CFAS - CHAPTER 5

Question 1

The elements directly related to the measurement of financial position are

a. Asset, liability and equity
b. Asset and liability
c. Income and expense
d. Asset, liability, equity, income and expense

Answer 1

a. Asset, liability and equity

Question 2

The elements of financial position describe amounts of resources and claims against resources

a. During a period of time
b. At a moment in time
c. During a period of time and at a moment in time d. Neither during a period of time nor at a moment in time

Answer 2

b. At a moment in time

Question 3

The elements directly related to the measurement of financial performance are

a. Income and expense
b. Asset, liability and equity
c. Asset and liability
d. Income, expense and equity

Answer 3

a. Income and expense

Question 4

It is a present economic resource controlled by the entity as a result of past events.

a. Asset
b. Liability
c. Equity
d. Income

Answer 4

a. Asset

Question 5

It is a present obligation of the entity to transfer an economic resource as a result of past events.

a. Asset
b. Liability
c. Equity
d. Expense

Answer 5

b. Liability

Question 6

It is the residual interest in the assets of the entity after deducting all of the liabilities.

a. Income
b. Equity
c. Retained earnings
d. All of the choices match the definition

Answer 6

b. Equity

Question 7

It is an increase in asset or a decrease in liability that results in increase in equity other than contribution from equity holders.

a. Asset
b. Liability
c. Income
d. Expenses.

Answer 7

c. Income

Question 8

It is a decrease in asset or an increase in liability that results in decrease in equity other than distribution to equity holders.

a. Asset
b. Liability
c. Income
d. Expense

Answer 8

d. Expense

Question 9

This arises in the course of ordinary regular activities of the entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent.

a. Income
b. Revenue
c. Profit
d. Gain

Answer 9

b. Revenue

Question 10

Which statement in relation to income is true?

a. Income encompasses both revenue and gain.
b. Revenue encompasses both income and gain.
c. Gain encompasses both income and revenue.
d. Income is technically the same as revenue.

Answer 10

a. Income encompasses both revenue and gain.

Question 11

Which is not within the new definition of an asset?

a. An asset is a present economic resource.
b. The economic resource is a right that has potential to produce economic benefit.
c. The economic resource is controlled by the entity as a result of past event.
d. Future economic benefit is expected to flow to the entity.

Answer 11

d. Future economic benefit is expected to flow to the entity.

Question 12

Which of the following criteria need not be satisfied for a liability to exist?
a. The entity has an obligation.
b. The obligation is to transfer an economic resource.
c. The obligation is a present obligation that exists as a result of a past event.
d. The settlement is expected to result in an outflow of economic benefit.

Answer 12

d. The settlement is expected to result in an outflow of economic benefit.

Question 13

A present obligation exists as result of past event if

a. The entity has already obtained economic benefit.
b. The entity must transfer an economic resource.
c. The entity has not yet obtained economic benefit but must transfer an economic resource.
d. The entity has already obtained economic benefit and must transfer economic resource.

Answer 13

d. The entity has already obtained economic benefit and must transfer economic resource.

Question 14

Rights that have the potential to produce economic benefits and correspond to an obligation of another entity include all, except

a. Right to receive cash
b. Right to receive goods
c. Right to exchange economic resources with another entity on favorable terms
d. Right over property, plant and equipment

Answer 14

d. Right over property, plant and equipment

Question 15

An economic resource could produce economic benefit if an entity is entitled to all, except

a. To receive contractual cash flows
b. To exchange economic resources with another entity on unfavorable terms
c. To receive cash by selling the economic resource
d. To extinguish a liability by transferring an economic
resource

Answer 15

b. To exchange economic resources with another entity on unfavorable terms

Question 16

It is the present ability to direct the use of an economic resource and obtain the benefit that may flow from it.

a. Control
b. Legal right
c. Obligation
d. Ownership

Answer 16

a. Control

Question 17

It is a duty or responsibility that an entity has no practical ability to avoid.

a. Right
b. Obligation
c. Equity
d. Expense

Answer 17

b. Obligation

Question 18

Obligations to transfer an economic resource include all, except

a. Obligation to pay cash
b. Obligation to deliver goods
c. Obligation to provide services
d. Obligation to transfer an economic resource even if a specified future event does not occur

Answer 18

d. Obligation to transfer an economic resource even if a specified future event does not occur

Question 19

Which statement is not true about income and expense?

a. Income is increase in asset or decrease in liability that results in increase in equity other than contribution from equity holders.

b. Expense is decrease in asset or increase in liability that results in decrease in equity other than distribution to equity holders.

c. Income and expenses are the elements that relate to financial position.

d. Income is broader than revenue.

Answer 19

c. Income and expenses are the elements that relate to financial position.

Question 20

This new term refers to the statement of profit or loss and a statement presenting other comprehensive income.
a. Income statement
b. Statement of comprehensive income
c. Statement of financial performance
d. Statement of financial position

Answer 20

c. Statement of financial performance

Question 21

Revenue may result from

a. A decrease in an asset from primary operations.
b. An increase in an asset from incidental transactions.
c. An increase in a liability from incidental transactions.
d. A decrease in a liability from primary operations.

Answer 21

d. A decrease in a liability from primary operations.

Question 22

What is the primary distinction between revenue and gain?

a. The materiality of the amount
b. The likelihood that the transaction will recur
c. The nature of the activity that gives rise to the transaction
d. The method of disclosing the transaction

Answer 22

c. The nature of the activity that gives rise to the transaction

Question 23

The term income

a. Includes revaluation surplus
b. Includes adjustment of prior period error.
c. Includes gain resulting from the sale of an asset in an arm’s length transaction.
d. Is the same as retained earnings.

Answer 23

c. Includes gain resulting from the sale of an asset in an arm’s length transaction.

Question 24

A decrease in an asset arising from peripheral or incidental transaction is called

a. Capital expenditure
b. Cost
c. Loss
d. Expense

Answer 24

c. Loss

Question 25

An outflow of asset based on an activity that represents the major operations is called
a. Loss
b. Liability
c. Expense
d. Equity

Answer 25

c. Expense