You are on page 1of 9

CONCEPTUAL FRAMEWORK AND PAS 1 QUIZBOWL

1. The Conceptual Framework outlines one underlying assumption of financial


statements. This is:
Answer: Going concern assumption
2. If financial information that is presented in a balance sheet or income statement
is misstated, and it influences the economic decisions of users, that information
is described as:
A. Reliable
B. Material

C. Prudent
D. Faithful

3. In respect to information included in financial statements, the accounting


concept of prudence ensures that:
A. The financial statements report what they purport to report.
B. A degree of caution in the exercise of judgements about estimates is made.
C. An appropriate balance is achieved between the relevance and the reliability
of information that has been included.
D. Information is provided to users within the time period in which it is most
likely to bear on their decisions.
4. An item cannot be recognized in the balance sheet or the income statement
unless it meets the two criteria of:
A. Materiality; Relevance to the users
B. Completeness; Measurement reliability
C. Neutrality; Representational faithfulness
D. Probable economic benefits; Measurement reliability
5. The operating cycle
A. Measure the time elapsed between cash disbursement for inventory and
cash collections of
the sales price
B. Refers to the seasonal variations experienced by business enterprise
C. Should be used to classify assets and liabilities as current if it is less than
one year
D. Cannot exceed one year
6. In classifying the elements of financial statements, the primary distinction
between revenues and gains is
A. The materiality of the amounts involved
B. The likelihood that the transactions involved will recur in the future
C. The nature of the activities that gave rise to the transactions involved

D. The costs versus the benefits of the alternative methods of disclosing the
transaction involved
7. Which of the following statements is not an objective of financial reporting?
A. Provide information that is useful in investment and credit decisions
B. Provide information about enterprise resources, claims to those resources, and
changes to them
C. Provide information on the liquidation value of an enterprise
D. Provide information that is useful in assessing cash flow prospects
8. Financial accounting can be broadly defined as the area of accounting that
prepares
A. General purpose financial statements to be used by parties internal to the
business enterprise only
B. Financial statements to be used by investor only
C. General purpose financial statements to be used by parties both internal and
external to the business enterprise
D. Financial statements to be used primarily by management
9. Preparation of consolidated financial statements when a parent-subsidiary
relationship exist is an example of the
A. Economic entity assumption
B. Relevance characteristic

C. Comparability characteristic
D. Neutrality characteristic

10.A document that contains disclosures including financial statements, that is


issued to potential investors, by companies seeking capital, is known as a:
A. Securities statement
B. Trust deed

C. Company constitution
D. Prospectus.

11.Which statement is incorrect concerning financial statements?


A. Financial statements do not show the results of managements stewardship of
resources entrusted to it.
B. Financial statements are prepared at least annually and are directed toward
the common information needs of a wide range of users.

C. The objective of general-purpose financial statements is to provide


information about the financial position, performance and cash flows of an
enterprise that is useful to a wide range of users in making economic decisions.
D. The management of an enterprise has the primary responsibility for the
preparation and presentation of financial statements.
12.Which is correct regarding the overall considerations in preparation and
presentation of financial statements?
A. Assets and liabilities, and income and expenses, when material should be
offset against each other.
B. Financial statements should be prepared on liquidity concern basis.
C. Each material item should be presented separately in the financial
statements. Immaterial amounts of similar nature and function should be
grouped or condensed as one line item in the financial statements.
D. The presentation and classification of financial statement items should not be
uniform from one accounting period to the next.
13.Which of the following information should be disclosed in the summary of
significant accounting policies?
A. Criteria for determining which investments are treated as cash equivalents
B. Guarantee of indebtedness of others
C. Business combination after balance sheet date
D. Refinancing of debt subsequent to the balance sheet date
14.Financial information does not demonstrate comparability and consistency when
I. Firms in the same industry use different accounting methods to account for the
same type of transaction
II. A company changes its estimate of the salvage value of fixed assets
III. A company fails to adjust its financial statements for changes in value of the
measuring unit
A. I only

B. I and II only

C. I and III only

D. I, II and III

15.When the presentation or classification of items in the financial statements is


amended
A. Comparative amounts for comparative reporting need not be reclassified
B. Comparative amounts for comparative reporting should be reclassified in all
cases
C. Comparative amounts for comparative reporting should be reclassified unless
it is impracticable to do so
D. Nothing should be done
16.Which is incorrect concerning the concept of materiality and aggregation?

A. Materiality depends on the size and nature of the item judged in the particular
circumstances of its omission or misstatement.
B. Materiality provides that the specific disclosure requirements of a PFRS must
be met even if the resulting information is not material.
C. Items of a dissimilar nature or function shall be presented separately unless
they are immaterial.
D. Information is material if its nondisclosure could influence the economic
decisions of users taken on the basis of the financial statements.
17.An entity decided to extend its reporting period from a year (12-month period) to
a 15-month period. Which of the following is not required under PAS 1 in case of
change in reporting period?
A. The entity should disclose the reason for using a longer period than a period
of 12 months.
B. The entity should change the reporting period only if other similar entities in
the geographical area in which it generally operates have done so in the current
year.
C. The entity should disclose that comparative amounts used in the financial
statements are not entirely comparable.
D. The entity should disclose the period covered by the financial statements.
18.What is disclosed when departing from an international accounting standard?
I. The Title of the Standard or Interpretation from which it has departed
II. The nature of the departure, and the treatment the Standard or Interpretation
would require
III. The reason why that treatment would be so misleading
IV. The treatment adopted
V. The financial impact of the departure on the financial statements (for each
period presented)
A. I and II only
B. I, II III and V only

C. I, II and III only


D. All of the above

19.Which statement is incorrect concerning the Conceptual Framework?


A. Nothing in the framework overrides any specific PFRS.
B. The framework deals with the objectives of the financial statements, the
qualitative characteristics that determine the usefulness of the information in
financial statements, the definition, recognition and measurement of the
elements of the financial statements and concepts of capital maintenance.
C. The framework sets out the concepts that underlie the preparation and
presentation of financial statements for internal and external users.

D. The framework is concerned with general purpose financial statements


including consolidated financial statements.
20.What is the primary difference in the treatment between the two concepts of
capital maintenance?
A. The treatment of the effects of changes in the prices of assets and liabilities of
the entity
B. The treatment of the effects of changes in the prices of expense and revenue
of the entity
C. The treatment of the effects of changes in foreign exchange rates
D. The treatment of the effect of changes in foreign subsidiary
21.Which of the following statements concerning equity is incorrect?
A. Although equity is defined as a residual, it may be sub-classified in the
balance sheet.
B. The creation of reserves is sometimes required by statute or other laws in
order to give the entity and its creditors an added measure of protection from
the effects of losses.
C. The existence and size of legal, statutory and tax reserves are information
that can be relevant to the decision-making needs of users, transfer from
reserves are expense rather than appropriation of retained earnings.
D. The amount at which equity is shown in the balance sheet is dependent on
the measurement of assets and liabilities.
22.According to the conceptual framework, which of the following statements
conforms to the realization concept?
A. Cash was collected on accounts receivable.
B. Product unit costs were assigned to cost of goods sold when the units were
sold.
C. An impaired asset was sold for cash.
D. Equipment depreciation was assigned to a production department and then
to product unit costs.
23.Per PAS 1, in the absence of a Standard or Interpretation that specifically applies
to a transaction or event, management shall develop and apply accounting
policy that results in relevant and faithfully represented information. Which of
following is the least likely source of such alternative?
A. The requirements and guidance on Standards /Interpretations on similar and
related issues
B. The definition, recognition criteria and measurement concepts for assets,
liabilities, income and expenses in the Framework.

C. Most recent pronouncements of other standard setting bodies that use a


similar conceptual framework to develop accounting standards and accepted
practice.
D. Textbooks and other accounting literature to the extent that these do not
conflict with existing Standards and Interpretations
24.Which is incorrect concerning the accounting constraints on relevant and
faithfully represented information?
A. It may often be necessary to report before all aspects of a transaction or other
event are known, thus impairing f.r..
B. The benefits derived from the information should exceed the cost of providing
it.
C. In achieving a balance between relevance and f.r., the overriding
consideration is how best to satisfy the economic decision-making needs of
users.
D. If there is undue delay in the reporting of information it may lose its relevance
and f.r..
25.Which one of the following bodies is responsible for reviewing accounting issues
that are likely to receive divergent or unacceptable treatment in the absence of
authoritative guidance, with a view to reaching consensus as to the appropriate
accounting treatment?
A. International Financial Reporting Interpretations Committee (IFRIC)
B. Standards Advisory Council (SAC)
C. International Accounting Standards Board (IASB)
D. International Accounting Standards Committee Foundation (IASCF)
26.Which of the following is an application of the science aspect of accounting?
A. Exercise of creative skill and judgment
B. Interpreting the information presented in the financial statements through
ratio and trend analysis
C. Applying the rules of debit and credit
D. Attesting to the fairness of presentation of financial condition and operating
results

27.Which is not included in the category of comprehensive income of an accounting


entity?
A. Net income for the period
B. Revaluation surplus
C. Gain on sale of treasury stock

D. None of the above


28.Disclosure in the financial statements is not required for which of the following?
A. Use of property by lease between a parent company and its subsidiary
B. Receipt of services by subsidiary from a principal without charge or without
record of receipt of services
C. Possibility of strike
D. Guarantees for indebtedness of others if the possibility of loss is remote
29.In which section of the statement of financial position should employment taxes
that are due for settlement in 15 months time be presented according to PAS 1?
A. Current liabilities
B. Current assets

C. Non-current liabilities
D. Non-current assets

30.This revenue recognition method is allowed when a sale is assured under a


forward contract or government guarantee or when a homogenous market exists
and there is negligible risk of failure to sell.
A. Percentage of completion method
B. Production method

C. Cash method
D. Accrual method

31.Which of the following bases of revenue recognition reflects the greatest


uncertainty about future events?
A. Sales method applied to sales of a department store.
B. Cost recovery method applied to an instalment sales contract.
C. Production method for a gold mining operation.
D. Percentage of completion on a construction contract.
32.The most useful information to existing and potential investors, lenders and
other creditors in predicting future cash flows is:
A. Information about current cash flows
B. Current earnings based on accrual accounting
C. Information regarding the accounting policies used by management
D. Information regarding the results obtained by using a wide variety of
accounting policies.
33.What is meant by comparability when discussing financial accounting
information?
A. Information has predictive and confirmatory value.
B. Information is reasonably free from error.
C. Information is measured and reported in a similar fashion across entities.
D. Information is timely.
34.Which of the following statements is true in relation to the enhancing qualitative
characteristic of understandability of financial information?
A. Users have a reasonable knowledge of business and economic activities and
review the information with reasonable diligence.

B. Users are expected to have significant business knowledge.


C. Financial statements shall exclude complex matters.
D. Financial statements shall be free from material error.
35.Which of the following is an implication of the going concern assumption?
A. The historical cost principle is credible.
B. Depreciation and amortization policies are justifiable and appropriate.
C. The current and noncurrent classification of assets and liabilities is justifiable
and significant.
D. All of these.
36.Which of the following statements pertaining to the Framework for the
Preparation and Presentation of Financial Statements is correct?
A. Financial statements, if properly prepared, can provide all of the information
needs of all types of users.
B. The external auditor hired by an enterprise has the primary responsibility for
the preparation and presentation of the financial statements of the enterprise.
C. Management has the ability to determine the form and content of additional
information in order to meet its own needs, but the reporting of such information
is beyond the scope of the framework.
D. Both A and C
37.Which of the following statements in relation to the going concern assumption is
incorrect?
A. The going concern concept assumes that the business enterprise will never
be liquidated.
B. The going concern assumption serves as the basis for classifying liabilities as
current and non-current.
C. The going concern assumption is generally applicable to most business
situations whether or not liquidation appears imminent.
D. If there is an intention or need to liquidate or curtail materially the scale of an
enterprises operations, the financial statements may have to be prepared on a
basis other than a going concern and the basis used is disclosed.
38.Under the accrual basis of accounting, cash receipts and disbursements may
A. Only coincide with the period in which revenues and expenses are
recognized.
B. Coincide with or follow, but never precede the period in which revenues and
expenses are recognized.
C. Precede, coincide with, but never follow the period in which revenues and
expenses are recognized.
D. Precede, coincide with or follow the period in which revenues and expenses
are recognized.
39.The information provided by financial reporting pertains to
A. Individual business enterprises, rather than to industries or an economy as a
whole or to members of society as consumers

B. Individual business enterprises and industries, rather than to an economy as


a whole or to members of society as consumers
C. Individual business enterprises and an economy as a whole, rather than
industries or to members of society as consumers
D. Individual business enterprises and an economy as a whole, rather than to
members of society as consumers
40.Which of the following statements in relation to the accounting entity
assumption is incorrectly stated?
A. In financial accounting the accounting entity is the specific business
enterprise which is identified in the financial statements
B. An accounting entity may exist as a sole proprietorship, a partnership, a
corporation, an individual, a group of individuals or any other form of
organization
C. Under the accounting entity assumption, the business enterprise is separate
and distinct from its owners, managers and employees that constitute the firm.
D. The boundaries of accounting entity is always the same as those of the legal
entity

You might also like