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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
Correct
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
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
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