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WorksheetsKế CFAB - Chap 1
Total questions: 25
Worksheet time: 14mins
Which of the following best explains what is meant by “capital expenditure”?
Capital expenditure is expenditure:
On non-current assets, including repairs and maintenance
On expensive items over £10,000
On the acquisition of non-current assets, or improvement in their earning capacity
On items relating to owners’ capital
Which of the following should be accounted for as capital expenditure?
The annual cost of painting a factory floor
The repair of a window in a building
The purchase of a vehicle by a garage for re-sale
Legal fees incurred on the purchase of abuilding
Which of the following items should be treated as capital expenditure in the financial statements of a sole trader?
£500 taken by the proprietor to buy himself a hi-fi system
£400 spent on purchasing a new PC to replace his secretary’s old one
£2,000 on purchasing a machine for re-sale
£150 paid to a painter for redecorating hisoffice
Which of the following is an aspect of relevance, according to the
Conceptual Framework?
Neutrality
Free from error
Completeness
Materiality
According to the Conceptual Framework, which qualitative characteristics enhance the usefulness of information that is relevant and faithfully represented?
Comparability, Understandability, Timeliness, Verifiability
Consistency, Prudence, Measurability, Verifiability
Consistency, Reliability, Measurability, Timeliness
Materiality, Understandability, Measurability,Reliability
Which THREE of the following users of financial statements are likely to be interested in the financial statements of a small private company?
Stock market analysts
Company employees
The company’s bank
Institutional shareholders
Suppliers
Which TWO of the following information needs apply to the government and its agencies in relation to the business as a sole trader?
The government and its agencies need information to:
Establish levels of tax revenue
Assess whether the business will continue in existence
Assess the owner’s stewardship
Take decisions about the investment
National statistics
Information about an entity’s financial position is primarily provided in
The statement of profit or loss
The statement of financial position
Retained earnings
The statement of cashflows
According to the Conceptual Framework, information on which TWO of the following areas can help users identify the reporting entity’s strengths and weaknesses?
The economic resources it controls
Its financial performance in the past
The demographic structure of the local economy
The entity’s claims (the entity’s liabilities)
Its managementstructure
According to IAS 01 Presentation of Financial Statements, which TWO of the following are objectives of financial statements?
To show the results of management’s stewardship of the resources entrusted to it
To provide a basis for valuing the entity
To provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions
To facilitate comparison of financial performance between entities operating in different industries
To assist management and those charged with governance in making timely economic decisions about deployment of the entity’s resources
Information is relevant if it is capable of making a difference in the decisions made by users. According to the Conceptual Framework, financial information is capable of making a difference in decisions if it has which of the following?
i. Predictive value
ii. Comparative value
iii. Historic value
iv. Confirmatory value
(i) and (iii) only
(ii) and (iv) only
(i) and (iv) only
(ii) and (iii) only
The accounting principle which, in times of rising prices, tends to understate asset values and overstate profit, is
Going concern
Accruals
Consistency
Historical cost
In time of rising prices, what effect does the use of historical cost concept have on a company’s asset value and profit?
Asset values and profit both understated
Asset values and profit both overstated
Asset values understated and profit overstated
Asset values overstated and profit understated
Which of the following statements about accounting concepts and the characteristics of financial information is correct?
Financial statements are required to give a true and fair view. These terms have clear definitions which are included in IAS 01
The historical cost concept means that only items capable of being measured in monetary terms can be recognized in financial statements
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 specific disclosure requirement of an IAS need not be satisfied if the information is immaterial
Listed below are two comments on accounting conventions.
i. According to the Conceptual Framework, financial information must be either relevant or faithfully represented if it is to be useful.
ii. Materiality means that only items having a physical existence may be recognized as assets.
Which, if either, of these comments is correct?
(i) only
(ii) only
Both of them
Neither of them
Which of the following is the best description of fair presentation in accordance with IAS 01 Presentation of Financial Statements?
The financial statements are accurate
The financial statements are as accurate as possible given the accounting system of the organization
The directors of the company have stated that the financial statements are accurate and correctly prepared
The financial statements are reliable in that they reflect the effects of transactions, other events and conditions
Which of the following definitions for the “going concern” concept in accounting is the most accurate in the light of IAS 01 Presentation of Financial Statements?
“The directors do not intend to liquidate the entity or to cease trading in the foreseeable future”
“The entity is able to pay its debts as and when they fall due”
“The directors expected the entity’s assets to yield future economic benefits”
“Financial statements have been prepared on the assumption that the entity is solvent and would be able to pay all creditors in full in the event of being wound up”
According to IAS 01 Presentation of Financial Statements, compliance with international accounting standards and international financial reporting standards will normally ensure that:
The entity’s inventory is valued at net realizable value
The entity’s asset are valued at their break-up value
The entity’s financial statement are prepared on the assumption that it is a going concern
The entity’s financial position, financial performance and cash flows are presented fairly
The directors of Lagon plc wish to omit an item from the company’s financial statement on the grounds that it is commercially sensitive. Information on the item would influence the user of the information when making economic decisions. According to IAS 01 Presentation of Financial Statement the item is said to be:
Neutral
Prudent
Material
Understandable
Which THREE of the following are fundamental principles of the IFAC Code of Ethics for Professional Accountants?
Integrity
Objectivity
Independence
Confidentiality
Courtesy
Which of the following statement is correct?
The ICAEW Code of Ethics applies to its members only
The ICAEW Code of Ethics applies to its members and employees of member firms only
The ICAEW Code of Ethics applies to its members, employees of member firms and ICAEW students
he ICAEW Code of Ethics applies to its members, employees of member firms, ICAEW students and all other members of UK accountancy bodies
Which of the following statements best describes ethical guidance in the UK?
Ethical guidance provides a set of rules which must be followed in all circumstances
Ethical guidance is a framework containing a combination of rules and principles, the application of which is dependent on the professional judgment of the accountant based on the specific circumstances.
Ethical guidance provides a set of principle which can be applied at the discretion of the accountant
Ethical guidance is a series of legalrequirements
A code based upon a set of principles requires a professional accountant to comply with a set of specific rules.
T
F
A rules-based code requires a professional accountant to identify, evaluate and address threats to compliance with fundamental ethical principle.
T
F
The ICAEW uses a rules-based approach.
T
F
