Question

1. How does the conceptual framework differ from an accounting standard?
a. The principles in the conceptual framework are specific in nature while accounting standards provide more general requirements for financial reporting.
b. The principles in the conceptual framework are general concepts while accounting standards provide specific requirements for a particular area of financial reporting.
c. The principles in the conceptual framework are designed to provide guidance and apply to a limited range of decisions relating to the preparation of financial reports while accounting standards apply to a wider range of decisions relating to the preparation of financial reports.
d. None of the above.
2. Which of the following statements is INCORRECT?
a. Each share in a company carries a right to share in the assets on the liquidation of the company.
b. Each share in a company carries a right to share proportionately in all new share issues of a company.
c. A share represents an ownership right in a company.
d. Each share in a company carries a right to vote for directors of the company.
3. Which of the following are key parts of the definition of an asset?
I. Probability
II. Control
III. Ownership
IV. Past Transaction or Event
V. Reliable Measurement
VI. Future Economic Benefits
a. I., III. & VI.
b. II., IV. & V.
c. III., V. & VI.
d. II., IV. & VI.

4. Banks Ltd has 42 000 ordinary shares on issue at 1 January 2015 which is the beginning of its reporting period. On 30 June 2015, it issued a further 4000 ordinary shares for cash. On 1 November 2015, Banks Ltd repurchased 1200 shares at fair value in a market transaction. The weighted average number of shares for use in the earnings per share calculation is:
a. 42 000 shares.
b. 43 400 shares.
c. 43 800 shares.
d. 44 800 shares.
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. An event that gives rise to a present obligation, but which cannot be measured with sufficient reliability is an example of a:
a. liability.
b. accrual.
c. provision.
d. contingent liability.
7. The following information relates to Buss Ltd for the year ended 30 June 2016.
• Accounting profit before income tax (after all expenses $300,000
have been included)
• Fines and penalties (not tax deductible) $20,000
• Depreciation of plant (accounting) $40,000
• Depreciation of plant (tax) $100,000
• Long-service leave expense (not a tax deduction until $8,000
the leave is paid)
• Income tax rate 30%
On the basis of this information the current tax liability is:
a. $74,400
b. $78,000
c. $80,400
d. $99,600

8. Which of the following is NOT a feature of intangibles that differentiates them from other assets?
a. They are largely knowledge based assets.
b. Many are not separable items.
c. They often do not have well-defined property rights.
d. None of the above, i.e. they are all features of intangible assets.
9. One of the advantages of principles-based standard is:
a. They allow for no professional judgement.
b. They are generally simpler.
c. They do not improve representational faithfulness of financial statements.
d. They allow for no manipulation.
10. The bonus issue of shares has the following impact on the equity of a company:
a. total equity increases.
b. total equity decreases.
c. one equity account increases and another equity account decreases by an equal amount.
d. only the amount of issued share capital changes.

Answer 1

Answer 1 - Option C - The principles in the conceptual framework are designed to provide guidance and apply to a limited range of decisions relating to the preparation of financial reports while accounting standards apply to a wider range of decisions relating to the preparation of financial reports. These are general guiding principles issued by the Accounting Body.

Answer 2 - Option B - Each share in a company doesn't carry a right to share proportionately in all new share issues of a company.

Answer 3 - Option B - Ownership is a key part of the definition of a fixed asset. The asset is defined as something a business owns and has use of in creation of income.

Answer 4 - Option C - (42000 + (4000x6/12) - (1200x2/12)) = 43800 shares weighted average

Answer 5 - Option D - Footnotes / Notes to the accounts serves all the purpose - it meets disclosure requirements, any significant risk information and information not available in the financial statements.

Answer 6 - Option D - Contingent Liability - is something which gives rise to a present obligation, but which cannot be measured with sufficient reliability i.e. Uncertain liability.