Whose needs are general purpose financial statements intended to meet?

A Shareholders of incorporated entities

B The general public
C Users of financial statements
D Regulatory authorities

Which body develops International Financial Reporting Standards?

A IASB
B IFRS Foundation
C IFRS IC
D IFRS Advisory Council

According to the International Accounting Standards Board, in whose interests are financial
reporting standards issued?
A Company directors
B The public
C Company auditors
D The government
Which of the following are roles of the IASB?
(1) Responsibility for all IFRS technical matters
(2) Publication of IFRSs
(3) Overall supervision and governance of the IFRS Advisory Council
(4) Final approval of interpretations by the IFRS Interpretations Committee
A 2 only
B 1 and 2 only
C 1, 2 and 3
D 1, 2 and 4

The issue of a new IFRS means that:

1) An existing standard may be partially or completely withdrawn
(2) Issues that are not in the scope of an existing standard are covered
(3) Issues raised by users of existing standards are explained and clarified
(4) Current financial reporting practice is modified
Which combination of the above will most likely be the result of issuing a new IFRS?
A 1, 2 and 3
B 2, 3 and 4
C 1, 3 and 4
D 1, 2 and 4

Which of the following are stages in the due process of developing a new International
Financial Reporting Standard?
(1) Issuing a discussion paper that sets out the possible options for a new standard
(2) Publishing clarification on the interpretation of an IFRS
(3) Drafting an IFRS for public comment
(4) Analysing the feedback received on a discussion paper
A 1, 2 and 3
B 2, 3 and 4
C 1, 3 and 4
D 1, 2 and 4
Which one of the following sentences is NOT a distinction between financial accounts and
management accounts?
A Financial accounts are primarily for external users and management accounts are primarily
for internal users
B Financial accounts are normally produced annually and management accounts are normally
produced monthly
C Financial accounts are mandatory whereas management accounts are voluntary
D Financial accounts are audited by management whereas management accounts are audited
by external auditors

Which of the following bodies has responsibility for encouraging global convergence of
international financial reporting standards?
A The International Financial Reporting Standards Interpretations Committee
B The International Financial Reporting Standards Foundation
C The International Accounting Standards Board
D The International Accounting Standards Committee

Which of the following most closely describes the meaning of relevance in the IASB’s
“Conceptual Framework for Financial Reporting”?
A It makes information provided in the financial statements useful to primary users
B It ensures that accounting records and financial statements are free from bias
C It provides a predictive or confirmatory value that can make a difference in a decision
D It ensures that financial statements comply with all accounting standards and legal
requirements
Which of the following statements about accounting concepts and the characteristics of
financial information is correct?
(1) The concept of substance over form means that the legal form of a transaction must be
reflected in financial statements, regardless of the economic substance
(2) Under the recognition concept only items capable of being measured in monetary terms can
be recognised in financial statements
(3) It may sometimes be necessary to exclude information that is relevant and reliable from
financial statements because it is too difficult for some users to understand
A 1 only
B 2 only
C 3 only
D None of these statements
Which of the following statements about accounting concepts are correct?
(1) The entity concept requires that a business is treated as being separate from its owners
(2) The prudence concept means that the lowest possible values should be applied to income
and assets and the highest possible values to expenses and liabilities
(3) The money measurement concept means that only assets capable of being reliably
measured in monetary terms can be included in the financial statements
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3

Which of the following statements about accounting concepts are correct?

(1) The money measurement concept requires all assets and liabilities to be accounted for at
original (historical) cost
(2) The substance over form convention means that the economic substance of a transaction
should be reflected in the financial statements, not necessarily its legal form
(3) The realisation concept means that profits or gains cannot normally be recognised in profit
or loss until realised
(4) The application of the prudence concept means that assets must be understated and
liabilities must be overstated in preparing financial statements
A 1 and 3
B 1 and 4
C 2 and 3
D 2 and 4

A sole trader is $5,000 overdrawn at her bank. She receives $1,000 from a credit customer.
Which elements of the financial statements will change due to this transaction?
A Assets and liabilities only
B Liabilities only
C Assets only
D Assets, liabilities and equity
A company includes in inventory goods received before the year end for which invoices are
not received until after the year end. Which of the following concepts is the company
applying?
A Historical cost
B Accruals
C Going concern
D Substance over form
Which one of the following best describes the objective of management’s stewardship of a
company?
A Profit maximisation
B Safeguarding cash
C Accountability for company’ assets
D High dividends for shareholders
What is the primary objective of general purpose financial statements?
A To provide financial information to the users of such information
B To maintain records of assets and liabilities
C To show the results of management’s stewardship
D To fulfil statutory requirements

Which of the following are necessary characteristics of “faithful representation” of

information?
(1) Information is free from bias
(2) Information is complete within the bounds of materiality and cost
(3) Information is free from material error
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3

The IASB’s Conceptual Framework for Financial Reporting (the Conceptual Framework) sets
out the concepts that underlie the preparation and presentation of financial statements for
external users. According to the Conceptual Framework, which of the following describes the
inclusion of an amount in the financial statements”?
A Disclosure
B Faithful presentation
C Measurement
D Recognition
Which of the following statements is correct?
A Profit is the amount by which the value of assets only have increased during the year
B Profit is the amount by which the value of liabilities only have decreased during the year
C Profit is not related to changes in the value of assets and liabilities
D Profit is the amount by which the increase in the value of assets exceeds the increase in the
value of liabilities during the year

Which of the following is the basis on which allowance for depreciation is charged to the
statement of profit or loss?
A Accruals
B Going concern
C Prudence
D Historical cost

In the last financial year, Cuchabee issued an invoice for $28,900 for the sale of a non-current
asset with a carrying amount of $27,600. What was the effect of this transaction on the
company’s assets, liabilities and equity?
Assets Liabilities Equity
A Unchanged Reduced Increased
B Increased Unchanged Increased
C Increased Reduced Increased
D Reduced Unchanged Reduced

The IASB’s Conceptual Framework for Financial Reporting identifies four qualitative
characteristics that enhance the usefulness of information that is relevant and faithfully
represented. Which of the following are examples of those characteristics?
(1) Consistency
(2) Cost constraint
(3) Timeliness
(4) Understandability
A 1 and 2
B 2 and 3
C 3 and 4
D 1 and 4
Following the preparation of the financial statements, the accountant of Tamore has
discovered that the depreciation charge has been overstated. When the depreciation charge
is corrected, how are the elements of the financial statements affected?
Assets Liabilities Equity
A Increased Decreased Unchanged
B Decreased Increased Increased
C Decreased Unchanged Decreased
D Increased Unchanged Increased

Which of the following is represented by the residual interest in the assets of the entity after
deducting all its liabilities?
A Income
B Profit
C Gains
D Equity

Consider the following statements about the IASB’s Conceptual Framework for Financial
Reporting:
(1) It will not be changed because it sets out underlying concepts
(2) It is intended to assist users in preparing financial statements
(3) It is an International Financial Reporting Standard
Which of the above statements is/are true?
A 1 only
B 2 only
C 1 and 2
D 2 and 3

What is defined by the following statement? “A resource controlled by an entity as a result of

past events and from which future economic benefits are expected to flow to the entity.”
A Income
B An expense
C A liability
D An asset