Financial Accounting 3 (ACC30020) Tutorial Questions PDF

Financial Accounting 3 (ACC30020) Topic 1: Conceptual Framework Tutorial Session Spring Semester (2024-25) Question 1 According to the 2018 IASB Conceptual Framework, which of the following is NOT an objective of financial statements? a) Providing information about the financial...

Financial Accounting 3 (ACC30020) Topic 1: Conceptual Framework Tutorial Session Spring Semester (2024-25) Question 1 According to the 2018 IASB Conceptual Framework, which of the following is NOT an objective of financial statements? a) Providing information about the financial position of an entity. (SOFP) b) Providing information about the financial performance of an entity. (IS) c) Providing information about changes in financial position of an entity. (CFS) d) Helping assess the long-term going concern status of the business. 2 Question 2 The role of the IASB is to? a) Issue international license to practice to Chartered Accountants; b) Review defective financial statements of entities; c) Formulate financial reporting standards and oversee the standard- setting process; d) Regulate the accountancy profession. 3 Question 3 Which of the following is NOT a qualitative characteristic of useful financial information as per the 2018 IASB Conceptual Framework? a) Relevance b) Economical c) Comparability d) Timeliness 4 Question 4 General Purpose Financial Statements: a) are only necessary for users who do not have the power to obtain information in addition to that contained within the General Purpose Financial Statements. b) provide all the information that users may need to make economic decisions. c) focus on disclosing information relevant to assessing the ability of an entity to generate future cash flows. d) meet the information needs that are common to all users. 5 Question 5 The purpose of the notes to the financial statements is to: a) explain any resources and obligations not recognised in the Statement of Financial Position b) provide information meeting the disclosure requirements under national laws or regulations. c) disclose risks and uncertainties affecting the entity. d) All of the above. 6 Question 6 The qualitative characteristics that make information in financial statements useful to investors identified within the Conceptual Framework are: a) Relevance, faithful representation, timeliness and comparability b) Relevance and faithful representation c) Relevance, faithful representation, comparability, verifiability, timeliness and understandability d) Comparability, verifiability, timeliness and understandability 7 Question 7 Information that is able to confirm or correct past evaluations that have been made by users of financial information is an example of information that satisfies which of the following characteristics of financial information identified in the Conceptual Framework? a) Understandability b) Relevance c) Verifiability d) Comparability 8 Question 8 An ‘asset’ is defined in the Conceptual Framework as - a) a resource controlled by the entity as a result of past events. b) a resource controlled by the entity as a result of future events and from which possible future economic benefits may flow to the entity. c) a resource controlled by the entity from which future economic benefits are expected to flow to the entity. d) a resource controlled by the entity as a result of past events which has the potential to produce economic benefits. 9 Question 9 A liability is defined in the Conceptual Framework as – a) possible obligation of the entity, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. b) a possible obligation of the entity expected to arise from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. c) a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. d) a present obligation of the entity arising from past events, the settlement of which is expected to result in an inflow to the entity of resources embodying economic benefits. 10 Question 10 The going concern assumption underlying the preparation of financial statements is also known as: a) the continuity assumption b) the matching assumption c) the prudence assumption d) the historical cost measurement basis 11 Question 11 If management intends to liquidate the entity’s operations, financial statements are prepared on the basis of – a) Historical cost b) Historical cost with a note that the entity is about to liquidate c) Expected liquidation values d) Financial statements do not have to be prepared. 12 Question 12 The Conceptual Framework can override requirements in a Standard. a) True b) False 13 Question 13 The objective of general purpose financial reporting as described in the Conceptual Framework is to: a) Provide information to regulators b) Support the entity's tax return c) Meet the information needs of an entity's stakeholders. d) Provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions relating to providing resources to the entity. 14 Question 14 Which of the following does the Conceptual Framework identify as the ‘primary users’ of general- purpose financial reports? a) Employees, investors, and trade union representatives b) Existing and potential investors, lenders, and other creditors c) Lenders and other creditors and customers d) Existing and potential investors, government agencies, and the general public 15 Question 15 Consolidated financial statements provide information about the assets, liabilities, equity, income, and expenses of both the parent and its subsidiaries as: a) Separate reporting entities b) A partnership c) A single reporting entity d) A legal entity 16 Question 16 For a right to meet the definition of an asset, it needs to be likely that the right will produce economic benefits for the entity. a) True b) False 17 Question 17 Some items that do NOT meet the definition of an asset, a liability, or equity may be recognised in the statement of financial position. a) True b) False 18 Question 18 The Conceptual Framework describes ‘prudence’ as: a) The exercise of caution when making judgements under conditions of uncertainty b) A bias towards understating assets or income and towards overstating liabilities or expenses c) A preference towards the earlier recognition of expenses and liabilities than of income and assets d) A mechanism for smoothing profits over time (understate profits in good years and overstate profits in bad years) 19 Question 19 A high level of measurement uncertainty associated with an asset always results in the asset not being recognised. a) True b) False 20 Question 20 The Conceptual Framework identifies a preferred measurement basis for all assets and liabilities. a) True b) False 21