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Accounting Theory chapter 2

20 Questions - Developed by: - Updated on: 2018-10-22 - 7,053 taken - 2 people like it

1

How does the conceptual framework differ from an accounting standard?

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
The principles in the conceptual framework provide specific requirements for a particular area of financial reporting while accounting standards are designed to provide general guidance
The principles in the conceptual framework are specific in nature while accounting standards provide more general requirements for financial reporting
The principles in the conceptual framework are general concepts while accounting standards provide specific requirements for a particular area of financial reporting

2

The accounting conceptual framework is what kind of theory?

Positive
Emergent
Abstract
Normative

3

The Conceptual Framework:

Is used by every country that has adopted the International Accounting Standards
Is based on the one Pacioli included in Particularis de Computis et Scripturis
Was a joint project between the AASB and FASB
Has remained unchanged for over 20

4

Which of the following questions does the Conceptual Framework NOT answer?

What is the purpose of the financial reports
What type of information should be included in financial reports
What measurement basis should be used in financial reports
Who are financial reports for

5

Which of the following statements is correct in relation to the assumptions to be made when preparing financial reports?

There is an assumption that more information is better than
The conceptual framework requires that several assumptions be made when preparing financial reports
There are no assumptions to be made when preparing financial reports
There is one underlying assumption which is that financial reports are prepared on a going concern basis

6

The conceptual framework states that it is concerned with general purpose financial reports. What are general purpose financial reports?

Financial reports which do not meet the needs of users
Financial reports that are tailored to the particular information needs of users
None of the above
Financial reports intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs

7

According to the conceptual framework the primary objective of financial information is

Prediction
Accountability
Stewardship
Decision Usefulness

8

The Conceptual Framework identifies a limited range of primary users of financial statements. Which of the following best describes these users?

Investors, Creditors, Overseers, Customers, General Public
Resource providers
Existing and potential investors, Lenders, Other creditors
Current investors

9

According to the Conceptual Framework which of the following are included in the fundamental qualitative characteristics that accounting information should have?

I. Relevance
II. Reliability
III. Faithful Representation
IV. Understandability

I.
I., II., III. and IV.
II. and III.
I. and II.

10

A key aspect of relevance is that information is

Neutral
Complete
Material
Forward looking

11

The four enhancing qualitative characteristics recognized by the conceptual framework are:

Understandability, verifiability, timeliness, comparability
Relevance, materiality, reliability, comparability
Materiality, comparability, timeliness, cost versus benefit
Understandability, cost versus benefit, verifiability, comparability

12

The constraints on financial reporting identified under the conceptual framework are:

Cost versus benefit
Understandability and materiality
Understandability and cost versus benefit
Timeliness and neutrality

13

Which of the following elements in the financial statement is NOT defined by reference to other elements?

Expenses
Equity
Income
Liabilities

14

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

II., IV. & VI.
II., IV. & V.
III., V. & VI.
I., III. & VI.

15

An element is considered probable if the chance of the flow associated with it occuring is greater than:

30%
90%
50%
75%

16

A key political benefit that may arise from a conceptual framework in accounting is:

Individuals and groups are able to influence the standard setters
Prevention of political interference in setting accounting standards
All of the above
Protection of the professional status of accountants and accounting

17

Accounting standards are seen to be political because

They can affect the competitiveness of organizations
They can create wealth transfers between different groups in society
All of the above
They can influence perceptions about organizations

18

Which of these is not a criticism of conceptual framework projects?

It is ambiguous and open to interpretation
Faithful representation and relevance conflict with each other
It is too descriptive
The measurement of the elements of financial reporting is too highly specified

19

It is argued that the conceptual framework is descriptive, not prescriptive, because:

None of the above
It's purpose is to try to improve practice rather than simply reflecting and giving approval to existing accounting principles and practice
It simply describes accounting principles as currently practiced and applied
It describes what should happen in practice

20

Faithfull representation has been criticized because

It leads to a single measurement model dominating accounting
It does not reflect the inherent uncertainty in accounting
It does not capture the true value of accounting transactions
It is not an important issue for accountants

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