Session 1 and 2 Assessment

A complete set of financial statements includes the following components, except

• Statement of financial position, statement of comprehensive income and statement of cash flows.
• Statement of changes in equity
• Notes, comprising a summary of significant accounting policies and other explanatory information
• Reports and statements such as environmental reports and value added statements.

What is the objective of financial statements?

• To provide information about the financial position, financial performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions.
• To prepare and present a statement of financial position, statement of comprehensive income, statement of cash flows and statement of changes in equity.
• To prepare and present relevant, reliable, comparable and understandable information to investors and creditors.
• To prepare and present financial statements in accordance with all applicable PFRS and Interpretations.

To meet the objective of providing information about financial position, financial performance and cash flows of an entity, financial statements should provide information about all of the following, except

• Assets, liabilities and equity
• Income and expenses, including gains and losses
• Contributions by and distribution to owners in their capacity as owners.
• Nature of the entity's business activities

Which of the following statements is incorrect concerning fair presentation of financial statements?

• Fair presentation requires the faithful representation of the effects of transactions and other events.
• Financial statements shall present fairly the financial position, financial performance and cash flows of an entity.
• In virtually all circumstances, a fair presentation is achieved by compliance with applicable PFRS.
• An entity whose financial statements comply with PFRS shall not make an explicit and unreserved statement of such compliance in the notes.

Technically, offsetting in financial statements is accomplished when

• The allowance for doubtful accounts is deducted from accounts receivable.
• The accumulated depreciation is deducted from property, plant and equipment.
• The total liabilities are deducted from total assets to arrive at net assets.
• Gains or losses from disposal of noncurrent assets are reported by deducting from the proceeds the carrying amount of the assets and the related disposal cost.

Materiality depends on

• The nature of the omission or misstatement.
• The size of the omission or misstatement.
• The size and nature of the omission or misstatement judged in the surrounding circumstances.
• The judgement of management.

Financial statements include a statement of financial position, a statement of comprehensive income, a statement of changes in equity and a statement of cash flows. Which of the following is also included as a component of financial statements? (a)  

• A statement of retained earnings
• Accounting policies
• An auditor's report
• A directors' report

Which of the following is included in a complete set of financial statements?

• A statement by the board of directors of compliance with local legislation
• A statement of changes in equity
• Summarized statements of financial position for the last five years
• Value added statement

Items of dissimilar nature or function

• Must always be presented separately in financial statements.
• Must not be presented separately in financial statements.
• Must be presented separately in financial statements if those items are material
• Must be presented separately in financial statements even if those items are immaterial.

An entity shall classify an asset, as current when (choose the incorrect one)

• The entity expects to realize the asset or intends to sell or consume it within the entity's normal operating cycle.
• The entity holds the asset for the purpose of trading.
• The entity expects to realize the asset within twelve months after the reporting period.
• The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after the reporting period.