Which of the following is the term that describes total net sales minus total expenses?
- A . Operating expenses
- B . Net income
- C . Total income
- D . Current assets
What is one of the main purposes of the International Financial Reporting Interpretations Committee (IFRIC)?
- A . Provide guidance on reporting issues not specifically addressed in International Accounting Standards Board (IASB)’s standards
- B . Provide advice to International Accounting Standards Board (IASB) on priorities
- C . Monitor International Accounting Standards Board (IASB)’s effectiveness, raise funds, and approve budget
- D . Discuss the roles and responsibilities of the International Accounting Standards Board (IASB) and its advisory groups
Which of the following plans obliges an employer to pay a specified amount of benefits to the employee?
- A . Post-employment plan
- B . Defined contribution plan
- C . Defined benefit plan
- D . Bonus plan
Why is accounting for short-term employee benefits generally a straightforward process?
- A . Because no actuarial assumptions are required to measure the obligation or cost and there is no possibility of any actuarial gain or loss
- B . Because short-term employee benefit obligations are measured on a discounted basis
- C . Because short-term employee benefits are not provided in exchange for the service of the employee
- D . Because the employer is required to incorporate actuarial assumptions into measurement of the obligation and the expenses
Which characteristic requires a high degree of consensus among individuals on a given measurement?
- A . Faithful representation
- B . Verifiability
- C . Comparability
- D . Neutral
Issuance of interim reports is an example of what enhancing characteristic?
- A . Comparability
- B . Verifiability
- C . Relevance
- D . Timeliness
Which of the following is one of the four main financial statements?
- A . Statement of full disclosure
- B . Statement of assets
- C . Statement of changes in shareholders’ equity
- D . Statement of accrual accounting
Predictive value is an ingredient of which of the following fundamental characteristics of information?
- A . Complete
- B . Comparability
- C . Relevance
- D . Neutral
Which of the following best defines the term “liability”?
- A . A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
- B . A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
- C . Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
- D . Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants
Company XYZ outsourced its printing services to a specialist printing firm. The specialist firm took responsibility for the staff, though the team remains on Company XYZ’s premises.
Which of the following is true?
- A . Because they remain on your premises, they are considered staff costs
- B . Due to the outsourcing of the staff, they are now considered service-supplier costs rather than staff costs
Which statement best describes the revalued amount of an asset?
- A . Its fair value at the date of revaluation less accumulated impairment
- B . Its fair value at the date of revaluation less accumulated depreciation
- C . Its fair value, less retained earnings
- D . Its fair value at the date of revaluation less accumulated depreciation and accumulated impairment
Which of the following describes the change in the net defined benefit liability (asset) during the period due to passage of time?
- A . Past service cost
- B . Current service cost
- C . Net interest on the net defined benefit liability (asset)
- D . Time value of money
What is the purpose of a balance sheet?
- A . To show sources of funds and the manner in which those funds are employed
- B . To account for changes in cash during the accounting period
- C . To show details of the nature of a company’s operating activities
- D . To reconcile the beginning and ending balances of stockholders’ equity
Which of the following is true of accrual accounting?
- A . Neither the recognition of revenue nor the recording of expense necessarily involves the receipt or payment of cash
- B . It rests on a primary guiding principle, which is recognition
- C . The recognition of revenue involves the receipt or payment of cash, while the recording of expense does not
- D . It entails recording income or expenditure only when money comes into or leaves the company
What are balanced sheets and income statements linked by?
- A . Investing activities
- B . Retained earnings
- C . Expenses
- D . Net income
Current assets comprise assets that can be converted to cash. They must be converted within what time period?
- A . Before the end of the fiscal year
- B . Within a year
- C . Within a fiscal year
- D . Within two years
What is the timing of revenue recognition?
- A . When it is probable that future economic benefits will flow to the company and reliable measurement of the amount of revenue is possible
- B . When the company reports current and non-current classifications in its statement of financial position
- C . When economic benefits are received by the company and reliable measurement of the amount of revenue is possible
- D . When users have sufficient reasonable knowledge of business and financial accounting matters to understand the information
Which of the following describes the concerns of Level 3 of the conceptual framework for financial reporting?
- A . Basic objective
- B . Recognition, measurement, and disclosure concepts
- C . Fundamental concepts
- D . Elements of financial statements
What is one of the purposes of International Accounting Standards Board (IASB)’s conceptual framework, which establishes the concepts that underlie financial reporting?
- A . Provides information about economic entities that is useful in making economic decisions
- B . Provides guidance where conflicting interpretations have developed
- C . Provides benchmark for judgments
- D . Informs International Accounting Standards Board (IASB) of implications of proposed standards
Which of the following best defines the term “equity”?
- A . The residual interest in the assets of the entity after deducting all its liabilities
- B . A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
- C . Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
- D . Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants
Which of the following is the best description of liquidity?
- A . The historical cost of an asset
- B . The fair value of an asset
- C . The ease of converting a noncash asset to cash
- D . Liabilities, minus equity
Which of the following is true of liabilities?
- A . Current liabilities come due in less than a year
- B . Current liabilities come due in less than 18 months
- C . Noncurrent liabilities come due in less than a year
- D . Both current and noncurrent liabilities come due in less than a year
The following requirements are characteristic of which term below? Must be reported on the balance sheet; must be owned or controlled by the company; and must possess expected future benefits.
- A . Assets
- B . Owners’ equity
- C . Contributed capital
- D . Liabilities
When does a present obligation exist?
- A . When the employee renders service
- B . When the company has no realistic alternative but to make the payments
- C . When a change in the company’s informal practices would cause unacceptable damage to its relationship with employees
- D . When the company recognizes the expected cost of profit-sharing and bonus payments
Neutral and complete are ingredients of which of the following fundamental characteristics of accounting information?
- A . Faithful representation
- B . Relevance
- C . Predictive value
- D . Comparability
Paid annual leave and paid sick leave are examples of which kind of employee benefits?
- A . Short-term benefits
- B . Post-employment benefits
- C . Termination benefits
- D . Long-term benefits
One of the reasons preparers use the conceptual framework is to:
- A . Develop accounting policies in the absence of specific standards
- B . Document a historical record of all judgments
- C . Develop alternate interpretations of specific standards
- D . Encourage change to standards as Board members change
What are the two guiding principles of accrual accounting?
- A . Expense recognition and matching
- B . Revenue recognition and matching
- C . Revenue recognition and measurement
- D . Cost and materiality
Employee benefits that are not short-term, post-employment or termination benefits are considered what kind of benefits?
- A . Short-term benefits
- B . Post-employment benefits
- C . Termination benefits
- D . Long-term benefits
When the economic consequences of a standard or rule is ignored, which characteristic is being represented?
- A . Neutral
- B . Verifiability
- C . Complete
- D . Relevance