What is the correcct definition of GAAP?

National accounting standards, international accounting standards, stock exchange rules and company law

National accounting standards and company law

National accounting standards, stock exchange rules and company law

International accounting standards, company law and stock exchange rules

Which of the following is an advantage of a company that prepares a set of financial statements under the regulatory framework?

Higher quality financial information is produced

Lower costs of producing financial information

More financial information available for competitors

Less disclosure of a company's activities in financial statements

What is the correct order for the process of issuing a new IFRS by the IASB?

Discussion Paper, Exposure Draft, Standard

Exposure Draft, Discussion Paper, Review

Exposure Draft, Discussion Paper, Standard

A conceptual framework is

a statement of theoretical principles which form the frame of reference for financial reporting.

the proforma financial statements

a list of key terms used by the IASB

a theoretical expression of accounting standards

Which of the following is an advantage of a conceptual framework?

A framework encourages standardised accounting practice.

The framework does not simplify the preparation and implementation of standards.

There are a variety of users, so not all will be satisfied with the content of the framework.

There are a variety of accounting situations which mean flexibility in the accounting approach is needed.

What is the name of the IASB's conceptual framework?

The Conceptual Framework for Financial Reporting

Statement of Principles for Financial Reporting

The Conceptual Framework for the Disclosure of Financial Statements

The Conceptual Framework for the Presentation of Financial Statements to Users

What is the fundamental reason that financial statements are produced, according to the IASB's Conceptual Framework?

To satisfy the requirements of external users

To provide information to tax authorities

To provide information for internal management

To report on a company's performance to its national government

Which of the following is not a use of financial statements prepared by a company?

Reliable method of valuing the entity

Decisions to buy, hold or sell equity investments

Assessment of the security of amounts lent to the entity

Assessment of management stewardship and accountability

If an accountant comes across a transaction that is not covered by a specific IFRS accounting standard, where should they initially look for guidance on accounting for that item?

The requirements of IFRSs dealing with similar and related issues

Which of the following constitute a change of accounting policy according to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors?

A change in the basis of valuing inventory

A change in depreciation method

Adopting an accounting policy for a new type of transaction not previously dealt with

A revision to the carrying amount of a building carried at its revalued amount

Which of the following items would not qualify for treatment as a change in accounting estimate, according to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors?

Correction necessitated by a material error

Provision for obsolescence of inventory

A change in the useful life of a non-current asset

A change in a previous provision for tax

Applying the rules of IAS 8, which of the following would qualify as a change in accounting policy?

Revising the valuation of inventory to first in first out from average cost.

Revising the depreciation method for a class of asset from straight line to reducing balance.

Amending the cut-off point for recognising an allowance for doubtful debts from receivables greater than 90 days old to receivables greater than 100 days old.

Amending the provision for warranties so it is calculated on 5 per cent of sales rather than 10 per cent of sales.

Under some circumstances, IAS 8 requires companies to adjust the financial statements of prior periods and re-state the balance on opening equity. Which of the following cases would such treatment be in accordance with IAS 8?

The company has material under-provision for corporation tax arising from the use of incorrect data by the tax advisors acting for the company.

A material decrease in the valuation of the opening inventory resulting from a change in legislation affecting the saleability of the company's products. This legislation was retrospective and was suddenly announced after the financial statements for the previous year had been agreed.

The discovery of a significant fraud carried out during the year in an overseas subsidiary resulting in a write-down in the valuation of its assets at the period end.

A deterioration in sales performance has led to the directors restating their general irrecoverable debt provision.

Which of the following is an advantage of a principles based system of accounting standard setting?

It discourages creative accounting.

It always provides the answers.

It results in greater comparability of financial statements.

It needs to be supported by illustrative examples and interpretations.

Which of the following statements is incorrect?

Application of IFRS whilst preparing a set of financial statements should ensure that they are completely accurate.

Application of IFRS is presumed to result in financial statements that achieve a fair presentation.

Under IFRS, all published financial statements are required to present fairly the financial position and financial performance of an entity.

Application of IFRS is presumed to result in financial statements that are more comparable.

Which of the following statements represents a disadvantage of the use of accounting standards?

Standards may tend towards rigidity in applying the rules.

Standards are a less rigid alternative to legislation.

Standards oblige companies to disclose their accounting policies.

Standards reduce variations in methods used to produce accounts.

Which of the following statements about going concern assumption is true?

The going concern basis should be used if the entity is expected to continue in operation for the foreseeable future.

The going concern basis should only be used if an entity can prove that it has the resources necessary to continue trading.

If an entity has any doubts over its ability to continue to trade, a basis other than going concern should be used.

The going concern basis should be used if the entity is expected to continue in operation for the next twelve months, but is looking to liquidate after that period.

There are four enhancing qualitative characteristics of useful financial information. What are those characteristics?

Comparability, timeliness, verifiability, understandability

Going concern, accruals, completeness, verifiability

Substance over form, neutrality, going concern, accruals

Comparability, understandability, completeness, neutrality

Which of these comments is correct, according to the IASB's Conceptual Framework for Financial Reporting?

Financial information prepared using accrual accounting provides a better basis for assessing an entity's performance than information based only on cash flows.

Materiality means that only items having a physical existence may be recognised as assets.

A faithful representation of financial information can never include amounts based on estimates.

To show faithful representation items should be complete, up to date and free from error.

Which of the following is a benefit of harmonisation?

Ability of investors to compare cross border financial statements

Increased training of staff to deal with new accounting standards

Amendment of tax systems in different countries to align with accounting requirements

Different countries have different legal systems for accounting which need to be amended

With which accounting body has the IASB carried out a joint project to develop several common accounting standards?

The Financial Accounting Standards Board

The Australian Accounting Standards Board

Which of the following is the correct definition of a liability?

A present obligation of the entity to transfer an economic resource as a result of past events

The residual interest in the assets of the entity after deducting all its liabilities

A present obligation arising from past events from which future economic benefits are expected to flow from the entity

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

Which of the following is an example of a current asset?

Motor vehicles held for sale as part of a trade

1. CPA Financial Accounting & Reporting Quick Revision Module 1

Authored by Rachel Collins

Business

Professional Development

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1. CPA Financial Accounting & Reporting Quick Revision Module 1

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40 questions

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MULTIPLE CHOICE QUESTION

3 mins • 1 pt

What is the main aim of accounting

To produce a trial balance

To record every financial transaction individually

To maintain ledger accounts for every asset and liability

To provide financial information to users of such information

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Which of the following groups of users would primarily be interested in a company's annual published financial statements?

Shareholders and suppliers

Management and employees

Shareholders and providers of finance

General public, environmental pressure groups

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Are the following statements correct or incorrect 1.The shareholder is only interested in a statement of financial prospects, that is, an indication of future progres. 2. The supplier of goods on credit is only interested in a statement of financial position, that is, an indication of the current state of affairs

Sh = Y, Su = Y

Sh = Y Su = N

Sh = N, Su = Y

Sh = N, Su = N

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Which of the following statements concerning the International Accounting Standards Board (IASB) is correct? I. It develops and ultimately issues International Financial Reporting Standards (IFRSs). II The IASB is accountable to the IFRS Foundation

I only

II only

Both I & II

Neither I or II

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Which of the following statements is correct?

The IASB appoints the Trustees of the IFRS Foundation

The IFRS Foundation develops and issues Interpretations.

The IFRS Interpretations Committee oversees the work of the IFRS Foundation

The IFRS Advisory Council assists and advises the IASB in the process of developing IFRSs.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Which of these statements are correct? I. The IASB has the objective of enforcing IFRS. II.The IASB is responsible for developing and issuing IFRS.

I only

II only

Both I & II

Neither I or II

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Which committee of the IASB provides guidance on the application of IFRS?

IFRS Foundation

IFRS Advisory Council

IFRS Interpretations Committee

International Accounting Standards Committee

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