ing *ta*tandandards +oardrds +oard/s/s ,I)*+/s- 0onceptual ramework is comparabilit.
,I)*+/s- 0onceptual ramework is comparabilit. 2$.
2$. ;oon6 Inc;oon6 Inc. applies diffe. applies different accounrent accounting treatting treatments to simiments to similar events from perilar events from period to period.od to period. ;oon6 Inc.
;oon6 Inc. is violating verifiabiis violating verifiabilit as lit as descrdescribed b ibed b the Internatithe International )ccounting *tandardonal )ccounting *tandardss +oard/s ,I)*+/s- 0onceptual ramework.
+oard/s ,I)*+/s- 0onceptual ramework. 2'.
2'. (he Intern(he Internationational )ccountinal )ccounting *tandards +oarg *tandards +oard/s ,I)*+- defind/s ,I)*+- definition of retaineition of retained earnings isd earnings is 9the residual interest in the a
9the residual interest in the assets of the entit after deducting all its liabilities.:ssets of the entit after deducting all its liabilities.: 2.
2. (he his(he histortoricaical l coscost princt principliple e wouwould be ld be of limitof limited usefed usefulneulness ifss if n!tn!t for the going concern for the going concern assumption.
assumption. 3.
3. (he econo(he economic entitmic entit assassumpumption means that economtion means that economic ic actactiviivit can t can be be ideidentintifiefied d witwith h aa particular legal entit.
particular legal entit. 31
31.. ;a;ateteririalialit t is is onone e of of ththe e babasisic c asassusumpmptitions ons of of acaccocoununtiting ng usused ed b b ththe e InInteternrnatationionalal )ccounting *tandards +oard ,I)*+-.
)ccounting *tandards +oard ,I)*+-. 32
32.. <e<eririodiodicicit t is is one one of of ththe e babasisic c asassusumpmptitionons s of of acaccocoununtiting ng usused ed b b ththe e InInteternrnatiationonalal )ccounting *tandards +oard ,I)*+-.
)ccounting *tandards +oard ,I)*+-. 33
33.. (i(imemelilineness ss is is onone e of of ththe e babasisic c asassusumpmptitionons s of of acaccocoununtiting ng usused ed b b ththe e InInteternrnatationionalal )ccounting *tandards +oard ,I)*+-.
34.
34. (he (he perperiodiiodicitcit basbasic ic assassumpumptiontions s of of accaccountounting ing ,us,used ed b b the the IntInternernatiationaonal l )cc)ccounountintingg *tandards +oard- makes depreciation and
*tandards +oard- makes depreciation and amorti5ation policies justifiable and appropriate.amorti5ation policies justifiable and appropriate. 3".
3". (he I)*+ c(he I)*+ conceptual framework onceptual framework specificall identifspecificall identifies accrual bies accrual basis accounting asis accounting as one of as one of itsits fundamental assumptions.
fundamental assumptions. 3#.
3#. ne of two assne of two assumptionumptions made b the I)*+ concs made b the I)*+ conceptual freptual frameworamework is that the reportk is that the reporting entiting entit is a going concern.
is a going concern. 3$.
3$. (he e&pense (he e&pense recognition principle recognition principle states that states that debits must debits must e!ual credits e!ual credits in each trin each transaction.ansaction. 3'.
3'. 7eve7evenues are reali5nues are reali5able when assable when assets receets received or held are readiived or held are readil converl convertible inttible into cash oro cash or claims to cash.
claims to cash. 3
3.. *u*upppplelemementntarar ininfoformrmatation ion mama ininclclude ude dedetatails ils or or amamouountnts s ththat at prpresesent ent a a didiffffererenentt perspective from that adopted in the financial
perspective from that adopted in the financial statements.statements. 4.
4. 0ompanies consider 0ompanies consider onl !uantitative onl !uantitative factors in factors in determining whether determining whether an item an item is material.is material. 41.
41. (he Inter(he Internationanational )ccountl )ccounting *tandaring *tandards +oard has given comds +oard has given companies the optpanies the option of using fairion of using fair value to report financial liabilities.
value to report financial liabilities. 42.
42. Under InterUnder Internationnational inanciaal inancial 7eporting *tandl 7eporting *tandards ,I7ards ,I7*- product costs are charge*- product costs are charged off ind off in the immediate period and period costs ma be carried into future periods.
the immediate period and period costs ma be carried into future periods. 43.
43. Under InterUnder Internationnational inanciaal inancial 7eporting *tandl 7eporting *tandards ,I7ards ,I7*- notes to the *- notes to the financfinancial statemial statementsents must !ualif as an element.
must !ualif as an element. 44.
44. Under InterUnder Internationanational inancial 7eportil inancial 7eporting *tandards ,I7ng *tandards ,I7*- supplemen*- supplementar informatar information mation ma be information that is high in relevance but low in reliabilit.
be information that is high in relevance but low in reliabilit. 4".
4". (he (he coscostbtbeneenefit fit conconstrstraint aint incincludeluded d in in the the IntInternernatioational nal )cc)ccounountinting g *ta*tandandards rds +oar+oard/sd/s conceptual framework states that financial information should be free from cost to users of conceptual framework states that financial information should be free from cost to users of the information.
the information. 4#.
4#. (he International (he International )ccounting *tandards )ccounting *tandards +oard/s ,I)*+- +oard/s ,I)*+- rule for rule for materialit is materialit is an item an item underunder "= of net income is
"= of net income is considered immaterial.considered immaterial. 4$.
4$. (he Intern(he Internationaational )ccounting *tanl )ccounting *tandards +oard/dards +oard/s ,I)*+- concepts ,I)*+- conceptual framewoual framework includes therk includes the concept of prudence or conservatism which means when in doubt6 choose the solution that concept of prudence or conservatism which means when in doubt6 choose the solution that will be
will be-east-east likel to overstate assets or income a likel to overstate assets or income a nd>or understate liabilities or e&penses.nd>or understate liabilities or e&penses. 4'.
4'. Under InterUnder Internationnational inancial 7eporal inancial 7eporting *tandarting *tandards ,I7*- compands ,I7*- companies must consideies must consider bothr both !uantitative and !ualitative factors in determining whether a
!uantitative and !ualitative factors in determining whether a n item is material.n item is material. 4.
4. UndUnder er IntInternernatioational inannal inanciacial l 7ep7eportorting ing *ta*tandandards ,I7rds ,I7*- *- comcompanpanies needies need n!tn!t report report immaterial items within the bod of the financial statements6 but must disclose them in the immaterial items within the bod of the financial statements6 but must disclose them in the notes or supplementar information that accompan the financial statements.
notes or supplementar information that accompan the financial statements. ".
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MULTIPLE CHOICE
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"1. ) soundl dev) soundl develoeloped conped concepceptuatual framl framewoework of conrk of concepcepts and objts and objectectiveives shous shouldld a.
a. inincrcreasease e fifinannancicial al ststatatememenent t ususersers@ @ undundererststandandining g of of and and coconfnfididenence ce in in fifinanancnciaiall reporting.
reporting. b.
b. enhancenhance compe comparabiliarabilit amot among comng companiespanies@ financ@ financial stial statemeatements.nts. c.
c. allow nallow new and emew and emerging perging practicractical problal problems to bems to be more !e more !uickluickl solv solved.ed. d.
d. alall l of of ththesese.e. "2
"2.. AhicAhich of h of ththe fe folollolowwining ,g ,aac- ac- arere n!tn!t true concerning a conceptual framework in account true concerning a conceptual framework in account ingB
ingB a.
a. It sIt shoulhould be a basd be a basis for sis for stantandardardsdsettettinging.. b.
b. It shoulIt should allow prd allow practicactical problal problems to be soems to be solved morlved more !uickle !uickl b refe b reference to itrence to it.. c.
c. It shoulIt should be based on fud be based on fundamendamental truntal truths that arths that are derivee derived from the lad from the laws of natws of nature.ure. d.
d. )ll )ll of of the the aboabove ve ,a,ac- c- are are trutrue.e. "3.
"3. Ahat iAhat is a s a purpurpospose of e of havhaving ing a ca conconcepteptual ual frframeameworworkBkB a.
a. (o enabl(o enable the profee the profession tssion to more !uico more !uickl solkl solve emerve emerging pracging practical prtical problemsoblems.. b.
b. (o prov(o provide a fouide a foundatindation from on from which twhich to build mo build more useore useful stful standardsandards.. c.
c. CCeieittheher a r a nonor br b.. d
d.. ++ootth a h a aannd bd b..
* *
"4
"4.. AhicAhich oh of tf the he fofollllowowining ig iss n!tn!t a benefit associated with the )*+ 0onceptual ramework a benefit associated with the )*+ 0onceptual ramework <rojectB
<rojectB a.
a. ) concept) conceptual frameual framework showork should increuld increase financase financial statial statement useement users@ underrs@ understandistanding ofng of and confidence in financial reporting.
and confidence in financial reporting. b.
b. <r<racactiticacal l prproboblelems ms shshouould ld be be momore re !u!uicicklkl sosolvlvabable le b b rerefefererencnce e to to an an e&e&isistitingng conceptual framework.
conceptual framework. c.
c. ) coher) coherent sent set of acet of accountcounting sing standardtandards and rs and rules sules should rhould result.esult. d.
d. +usin+usiness entiess entities wities will need far lell need far less assss assistancistance from acce from accountanountants becats because the finuse the financialancial reporting process will be !uite eas
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"".. ) ) sosounundldl dedevevelolopeped d coconcncepeptutual al frframameweworork k enenabableles s ththe e InInteternrnatatioionanal l )c)ccocoununtitingng *tandards +oard ,I)*+- to
*tandards +oard ,I)*+- to I.
I. IssIssue mue more ore useuseful ful and and conconsissistentent pt pronronounouncemcementents os ovever tr timeime.. II.
II. ;or;ore !uie !uicklckl so solve nlve new anew and emd emergerging pring practacticaical prol probleblems b ms b refrefereerencincing basng basicic theor. theor. a a.. I I oonnll.. b b.. III I oonnll.. c
c.. ++ootth I h I anand Id III.. d.
d. CeCeititheher I r I nonor Ir II.I. "#.
"#. In the conIn the concepceptuatual framl framewoework for finrk for financancial repial reportorting6 whing6 what proat providvides thes the whe whtthe goalhe goalss and purposes of accountingB
and purposes of accountingB a.
a. ;e;easasururememenent t and and rerecocogngnitition ion coconcncepepts ts susuch ch as as asassusumpmptitionons6 s6 prprinincicipleples6 s6 anandd constraints
constraints b.
b. EualitEualitative ative charcharacteracteristicistics of s of accounaccounting ting inforinformatiomationn c.
c. %le%lemenments ts of of finfinancancial ial stastatemtementsents d.
d. bjbjectective ive of fof finainancincial ral repoeportirtingng "$.
"$. (he (he undeunderlrling ing thetheme me of of the the conconcepceptual tual fraframewmework ork isis a.
a. dedecicisision on ususefefululnenessss.. b.
b. unundedersrstatandndabiabililitt.. c.
c. rreleliiababiililitt.. d.
d. cocompmpararababililitit.. "'.
"'. Ahat Ahat is tis the objhe objectivective of e of financfinancial rial reportineporting as g as indicindicated ated in the in the conceconceptual ptual framframeworkeworkBB a.
a. providprovide infore information tmation that is ushat is useful to thoseful to those making ie making investnvesting and creding and credit decisit decisions.ions. b.
b. providprovide ine informformation ation that that is usis useful eful to mto managemanagement.ent. c.
c. providprovide infe informatormation abion about tout those ihose investnvesting in ing in the the entitentit.. d.
d. )l)ll ol of f ththe ae aboboveve.. ".
". (he (he InterInternationnational )cal )ccountcounting *ing *tandartandards +ds +oard/s oard/s ,I)*+,I)*+/s- 0/s- 0onceponceptual tual rameramework work incluincludesdes all of the following
all of the following e3&e,te3&e,tFF a.
a. bjbjectective ive of fof finainancincial real reporportinting.g. b.
b. *up*uppleplemenmentartar infinformormatiationon c.
c. %le%lemenments ots of ff finainancincial sal stattatemeementsnts.. d.
d. EualitEualitative ative charcharacteracteristicistics of s of accounaccounting ting inforinformatiomation.n. #.
#. (he se(he second lecond level in the Invel in the Interternatnationaional )ccol )ccountunting *taing *tandandards +ords +oardard/s ,I)/s ,I)*+/*+/s- 0oncs- 0oncepteptualual ramework
ramework a.
a. IdentIdentifies ifies the the objecobjective tive of fof financinancial rial reportieporting.ng. b.
b. IdentIdentifies reifies recognitcognition6 measion6 measuremenurement6 and disclt6 and disclosure conosure concepts uscepts used in establed in establishing andishing and appling accounting standards.
appling accounting standards. c.
c. <rovid<rovides es the the elemeelements nts of fof financinancial ial statestatementsments.. d.
#1
#1.. (he (he obobjejectctivive e of of fifinanancncial ial rereporportiting ng in in ththe e InInteternrnatiationaonal l )c)ccocountuntining g *t*tandandarards ds +o+oarard/d/ss ,I)*+/s- 0onceptual ramework
,I)*+/s- 0onceptual ramework a.
a. Is tIs the fohe foundundatiation foon for thr the rae ramewmeworkork.. b.
b. IncluIncludes the !ualides the !ualitativtative characte characteristeristics that makics that make accounte accounting informing information useation useful.ful. c.
c. Is fIs found ound on thon the thie third lerd level ovel of thf the re rameameworwork.k. d.
d. )ll of the c)ll of the choices ahoices are corrre correct regarect regarding the obding the objectijective of finve of financial reancial reportinporting.g. #2
#2.. )n im)n implplicicit it asassusumpmptition on of of ththe e InInteternrnatationional al )c)ccocountuntining g *t*tanandardards ds +o+oardard/s /s ,I,I)*)*+/+/s- s-0onceptual ramework is that
0onceptual ramework is that a.
a. InforInformation mmation must be decisust be decisionusionuseful to all poteeful to all potential usential users of finanrs of financial reporcial reporting.ting. b.
b. ?enera?eneralpurplpurpose finaose financial rencial reportinporting is the primg is the primar sourar source of infce of informatormation for useion for users ofrs of financial reporting.
financial reporting. c.
c. UserUsers need reass need reasonable knonable knowledowledge of busige of business and finess and financianancial accounl accounting matting matters toters to understand the information contained in financial
understand the information contained in financial statements.statements. d.
d. )ll )ll of tof the che choichoices aes are cre corrorrectect.. #3.
#3. (he overr(he overriding iding critecriterion rion b wb which hich accouaccounting nting inforinformatiomation can can be n be judged judged is tis that hat ofof a.
a. useusefulfulnesness fs for dor deciecisiosion man makinking.g. b.
b. frfreeeedodom fm frorom bim biasas.. c
c.. ttiimmeelliinneessss.. d.
d. cocompmpararababililitit.. #4.
#4. Ahich of tAhich of the fohe followillowing is ng is a fua fundamendamental ntal !ualit!ualit of of usefuseful acul accountcounting ining informformationBationB a.
a. 0o0ompmpararababililitit.. b
b.. 77eelleevvaannccee.. c.
c. 0o0onsnsisisttenencc.. d.
d. ;;atatereriialalitit.. #".
#". Ahich of tAhich of the fohe followillowing is ng is a fua fundamendamental ntal !ualit!ualit of of usefuseful acul accountcounting ining informformationBationB a.
a. 0o0onsnserervavatitismsm.. b.
b. 0o0ompmpararababililitit.. c.
c. aaitithfhful reul reprpresesenentatatitionon.. d.
d. 0o0onsnsisisttenencc.. ##.
##. Ahat is mAhat is meant eant b cb comparaomparabilitbilit w when dihen discusscussing sing financfinancial acial accountcounting iing informnformationBationB a.
a. InforInformation mation has has predicpredictive tive or or feedbfeedback ack value.value. b.
b. InfInformormatiation is reon is reasoasonabnabl frel free from ee from errorror.r. c.
c. InforInformation tmation that is mehat is measured and rasured and reporteeported in a simild in a similar fashiar fashion acroson across compas companies.nies. d.
d. InInfoformrmatation ion is tis timimelel.. #$.
#$. Ahat is mAhat is meant eant b cb consisonsistenc tenc when when discdiscussinussing fing financial ancial accounaccounting ting informinformationBationB a.
a. InforInformation tmation that is mehat is measured and rasured and reporteeported in a simild in a similar fashiar fashion acroson across points points in time.s in time. b.
b. InInfoformrmatation ion is tis timimelel.. c.
c. InforInformation mation is mis measureasured simed similarl ilarl acrosacross the s the indusindustr.tr. d.
#'.
#'. AhiAhich och of tf the fhe follollowiowing ing is an s an ingingredredient ient of rof releelevanvanceBceB a.
a. 0o0ompmpleletetenenesss.s. b.
b. 7ep7epresresententatiationaonal fal faithithfulfulnesness.s. c
c.. CCeeututrralalitit.. d.
d. <r<rededicictitive vve valalueue.. #.
#. AhiAhich of tch of the folhe followlowing is aing is an ingrn ingredieedient of fnt of faitaithfuhful repl represresententatiationBonB a.
a. <r<rededicictitive vve valalueue.. b.
b. ((imimelelininesesss.. c
c.. CCeeututrralalitit.. d.
d. eeededbaback ck vvalalueue.. $.
$. 0hangi0hanging thng the mete method of hod of inventinventor vor valuatioaluation shon should buld be repore reported in ted in the fthe financinancial sial statemtatementsents under what !ualitative characteristic of accounting informationB
under what !ualitative characteristic of accounting informationB a.
a. UnUndedersrstatandndabiabililitt.. b.
b. 8e8erirififiababililitit.. c
c.. ((iimmeelilinneessss.. d.
d. 0o0ompmpararababililitit.. $1.
$1. 0om0ompan ) ispan ) issuisuing its ang its annunnual final financancial reial reporports wits withithin one monn one month of thth of the end of the e end of the ear isear is an e&le of which enhancing
an e&le of which enhancing !ualit of accounting informationB!ualit of accounting informationB a.
a. CCeueuttrralalitit.. b.
b. ((imimelelininesesss.. c.
c. <r<rededicictitive ve vavalulue.e. d.
d. 7ep7epresresententatiationaonal fal faithithfulfulnesness.s. $2.
$2. Ahat iAhat is the s the !ualit!ualit of i of informnformation tation that enahat enables usbles users ters to betto better forer forecasecast futurt future opere operationsationsBB a.
a. 77eleliaiabibililitt.. b.
b. ;;atatereriialalitit.. c.
c. 0o0ompmpararababililitit.. d
d.. 77eelleevvaannccee.. $
$3.3. AhAhicich h of of tthe he ffolollolowwining g iningrgrededieientnts s of of ffununddamamenenttal al !!uaualilitities es is is pparart t of of fafaitithfhfulul representationB
representationB a.
a. CCeueuttrralalitit.. b.
b. <r<rododucuctitive vve valalueue.. c.
c. 0o0onfnfirirmamatotor var valulue.e. d.
d. ((imimelelininesesss.. $4.
$4. DecisDecision mion makers akers var var widel widel in thin the tpe tpes of es of decisdecisions tions the mhe make6 ake6 the mthe methods ethods of deof decisicisionon making the emplo6 the information the alread possess or can obtain from other making the emplo6 the information the alread possess or can obtain from other sourc
sources6 and es6 and their abilit to their abilit to procesprocess s inforinformatiomation. n. 0ons0onse!uentle!uentl6 for 6 for inforinformatiomation n to to bebe useful there must be a linkage between these users and the decisions the make. (his useful there must be a linkage between these users and the decisions the make. (his link is
link is a.
a. rreelelevvananccee.. b.
b. rreleliiababiililitt.. c.
c. unundedersrstatandndababililitit.. d.
$"
$".. (he (he twtwo o fufundndamamenentatal l !u!ualalitities that makies that make e acaccocoununtiting ng ininfoformrmatation useion usefuful l fofor r dedecicisisionon making are
making are a.
a. comcomparparabilabilit it and and conconsissistentenc.c. b.
b. matmaterierialitalit and and timtimelielinesness.s. c.
c. relrelevaevance ance and faind faithfthful reul reprepresensentattationion.. d.
d. relreliabiabiliilit t and and comcomparparabiabilitlit.. $#.
$#. )ccount)ccounting iing infonformrmatiation is on is conconsidsidereered to bd to be ree relevlevant want when ihen itt a.
a. cacan n be depebe dependnded ed on to on to rereprpresesent the econent the economomic condic condititionions s anand d evevenents that it ts that it isis intended to represent.
intended to represent. b.
b. is capis capablable of make of making a difing a differferencence in a decise in a decisionion.. c.
c. is undeis understanrstandable b dable b reasonreasonabl inabl informeformed users od users of accof accountinunting informg information.ation. d.
d. is vis vererififiaiablble and ne and neueutrtral.al. $$.
$$. (he !ualit (he !ualit of infof informatormation thaion that givet gives asss assurance turance that it hat it is reis reasonabasonabl frel free of ere of error and ror and biasbias a.
a. rreelelevvananccee.. b.
b. fafaitithfhful repul repreresesentntatatioion.n. c.
c. veverirififiababililitit.. d.
d. neneututrralalitit.. $'
$'.. inainancnciaial il infnforormamatition on dodoesesn!tn!t demonstrate consistenc when demonstrate consistenc when a.
a. firmfirms in the sams in the same induste industr use difr use differenferent account accounting meting methods to acthods to account fcount for the samor the samee tpe of transaction.
tpe of transaction. b.
b. a compa compan chanan changes its ges its estimestimate of tate of the salvhe salvage valage value of a fiue of a fi&ed ass&ed asset.et. c.
c. a a cocompmpan faian fails to ls to adadjusjust t itits s fifinanancnciaial l ststatatememenents for ts for chchanganges in es in ththe e vavalulue e of theof the measuring unit.
measuring unit. d.
d. nonone ne of of tthehesse.e. $.
$. Ahen infoAhen informrmatiation abouon about two dit two diffefferenrent entet enterprrpriseises has bees has been prepn prepareared and pred and presensented in ated in a similar manner6 the information e&hibits the characteristic of
similar manner6 the information e&hibits the characteristic of a.
a. rreelelevvananccee.. b.
b. rreleliiababililitit.. c.
c. ccononssisistetencnc.. d.
d. nonone ne of of tthehesse.e. '.
'. (he second lev(he second level of the Inteel of the Internarnatiotional )cnal )ccoucountinting *tanng *tandardards +oards +oard/s ,I)d/s ,I)*+/s*+/s- 0once- 0onceptuptualal ramework
ramework a.
a. providprovides concees conceptual buiptual building bloclding blocks that e&ks that e&plain the !ualplain the !ualitatiitative charave characteriscteristics oftics of accounting information.
accounting information. b.
b. definedefines ts the ehe elemenlements ts of of financfinancial ial statstatementements.s. c.
c. servserves as a bres as a bridge betidge between thween the 9wh: e 9wh: of accof accountinounting and the 9g and the 9how: of how: of accouaccounting.nting. d.
d. all all of of the the chochoiceices ars are ce corrorrectect.. '1
'1.. In thIn the e InInteternrnatatioionanal l )c)ccocoununtiting ng *t*tanandadardrds s +o+oarard/d/s s ,I,I)*)*+/+/s- s- 0o0oncncepeptutual al rramameweworork6k6 !ualitative characteristics
!ualitative characteristics a.
a. )re )re consconsidered idered eitheeither fr fundamundamental ental or eor enhancinhancing.ng. b.
b. 0ontr0ontribute to tibute to the decishe decisionusionusefulneefulness of finss of financial rancial reportieporting inforng informatiomation.n. c.
c. DistDistinguisinguish better informh better information from ination from inferior infferior informatormation for decision for decisionmakionmaking purposing purposes.es. d.
'2.
'2. In the IntIn the Internernatiational )conal )ccoucountinting *tanng *tandardards +oards +oard/s ,Id/s ,I)*+)*+/s- 0on/s- 0oncepceptuatual raml ramewoework6 anrk6 an enhancing !ualitative characteristic is
enhancing !ualitative characteristic is a.
a. <r<rededicictitive vve valalueue.. b.
b. rree ee frfrom om ererroror.r. c
c.. ((iimmeelilinneessss.. d.
d. 0o0onfnfirirmamatortor vavaluelue.. '3.
'3. In the IntIn the Internernatiational )conal )ccoucountinting *tanng *tandardards +oards +oard/s ,Id/s ,I)*+)*+/s- 0on/s- 0oncepceptuatual raml ramewoework6 anrk6 an ingredient of a fundamental !ua
ingredient of a fundamental !ua litative characteristic islitative characteristic is a.
a. CCeueuttrralalitit.. b.
b. 8e8erirififiababililitit.. c
c.. ((iimmeelilinneessss.. d.
d. UnUndedersrstatandndabiabililitt.. '4
'4.. In In ththe e InInteternrnatiationonal al )c)ccocountuntining g *t*tandandarards ds +o+oarard/s d/s ,I,I)*)*+/+/s- s- 0o0oncncepeptutual al rramameweworkork6 6 aa fundamental !ualitative characteristic is
fundamental !ualitative characteristic is a.
a. ;;atatereriialalitit.. b.
b. aaitithfhful reprul represesenentatatitionon.. c.
c. DeDecicisision on ususefefululnenessss.. d.
d. CCeueuttrralalitit.. '".
'". (o be a faith(o be a faithful reful reprepresensentattation as desion as descricribed b the Inbed b the Interternatnationional )ccal )ccounountinting *tandg *tandardardss +oard/s ,I)*+/s- 0onceptual ramework6 information must be all of
+oard/s ,I)*+/s- 0onceptual ramework6 information must be all of the followingthe following e3&e,te3&e,tFF a.
a. 00oommpplleettee.. b.
b. rree ee frfrom om ererroror.r. c.
c. 0o0onfnfirirmamatotorr.. d
d.. CCeeuuttrraall.. '#
'#.. %n%nhanhancicing ng !u!ualalititieies s as as dedescscriribebed d b b ththe e InInteternrnatationional al )c)ccocoununtiting ng *t*tanandardards ds +o+oarard/d/ss ,I)*+/s- 0onceptual ramework6 include all of the
,I)*+/s- 0onceptual ramework6 include all of the followingfollowing e3&e,te3&e,tFF a.
a. 0o0ompmpararababililitit.. b.
b. CCeueuttrralalitit.. c.
c. UnUndedersrstatandndababililitit.. d.
d. 8e8erirififiababililitit.. '$
'$.. %r%rin in 0o0ompmpan appan applilies the sames the same e acaccocoununtiting treng treatmatmenent t to simto simililar evenar events frots from m pepeririod tood to period
period. . %rin 0omp%rin 0ompan is e&hibitan is e&hibiting which of the following which of the following !ualiting !ualities as descries as described b theibed b the International )ccounting *tandards +oard/s ,I)*+/s- 0onceptual rameworkB
International )ccounting *tandards +oard/s ,I)*+/s- 0onceptual rameworkB a.
a. 8e8erirififiababililitit.. b.
b. 0o0onsnsisistetencnc.. c.
c. <r<rededicictitive ve vavalulue.e. d.
* *
''
''.. )c)ccocordrdining g to to ththe e I)I)*+ *+ 0o0oncncepeptutual al rramameweworork6 k6 ththe e elelememenentsts asseassets6 ts6 liabilliabilitiesities6 6 andand
e!uit
e!uit describe amounts of resources and claims to describe amounts of resources and claims to resources at>during aresources at>during a ;
;oommeennt it in (n (iimmee <<eerriiood od of f ((iimmee a a.. GGeess CCoo b b.. GGeess GGeess c c.. CCoo GGeess d d.. CCoo CCoo '.
'. Ahich of tAhich of the folhe followlowing is ning is not a basot a basic elic elemeement of fnt of finainancincial stal stateatemenmentsBtsB a
a.. ))sssseettss.. b.
b. *ta*tatemtement ent of fof finaninanciacial pol positsitionion.. c
c.. %%!!uuiitt.. d
d.. IInnccoommee.. .
. Ahich of Ahich of the the folfollowlowing bing basiasic elec elemenments of ts of finfinancancial sial stattatemeements ints iss n!tn!t associated with the associated with the statement of financial positionB
statement of financial positionB a
a.. IInnccoommee.. b b.. %%!!uuiitt.. c c.. HHiiababiilliitt.. d d.. ))sssseett.. 1.
1. Issuance of Issuance of commcommon stoon stock for ck for cash acash affecffects whts which basich basic eleic element oment of finf financial ancial statestatementmentsBsB a.
a. 77eevveennueuess.. b
b.. HHoosssseess.. c.
c. HiHiababililititieiess.. d
d.. %%!!uuiitt.. 2.
2. (he Intern(he International ational )ccou)ccounting nting *tanda*tandards +rds +oard ,oard ,I)*+- I)*+- definedefines fis five inve interreterrelated lated elemeelements onts off financial statement
financial statements. s. Ahich of Ahich of the following the following isis n!tn!t one of those elementsB one of those elementsB a a.. ))sssseett.. b b.. IInnccoommee.. c c.. %%!!uuiitt.. d.
d. )ll of )ll of the cthe choices hoices are elare elementements defs defined bined b the the I)*+.I)*+. 3.
3. (he Inter(he Internatnationaional )ccl )ccountounting *ting *tandandardards +oard ,Is +oard ,I)*+)*+- defi- defines one of tnes one of the " elemhe " elementents ass as followsF 9the residual interest in the assets of the entit after deducting all its liabilities: followsF 9the residual interest in the assets of the entit after deducting all its liabilities: Ahich element matches this descriptionB
Ahich element matches this descriptionB a.
a. 7e7etatainined eaed earnrniningsgs.. b
b.. IInnccoommee.. c
c.. %%!!uuiitt.. d.
d. )ll of )ll of the cthe choichoices maes match ttch this dhis defiefinitnitionion..
44.. AAhhiicch of th of thhe foe folllloowwiinng isg is n!tn!t a basic assumption underling the financial accounting a basic assumption underling the financial accounting structureB
structureB a.
a. %co%conomnomic ic ententit it assassumpumptiontion.. b.
b. ?o?oining cong concecern asrn assusumpmptition.on. c.
c. <e<eririodiodicicit at assssumumptptionion.. d.
".
". AhiAhich basch basic assic assumpumptiotion is illusn is illustratrated wheted when a firm repn a firm reportorts finas financincial resal results on an annults on an annualual basisB
basisB a.
a. %co%conomnomic ic ententit it assassumpumptiontion.. b.
b. ?o?oining cong concecern asrn assusumpmptition.on. c.
c. <e<eririodiodicicit at assssumumptptionion.. d.
d. ;o;onenetatar unr unit asit assusumpmptition.on. #
#.. AhAhicich h babasisic c asassusumpmptition on mmaa n!tn!t be followed when a firm in bankruptc reports financial be followed when a firm in bankruptc reports financial resultsB
resultsB a.
a. %co%conomnomic ic ententit it assassumpumptiontion.. b.
b. ?o?oining cong concecern asrn assusumpmptition.on. c.
c. <e<eririodiodicicit at assssumumptptionion.. d.
d. ;o;onenetatar unr unit asit assusumpmptition.on. $.
$. Ahich Ahich accounaccounting ating assumssumption ption or prior principlnciple is be is being veing violateiolated if d if a coma compan ppan providrovides fies financiananciall reports in connection with a new
reports in connection with a new product introductionBproduct introductionB a.
a. %c%cononomomic ic enentititt.. b.
b. <e<errioiodidiccitit.. c.
c. 7e7evevenue nue rerecocogngnititioion.n. d.
d. uull ll didiscsclolosusurere..
* *
'.
'. AhiAhich of the fch of the follollowiowing basng basic accic accounountinting assug assumptmptionions is thres is threateatened b thned b the e&ise e&istentence ofce of severe inflation in the economB
severe inflation in the economB a.
a. ;o;onenetatar unr unit asit assusumpmptition.on. b.
b. <e<eririodiodicicit ast assusumpmptitionon.. c.
c. ?o?oininggcoconcncerern n asassusumpmptitionon.. d.
d. %co%conomnomic ic ententit it assassumpumptiontion..
* *
.
. During During the lithe lifetimfetime of an e of an entitentit acc accountanountants prts produce oduce financfinancial stial statematements at ents at artiartificial ficial pointpointss in time in accordance with the concept of
in time in accordance with the concept of
bbjjeeccttiivviitt <<eerriiooddiicciitt a a.. CCoo CCoo b b.. GGeess CCoo c c.. CCoo GGeess d d.. GGeess GGeess 1
1.. UndUnder cuer currerrent Int I7*6 i7*6 inflnflatiation is on is ignignoreored in acd in accoucountinting dung due to te to thehe a.
a. ecoeconomnomic ic ententit it assassumpumptiontion.. b.
b. gogoining cong concecern asrn assusumpmptition.on. c.
c. momonenetartar un unit asit assusumpmptition.on. d.
d. pepeririododicicitit ass assumumptptioion.n. 1
11.1. (h(he e ececononomomic ic enentitit t asassusumpmptitionon a.
a. is is inapplinapplicable icable to to unincounincorporatrporated ed businebusinessessses.. b.
b. recogrecogni5es ni5es the the legal legal aspecaspects of ts of businebusiness orss organi5gani5ationsations.. c.
c. re!re!uireuires pers periodiiodic incc income mome measeasureuremenment.t. d.
12
12.. <repara<reparatiotion n of consof consolidolidateated d finfinancancial statial statemeements when a nts when a parparententsusubsibsidiadiar relatr relationsionshiphip e&ists is an e&le of the
e&ists is an e&le of the a.
a. ecoeconomnomic ic ententit it assassumpumptiontion.. b.
b. relrelevaevance nce chacharacracterterististic.ic. c.
c. comcomparparabilabilit it chacharacracterterististic.ic. d.
d. neuneutratralitlit chacharacracterterististic.ic. 1
13.3. DuriDuring ng ththe e lilifefetitime me of of an an enentititt6 6 acaccocoununtatantnts s prproduoduce ce fifinanancnciaial l ststatatememenents ts at at ararbitbitrararr points in time in accordance
points in time in accordance with which basic accounting conceptBwith which basic accounting conceptB a.
a. 0o0ostst>b>benenefefit conit conststrarainintt b.
b. <e<eririodiodicicit ast assusumpmptitionon c.
c. ;a;ateteririalialit t coconsnstrtrainaintt d.
d. %&p%&pensense re recogecognitnition ion priprincincipleple 1
14.4. (h(he asse assumumptptioion than that a bust a busininesess ents entererprprisise wile willl n!tn!t be sold or li!uidated in the near future be sold or li!uidated in the near future is known as the
is known as the a.
a. ecoeconomnomic ic ententit it assassumpumptiontion.. b.
b. momonenetartar uni unit asst assumumptptionion.. c.
c. mamateteririalialit at assssumumptptionion.. d.
d. nonone ne of of tthehesse.e. 1".
1". Ahich of tAhich of the fohe followillowing is ng is an iman implicaplication tion of of the gthe going coing conceroncern assn assumptiumptionBonB a.
a. (he hi(he histstoriorical cocal cost prst princinciple is ciple is credrediblible.e. b.
b. DeprDepreciatieciation and amorton and amorti5atii5ation policon policies are jusies are justifiabtifiable and apprle and appropriatopriate.e. c.
c. (he curr(he currentnonentnoncurrecurrent classnt classificatification of assetion of assets and liabilits and liabilities is justiies is justifiable and sigfiable and signifnif cant.
cant. d.
d. )l)ll l of of ththesese.e. 1#
1#.. (he basic ass(he basic assumpumptiotions of accons of accountunting useing used b the Inted b the Internarnatiotional )ccnal )ccountounting *taing *tandandardsrds +oard ,I)*+- include all of the following
+oard ,I)*+- include all of the following e3&e,te3&e,tFF a.
a. ?o?oining cog concncerern.n. b.
b. <e<errioiodidiccitit.. c.
c. )c)ccrcruaual bl basasisis.. d.
d. ;;atatereriialalitit.. 1$
1$.. (he basic ass(he basic assumpumptiotions of accons of accountunting useing used b the Inted b the Internarnatiotional )ccnal )ccountounting *taing *tandandardsrds +oard ,I)*+- include
+oard ,I)*+- include a.
a. CCeueuttrralalitit.. b.
b. <e<errioiodidiccitit.. c.
c. UnUndedersrstatandndababililitit.. d.
d. ;;atatereriialalitit.. 1'
1'.. (he basic ass(he basic assumpumptiotions of accons of accountunting useing used b the Inted b the Internarnatiotional )ccnal )ccountounting *taing *tandandardsrds +oard ,I)*+- include
+oard ,I)*+- include a.
a. ;;ononetetarar un unitit.. b.
b. DeDecicisision on ususefefululnenessss c
c.. ((iimmeelilinneessss.. d.
1
1.. AhAhicich h of of ththe e fofollllowowining g babasisic c asassusumpmptitionons s of of acaccocoununtiting ng ,u,usesed d b b ththe e InInteternrnatatioionanall )ccounting *tandards +oard- makes depreciation and amorti5ation policies justifiable and )ccounting *tandards +oard- makes depreciation and amorti5ation policies justifiable and appropriateB
appropriateB a.
a. <e<errioiodidiccitit.. b.
b. DeDecicisision on ususefefululnenessss c.
c. ;;ononetetarar u unnitit.. d.
d. ?o?oining cog concncerern.n. 11.
11. <ropone<roponents onts of hisf historictorical cosal cost ordt ordinarilinaril ma maintain intain that that in coin comparimparison wson with alith all othl other ver valuatioaluationn alternatives for general purpose financial reporting6 statements prepared using historical alternatives for general purpose financial reporting6 statements prepared using historical costs are more
costs are more a.
a. vvererififiaiabblele.. b
b.. rreelelevvanantt.. c.
c. indindicaicativtive of the ene of the entittit@s p@s purcurchashasing poing powerwer.. d.
d. ccononsserervavatitiveve.. 111
111.. 8al8aluinuing assg assets aets at thet their li!ir li!uiduidatiation valon values rues rathather thaer than then their cosir cost ist is %n&!ns%stent%n&!ns%stent with the with the a.
a. pepeririododicicitit ass assumumptptioion.n. b.
b. mamatctchinhing g prprininciciplple.e. c.
c. mamateteririalialit ct cononststrairaintnt.. d.
d. hishistortoricaical l coscost t priprincinciple.ple. 112.
112. 7even7evenue is ue is generagenerall rll recogni5ecogni5ed wheed when a sn a sale occale occurs. (urs. (his shis statemtatement dent descriescribes tbes thehe a.
a. conconsissistentenc c chacharacracterterististic.ic. b.
b. mamatctchinhing g prprininciciplple.e. c.
c. revrevenuenue e recrecogniognitiotion n priprincincipleple.. d.
d. relrelevaevance nce chacharacracterterististic.ic. 113
113.. ?en?eneraerallll6 rev6 revenue fenue from srom sales ales shoshould be ruld be recoecogni5gni5ed at a poed at a point wint whenhen a.
a. manmanagemagement deent decidcides it is apes it is appropropripriate to do sate to do so.o. b.
b. the prthe product oduct is avis availablailable for se for sale to ale to the ultthe ultimatimate conse consumer.umer. c.
c. the entthe entire amouire amount recnt receivableivable has been ce has been collecollected from ted from the custhe customer atomer and thernd there remaine remainss no further warrant liabilit.
no further warrant liabilit. d.
d. nonone ne of of tthehesse.e. 11
114.4. 7e7evevenunue gee genenerarall ll shshoulould be rd be rececogogni5ni5eded a.
a. at tat the ehe end ond of pf prodroducuctitionon.. b.
b. at tat the the time ime of cof cash ash colcolleclectiotion.n. c.
c. wwhehen rn reaealili5e5ed.d. d.
d. whwhen en a sa salale oce occucursrs.. 11
11".". AhAhicich oh of tf the he fofollllowowining ig iss n!tn!t a time when revenue ma be recogni5edB a time when revenue ma be recogni5edB a.
a. )t )t ttimime oe of sf salalee b.
b. )t )t rerececeipipt ot of cf casashh c.
c. DuDuriring ng prprododucuctitionon d.
11
11#.#. (h(he e )l)llowlowanance for ce for DoDoububtftful )ccoul )ccountunts6 whis6 which appech appears as ars as a a dededuductctioion n frfrom )ccom )ccounountsts 7eceivable on a statement of financial position and which is based on an estimate of bad 7eceivable on a statement of financial position and which is based on an estimate of bad debts6 is an application of the
debts6 is an application of the a.
a. conconsissistentenc c chacharacracterterististic.ic. b.
b. e&pe&pensense re recoecognignition tion priprincinciple.ple. c.
c. mamateteririalialit ct cononststrarainint.t. d.
d. revrevenuenue re recoecognignitiotion pn prinrincipciple.le. 11
11$.$. (he accou(he accountinting pring princinciple of e&ple of e&penpense recse recogniognitiotion is besn is best demot demonsnstratrated bted b a.
a. not renot recogni5cogni5ing an ing an e&pense&pense unlese unless soms some revee revenue is nue is reali5reali5ed.ed. b.
b. assocassociating iating efforeffort ,e&t ,e&pensepense- with - with accomaccomplishplishment ,rment ,revenueevenue-.-. c.
c. recrecognogni5ini5ing prepg prepaid reaid rent recnt receiveived as reed as revenvenue.ue. d.
d. estabestablishinlishing an g an )pprop)ppropriatiriation for on for 0onti0ontingencingencies aces account.count. 11
11'.'. )pp)ppliclicatiation on of of the the fulfull dl disciscloslosure ure priprincncipleiple a.
a. is theoris theoretieticalcall desirl desirable but not able but not prapractictical becacal because the costs of use the costs of comcompleplete disclte disclosuosurere e&ceed the benefits.
e&ceed the benefits. b.
b. is violis violated wheated when importn important finant financial inancial informaformation is bution is buried in the nried in the notes to thotes to the finance financialial statements.
statements. c.
c. is demonis demonstrstrateated d b the use b the use of supplof supplemeementantar inforr informatmation presion presententing the effecing the effects ofts of changing prices.
changing prices. d.
d. re!uirre!uires that es that the finthe financiaancial statel statements ments be consbe consistenistent and comt and comparablparable.e. 11.
11. Ahich of tAhich of the folhe followinlowing is g is an argan argument ument againsagainst usit using hisng historictorical cosal cost in t in accouaccountingBntingB a.
a. aiair vr valuealues as are re mormore ree relevlevant.ant. b.
b. ististorical orical costs costs are bare based oased on an n an e&chane&change trge transacansaction.tion. c.
c. isistortoricaical cl costosts as are re relreliabiable.le. d.
d. aiair vr valuealues s are are subsubjecjectivtive.e. 12
12.. AhAhen ien is rs revevenenue gue genenereralall rl rececognogni5i5ededBB a.
a. AhAhen en cacash sh is is rerececeiviveded.. b.
b. AhAhen ten the whe wararrarantnt e& e&pipireres.s. c.
c. AhAhen pren prododucuctition is coon is compmpleleteted.d. d.
d. AhAhen en ththe se sale ale ococcucursrs.. 121.
121. Ahich of tAhich of the folhe followinlowing are g are the tthe two cwo componenomponents of ts of the the revenrevenue recue recognitiognition pron principleincipleBB a.
a. 0as0ash is rech is receiveived and ted and the amhe amount iount is mats materierial.al. b.
b. It is prIt is probable thobable that futuat future econre economic benomic benefits wefits will flow till flow to the como the compan and it pan and it is possis possibleible to reliabl measure the amount.
to reliabl measure the amount. c.
c. <roduc<roduction is ction is completomplete and there and there is an ace is an active mtive market farket for the pror the productoduct.. d.
d. 0ash i0ash is reas reali5ed oli5ed or realr reali5able i5able and proand productiduction is con is completomplete.e. 12
122.2. AhAhicich of th of the fhe folollolowiwing png praracctiticeces mas ma n!tn!t be an acceptable deviation from recogni5ing be an acceptable deviation from recogni5ing revenue at the point of saleB
revenue at the point of saleB a.
a. UpUpon on rerececeipt ipt of of cacashsh.. b.
b. DuDuriring prng prododucuctitionon.. c.
c. UpUpon on rerececeipt ipt of of orordeder.r. d.
1
12323.. AhAhicich oh of tf the he fofollllowowining ig iss n!tn!t a re!uired component of financial statements prepared in a re!uired component of financial statements prepared in accordance with generall accepted accounting principlesB
accordance with generall accepted accounting principlesB a.
a. <re<residsidentent@s le@s lettetter to sr to sharehareholholderders.s. b.
b. *ta*tatemtement ent of fof finaninanciacial pol positsitionion.. c.
c. InIncocome me ststatatememenent.t. d.
d. CotCotes tes to fio finannanciacial sl stattatemeementsnts.. 124.
124. Ahat Ahat is tis the genhe general aeral approacpproach as h as to wto when prhen product oduct costcosts are s are recognrecogni5ed i5ed as e&as e&pensepensesBsB a.
a. In tIn the pehe period riod whewhen the en the e&pe&pensenses are ps are paid.aid. b.
b. In thIn the pere period wiod when thhen the e&pe e&pensenses are ies are incuncurrerred.d. c.
c. In thIn the pere period wiod when thhen the vene vendor indor invoivoice is rce is receeceiveived.d. d.
d. In tIn the perhe period wiod when thhen the rele related rated revenue evenue is ris recogniecogni5ed.5ed. 12"
12".. Cot adjCot adjustusting the aming the amounounts repots reporterted in the financd in the financial staial statemtementents for infls for inflatioation is an n is an e&ae&lmplee of which basic principle of accountingB
of which basic principle of accountingB a.
a. %c%cononomomic ic enentititt.. b.
b. ?o?oining cog concncerern.n. c.
c. iiststororicical al cocostst.. d.
d. uull ll didiscsclolosusurere.. 12#
12#.. 7ec7ecognognitiition of e&penon of e&pense relase related to amorted to amorti5ti5atiation of an intangon of an intangiblible assee asset illust illustratrates whites whichch principle of accountingB
principle of accountingB a.
a. %&%&pepensnse re rececognognititioion.n. b.
b. uull ll didiscsclolosusurere.. c.
c. 7e7evevenue nue rerecocogngnititioion.n. d.
d. iiststororicical cal cosost.t. 12$
12$.. AheAhen shon should an euld an e&pe&pendinditurture be rece be recordorded as an ased as an asset rset rathather ther than an e&an an e&penpenseBseB a
a.. CCeevveerr.. b
b.. ))llwwaass.. c.
c. If If ththe ame amounount is t is mamateteririal.al. d.
d. AhAhen fen fututurure bee benenefifit e&t e&itits.s. 12
12'.'. AhAhicich h acaccocoununtiting assng assumumptption or prinion or princiciplple e is beinis being g viviolaolateted d if a if a cocompmpan is a an is a papartrt toto major litigation that it ma lose and decides
major litigation that it ma lose and decides n!tn!t to include the information in the financial to include the information in the financial statements because it ma have a negative
statements because it ma have a negative impact on the compan@s stock priceBimpact on the compan@s stock priceB a.
a. uull ll didiscsclolosusurere.. b.
b. ?o?oining cog concncerern.n. c.
c. iiststororicical al cocostst.. d
d.. ;;aattcchihinngg.. 12
12.. AhiAhich assch assumpumptiotion or princn or principle reiple re!uir!uires that ales that all inforl informatmation sigion signifnificaicant enount enough to affegh to affect act a decision of reasonabl informed users should be
decision of reasonabl informed users should be reported in the financial statementsBreported in the financial statementsB a.
a. ;;aattcchihinngg.. b.
b. ?o?oining cog concncerern.n. c.
c. iiststororicical al cocostst.. d.
13
13.. (he basic prin(he basic principciples of accles of accounountinting used b the Integ used b the Internarnatiotional )ccnal )ccounountinting *tandg *tandardards +oards +oard include all of the following
include all of the following e3&e,t ))e3&e,t
a.
a. ;;eaeassururememenentt b.
b. uull ll didiscsclolosusurere c.
c. 7e7evevenunue rece recogogninititionon d.
d. ?o?oining cg cononccerernn 131
131.. (he Inter(he Internatnationional )ccal )ccounountinting *tang *tandardards +oards +oard has givd has given comen companpanies the opies the optiotion of usingn of using fair value to report all of the following
fair value to report all of the following e3&e,te3&e,tFF a.
a. 77ececeieivvabableless b.
b. IInvnvesestmtmenentsts c.
c. iinanancnciaial l liliababililititieiess d.
d. )ll of )ll of the cthe choichoices caes can be van be valued alued at fait fair valr value.ue. 132.
132. Under InterUnder Internationnational al inanciinancial 7al 7eporteporting *ting *tandardandards ,Is ,I7*- 7*- revenrevenue mue ma ba be rece recogni5edogni5ed a.
a. )t )t ththe pe poioint nt of sof salale.e. b.
b. DuDuriring prng prododucuctitionon.. c.
c. )t )t ththe ee end ond of pf proroduductctioion.n. d.
d. )ll of t)ll of the choiche choices ma bes ma be accepe acceptable ftable for reveor revenue recnue recognitioognition under In under I7*.7*. 133
133.. Under InteUnder Internarnatiotional innal inancancial 7epial 7eportorting *taing *tandandards ,Irds ,I7*- JJJ7*- JJJJJJJJJJ costJ costs are chargs are charged offed off in the immediate period and JJJJJJJJ costs ma be carried into future periods.
in the immediate period and JJJJJJJJ costs ma be carried into future periods. a.
a. <e<eririododK pK proroduductct.. b.
b. ;a;ateteririalK alK ovovererhehead.ad. c.
c. <r<rododucuctK tK pepeririodod.. d.
d. veverherheadK adK admadminisinistratrativtive.e. 13
134.4. UnUndeder r InInteternrnatatioionanal l iinanancnciaial l 7e7epoportrtining g *t*tanandadardrds s ,I,I77*- *- nonotetes s to to ththe e fifinanancnciaiall statements
statements a.
a. ;u;ust st be be !u!uanantitififiablable.e. b.
b. ;u;ust !st !uaualilif af as an es an elelemementnt.. c.
c. )mpli)mplif or e&plf or e&plain itemain items presens presented in the mated in the main bod of thin bod of the finance financial staial statementements.ts. d.
d. )ll of the c)ll of the choices ahoices are corrre correct regarect regarding notding notes to the fines to the financial sancial statemtatements.ents. 13".
13". Under InterUnder Internationnational al inanciinancial 7al 7eporteporting *ting *tandardandards ,Is ,I7*- 7*- suppsupplementlementar iar informnformationation a.
a. ;a be i;a be informnformation thation that is hiat is high in relgh in relevance bevance but low in ut low in reliabreliabilitilit.. b.
b. ;a i;a include nclude e&plane&planations ations of uncof uncertainertainties aties and connd contingetingencies.ncies. c.
c. ;a i;a include nclude descdescriptionriptions of as of accounccounting pting policieolicies and ms and methodsethods.. d.
d. )ll of t)ll of the choiche choices are ces are correct rorrect regardinegarding supplg supplementementar infar informatormation.ion. 13#.
13#. Ahich of tAhich of the fohe followillowing is ng is a ca constronstraint aint in pin presenresenting fting financiinancial inal informatformationBionB a.
a. ;;atatereriialalitit.. b.
b. uull ll didiscsclolosusurere.. c
c.. 77eelleevvaannccee.. d.
13$
13$.. )ll of t)ll of the folhe followlowing reing reprepresensent cost costs of prts of proviovidinding finag financincial infal informormatiationon e3&e,te3&e,t
a.
a. pprreepparariningg.. b.
b. didissssememininatatining.g. c.
c. acaccecessssining cag capipitatal.l. d
d.. aauuddiittiinngg.. 13'
13'.. AhiAhich of thch of the folle followiowing are beng are benefnefits of pits of provrovidiniding fing financancial inial inforformatmationionBB a.
a. <o<otetentntiaial ll lititigigatationion.. b
b.. ))uuddititiinngg.. c.
c. DiDiscscloslosurure to come to compepetititition.on. d.
d. ImImprovproved aled alloclocatiation oon of ref resousourcerces.s. 1
133.. AhAherere ie is ms matatereriaialilittn!tn!t used in providing financial informationB used in providing financial informationB a.
a. )pp)ppliling the reng the revenvenue recoue recognitgnition prion princincipleiple.. b.
b. DeterDetermining wmining what itehat items to inms to include in clude in the finthe financial sancial statemtatements.ents. c.
c. )pp)ppliling thng the goie going cong concencern asrn assumsumptiption.on. d.
d. DetDetermermininining the lg the leveevel of dl of disciscloslosureure.. 14
14.. %&%&pepensnsining g ththe cose cost of t of cocop papp paper wheer when the papn the paper is ac!er is ac!uiruired is an e&amed is an e&lple of e of whwhicichh constraintB
constraintB a.
a. ;;atatereriialalitit.. b.
b. 0o0ossttbebenenefifit.t. c.
c. 0o0onsnserervvatatisism.m. d.
d. InInduduststr r prpracactiticeces.s. 14
141.1. 0h0harargiging off the cong off the cost of a st of a wawaststebebasaskeket t wiwith an estith an estimamateted d ususefeful liful life of e of 1 ea1 ears as anrs as an e&pense of the period when purchased is an e&le of the application of the
e&pense of the period when purchased is an e&le of the application of the a.
a. conconsissistentenc c chacharacracterterististic.ic. b.
b. mamatctchinhing g prprininciciplple.e. c.
c. mamateteririalialit ct cononststrairaintnt.. d.
d. hishistortoricaical l coscost t priprincinciple.ple. 142
142.. AhiAhich och of thf the foe follollowinwing stg stateatemenments abts about out matmaterierialialit it iss n!tn!t correctB correctB a.
a. )n ite)n item musm must makt make a dife a differenference or it ce or it need noneed not be dit be disclossclosed.ed. b.
b. ;ater;aterialitialit is a is a mattematter of rr of relativelative si5e e si5e or impor importancortance.e. c.
c. )n item is )n item is matermaterial if its ial if its inclusinclusion or omion or omissiission would inon would influencfluence or change or change the judgme the judgmentent of a reasonable person.
of a reasonable person. d.
d. )ll of )ll of these these are corare correct srect statemtatements aents about mbout materiaaterialit.lit. 143
143.. (he Int(he Internernatioational )ccnal )ccountounting *taning *tandardards +oardds +oard/s conc/s concepteptual framual framewoework inclrk includes a costudes a cost benefit constraint.
benefit constraint. Ahich of the following best Ahich of the following best describes the costbenefit consdescribes the costbenefit constraintBtraintB a.
a. (he bene(he benefits of tfits of the inforhe informatiomation must be grn must be greater thaeater than the cosn the costs of provts of providing it.iding it. b.
b. inaninancial infcial informatormation shouion should be free frld be free from cost tom cost to users of to users of the informhe information.ation. c.
c. 0ost0osts of provis of providing finding financial iancial informnformation are nation are not alwaot alwas evidens evident or measut or measurable6 brable6 butut must be considered.
must be considered. d.
144
144.. (he Intern(he Internatiational )cconal )ccountounting *taing *tandarndards +oards +oard/s ,I)d/s ,I)*+- conc*+- concepteptual framual framewoework inclrk includeudes as a costbenefit constraint.
costbenefit constraint. Ahich of the following is trAhich of the following is true regarding this constraintBue regarding this constraintB a.
a. +enef+enefits arits are more more dife difficult ficult to !to !uantifuantif tha than cosn costs.ts. b.
b. (he I)(he I)*+ seek*+ seeks input os input on costn costs and bens and benefits efits as part as part of theiof their due pror due processcess.. c.
c. +enef+enefits to prits to preparereparers ma ins ma include acclude access tcess to capito capital at a loal at a lower coswer cost.t. d.
d. )ll )ll of tof the che choichoices aes are cre corrorrectect.. 14"
14".. (he Intern(he Internatiational )cconal )ccountounting *taing *tandarndards +oards +oard/s ,I)d/s ,I)*+- conc*+- concepteptual framual framewoework inclrk includeudes as a materialit constraint.
materialit constraint. Ahich of the following is tAhich of the following is true regarding this constraintBrue regarding this constraintB a.
a. (he I)*(he I)*+/s rule fo+/s rule for materr materialit iialit is an item us an item under "= of nender "= of net income is t income is consiconsidereddered immaterial.
immaterial. b.
b. ;ater;aterialitialit factor factors into bots into both internah internal and e&terl and e&ternal accounal accounting denting decisicisions.ons. c.
c. )n item )n item is immis immateriaterial if its al if its inclusinclusion or omion or omissioission would in would influenfluence or cnce or change thhange thee judgment of a reasonable person.
judgment of a reasonable person. d.
d. )ll )ll of tof the che choichoices aes are cre corrorrectect.. 14#.
14#. (he Inter(he Internationnational )al )ccounccounting ting *tanda*tandards rds +oard/+oard/s ,Is ,I)*+- )*+- conceconceptual ptual frameframeworkwork a.
a. IncluIncludes the condes the concept of pcept of prudencrudence or consere or conservatisvatism which mm which means when in deans when in doubt6oubt6 choose the solution that will be
choose the solution that will be least likel to overstate assets or income and>orleast likel to overstate assets or income and>or understate liabilities or e&penses.
understate liabilities or e&penses. b.
b. %&clu%&cludes the codes the concept of pncept of prudencrudence or consee or conservatisrvatism becausm because it is incoe it is inconsisnsistent wittent withh neutralit6 which encompasses freedom from bias.
neutralit6 which encompasses freedom from bias. c.
c. IncluIncludes the cdes the conceponcept of prudt of prudence or cence or conservonservatism watism which mhich means wheeans when in doubn in doubt6t6 choose the solution that will be
choose the solution that will be least likel to understate assets or income and>orleast likel to understate assets or income and>or overstate liabilities or e&penses.
overstate liabilities or e&penses. d.
d. IncluIncludes the cdes the conceponcept of prudt of prudence or cence or conservonservatism as atism as a desira desirable6able6 :'t n!t "e;'%"e$:'t n!t "e;'%"e$66 !ualit of financial reporting information.
!ualit of financial reporting information. 14$
14$.. (he Intern(he Internatioational )ccnal )ccounounting *tating *tandandards +oarrds +oard/s ,I)d/s ,I)*+- conc*+- concepteptual framual framewoework inclrk includeudess which of the following const
which of the following constraintsBraintsB a
a.. <<rruuddeennccee b.
b. 0o0onsnserervvatatisismm c
c.. 00oosstt d.
