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A.

1. Adding together of assets, liabilities, equity, income or expenses that have Which of the
following is not a chapter of the IASB Framework?
o The objective of financial statements
o The elements of financial statements
o Concepts of capital and capital maintenance
o Concepts of income and expenditure
o Recognition of the elements of financial statements

Correct

There is no chapter called “Concepts of income and expenditure”. The chapters of the IASB
Framework are:
– The objective of financial statements
– Underlying assumptions
– Qualitative characteristics of financial statements
– The elements of financial statements
– Recognition of the elements of financial statements
– Measurement of the elements of financial statements
– Concepts of capital and capital maintenance
2. Which of the following is not an advantage of having a conceptual framework of accounting?
o Development of accounting standards is subject to less political pressure
o A consistent balance sheet or income statement approach is used to setting standards
o Considers the needs of all users
o Avoids a mixed up approach to setting standards

Incorrect

One of the disadvantages of using a conceptual framework of accounting is that it cannot


consider the needs of all users even though each user will have different needs and
requirements.
3. A conceptual framework for accounting is..
o A set of financial statements
o A set of rules governing financial reporting
o A set of components of financial statements
o A set of principles underpinning financial reporting

Correct

A conceptual framework for accounting is a set of generally accepted theoretical principles,


which are referred to for financial reporting. They provide the basis for creating and
evaluating accounting standards.
4. A conceptual framework sets out the detailed accounting treatment of transactions and other
items.
o True
o False

Correct

A conceptual framework sets out the broad rules for governing financial reporting, the
accounting standards provide the detailed accounting treatment.
5. GAAP stands for:
o Generally accepted accounting principles
o Globally accepted accounting practice
o Generally allowable accounting principles
o Generally allowable accounting practice

Correct

6. Which of the following is not a purpose of a financial reporting conceptual framework?


o Development of new reporting practices
o Evaluation of existing reporting practices
o Enforcement of existing reporting practices

Correct

The theoretical principles of a financial reporting conceptual framework allow for the
evaluation of existing reporting practices and the development of new reporting practices.
7. Which of the following are components of Generally Accepted Accounting Practice (‘GAAP’)?
o Stock exchange requirements
o Regional bodies (eg. European Union directives)
o National accounting standards
o National company law
o All of these

Incorrect

GAAP is a constantly changing concept, which is influenced by the major components


required above. In most countries it is not specifically defined or hold any authority.
8. Which of the following relate to financial position in a set of financial statements?
o Assets, liabilities, income and expenses
o Assets, liabilities and equity
o Income and expenses
o Income, expenses and liabilities

Correct

Assets, liabilities and equity are found in a Statement of Financial Position. They show the
entity’s finances at a fixed moment in time.
Income and expenses are used in the Statement of Comprehensive Income and show how a
company has performed financially between two dates (eg, a year, or accounting period)
9. Which of the following is not a disadvantage of having a conceptual framework of
accounting?
o It does not allow for different conceptual bases depending on the user
o It does not make the setting of accounting standards easier
o It may hamper the development of preparing accounting standards
o It may lead to inconsistent accounting practices

Incorrect

One of the benefits of having a conceptual framework of accounting is that it leads to the
development of consistent accounting practices. However, this does not make the
preparation of accounting standards easier and may even hamper their development as
each new standard will have to be checked for consistency with the framework.
10. Conceptual frameworks limit the consistency and comparability of financial statements.
o True
o False

Correct

A conceptual framework improves the consistency and comparability of financial statements


by removing choices of alternative accounting treatments.
B. shared characteristics