‘Resources controlled by the entity as a result of past transactions or events and from which future economic benefits are expected to flow to the entity’ is the definition of:
a. expenses.
*b. assets.
c. liabilities.
d. equity.
Correct answer: b
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
Which of these is an asset?
*a. Investments.
b. Employee benefits payable.
c. General reserve.
d. Interest earned on investments.
Correct answer: a
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
Which of the following is an example of a liability?
a. Allowance for doubtful debts.
*b. Revenue received in advance.
c. Prepayments.
d. Accumulated depreciation.
Correct answer: b
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
‘Decreases in economic benefits in the form of outflows or depletions of assets or incurrences of liabilities that result in a decrease in equity, other than those relating to distributions to equity participants’ is the definition of:
a. liabilities.
b. assets.
*c. expenses.
d. equity.
Correct answer: c
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
Special purpose financial reports provide information for which group(s)?
Internal users
External users
I
Yes
Yes
II
No
No
III
No
Yes
IV
Yes
No
a. I
b. II
c. III
*d. IV
Correct answer: d
Learning Objective 1.8 ~: Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
Preparing financial statements for external users costs large entities:
a. nothing, as all charges are reimbursed by the government.
b. very little, as the statements are quite simple to prepare.
*c. a significant amount.
d. varying amounts depending on the year in question.
Correct answer: c
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
Under the Conceptual Framework, the qualitative characteristic of relevance is described as information that:
*a. is of value to users in decision making.
b. is material.
c. can be recorded in accounting reports.
d. can be reliably measured.
Correct answer: a
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
The term ‘general purpose financial statements’ refers to the fact that the information conveyed is:
a. generally reliable.
b. useful for general purposes but not for making specific decisions.
*c. potentially valuable for a number of users.
d. comparable over several accounting periods.
Correct answer: c
Learning Objective 1.8 ~ Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics of financial statements
Which of the following is not a limitation of accounting information?
a. The use of historical data to predict future events.
b. The time delay from when events take place and their reporting.
c. Its subjective nature.
*d. Its objective nature.
Correct answer: d
Learning Objective 1.9 ~ Give examples of the limitations of accounting information
The time delay in Australia in providing the annual report of large companies to external users after the end of the financial year is: