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Financial Accounting and Reporting > Conceptual Framework > Flashcards

Conceptual Framework Flashcards

1
Q

The objective of general purpose financial reporting as described in the Conceptual Framework is to

a. Provide information to regulators
b. Support the entity’s tax return
c. Meet the information needs of an entity’s stakeholders
d. Provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity

A

D. Provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity

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2
Q

A reporting entity can be

a. A portion of an entity
b. A single entity
c. More than one entity
d. None of the above

A

c. More than one entity

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3
Q

TRUE OR FALSE

In selecting a measurement basis for an asset or liability, it is more important to consider the nature of the information that the measurement basis will produce in the statement(s) of financial performance than in the statement of financial position

A

FALSE

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4
Q

TRUE OR FALSE

An analysis of income and expenses recognised in the statement of profit or loss is sufficient to understand an entity’s financial performance for the period

A

FALSE

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5
Q

Which statement is included in the Conceptual Framework?

a. Relevance is a fundamental qualitative characteristic of useful financial information
b. Financial information without both relevance and faithful representation is not useful
c. Enhancing qualitative characteristics cannot make information useful if that information is irrelevant or does not provide a faithful representation of what it purports to represent
d. All of the above
e. None of the above

A

d. All of the above

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6
Q

TRUE OR FALSE

Some items that do NOT meet the definition of an asset, a liability or equity may be recognised in the statement of financial position

A

FALSE

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7
Q

Entities have to apply the revised Conceptual Framework

a. Immediately after it is issued
b. For annual reporting periods beginning on or after 1 January 2020, with early application permitted
c. Never - the Conceptual Framework is only used by the International Accounting Standards Board
d. Whenever they want to

A

b. For annual reporting periods beginning on or after 1 January 2020, with early application permitted

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8
Q

TRUE OR FALSE

A high level of measurement uncertainty associated with an asset always results in the asset not being recognised

A

FALSE

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9
Q

All of the following represent costs of providing financial information except

a. Preparing
b. Disseminating
c. Auditing
d. Accessing Capital

A

d. Accessing Capital

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10
Q

General purpose financial statements

a. Are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs
b. Provide all of the information that financial statements’ users need
c. Are designed to show the value of a reporting entity since they provide information to help existing and potential investors, lenders and other creditors to estimate the value of the reporting entity
d. All of the above

A

c. Are designed to show the value of a reporting entity since they provide information to help existing and potential investors, lenders and other creditors to estimate the value of the reporting entity

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11
Q

Which statement is incorrect regarding the definition of an asset?

a. An asset is a present economic resource controlled by the entity as a result of past events
b. An economic resource is a right that has the potential to produce economic benefits
c. It clarified that an asset is the economic resource, not the ultimate inflow of economic benefits
d. It needs to be certain or likely that economic benefits will arise

A

d. It needs to be certain or likely that economic benefits will arise

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12
Q

Information about income and expenses is

a. Less important as information about assets and liabilities
b. More important as information about assets and liabilities
c. Just as important as information about assets and liabilities
d. Not important

A

c. Just as important as information about assets and liabilities

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13
Q

In accordance with the Conceptual Framework, historical cost

a. Provides information derived, at least in part, from the price of the transaction or other event that gave rise to the item being measured
b. Is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date
c. Reflects entity-specific current expectations about the amount, timing and uncertainty of future cash flows
d. Reflects the current amount that would be paid to acquire an equivalent asset or received to take on an equivalent liability

A

a. Provides information derived, at least in part, from the price of the transaction or other event that gave rise to the item being measured

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14
Q

Which concept of capital should be adopted by an entity if the users of financial statements are primarily concerned with the maintenance of nominal invested capital or the purchasing power of invested capital?

a. Financial Concept
b. Physical concept
c. Contemporary capital
d. Traditional Capital

A

a. Financial Concept

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15
Q

Which capital maintenance concept requires the adoption of the current cost basis of measurement?

a. Financial Concept
b. Physical concept
c. Contemporary capital
d. Traditional Capital

A

b. Physical concept

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16
Q

Which of the following is not a basic assumption underlying financial accounting?

a. Economic Entity assumption
b. Going concern Assumption
c. Periodicity Assumption
d. Historical cost assumption

A

d. Historical Cost Assumption

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17
Q

Which of the following statements best describes the term “Going Concern”?

a. When current liabilities of an entity exceed current asset
b. The ability of the entity to continue operation for the foreseeable future
c. The potential to contribute to the flow of cash and cash equivalents to the entity
d. The expenses of an entity exceed the income.

A

B. The ability of the entity to continue operation for the foreseeable future

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18
Q

Which of the following is an implication of the going concern assumption?

a. The historical cost principle is credible.
b. Depreciation and Amortization policies are justifiable and appropriate.
c. The current and noncurrent classification of assets and liabilities is justifiable and significant
d. All of these

A

D. All of these

19
Q

The relatively stable economic, political, and social environment supports

a. Conservatism
b. Materiality
c. Timeliness
d. Going Concern

A

D. Going Concern

20
Q

Which underlying assumption serves as the basis for preparing financial statements at regular artificial points in time?

a. Accounting entity
b. Going concern
c. Accounting period
d. Stable Monetary Unit

A

c. Accounting Period

21
Q

Which basic accounting assumption is threatened by the existence of severe inflation in the economy?

a. Monetary Unit assumption
b. Periodicity assumption
c. Going concern assumption
d. Economic entity assumption

A

a. Monetary Unit assumption

22
Q

Which of the following is not an important characteristic of the financial statements that accountants currently prepare?

a. The information in financial statements is expressed in units of money adjusted for changing purchasing power
b. Financial statements articulate with one another because measuring financial position is related to measuring changes in financial position
c. The information in financial statements is summarized and classified to help meet users’ needs
d. Financial statements can be justified only if the benefits exceed the costs

A

a. The information in financial statements is expressed in units of money adjusted for changing purchasing power

23
Q

The concept of accounting entity is applicable

a. Only to the legal aspect of the business organization
b. Only to the economic aspects of business organization
c. Only to business organizations
d. Whenever accounting is involved

A

D. Whenever accounting is involved

24
Q

This is a complete, comprehensive, and single document promulgated by IASB establishing the concepts that underlie financial reporting.

a. Conceptual Framework for Financial Reporting
b. Conceptual Framework for Financial Statements
c. Conceptual Framework for Business entities
d. Framework for the Preparation and Presentation of financial Statements

A

a. Conceptual Framework for Financial Reporting

25
Q

Which of the following is not a purpose of the Conceptual Framework?

a. To assist FRSC in developing accounting standards that will represent GAAP in the Philippines
b. To assist the FRSC in the review and adoption of existing international accounting standard
c. To assist auditors in forming an opinion as to whether financial statements conform with Philippine GAAP
d. To assist the Board of Accountancy in promulgating rules and regulations affecting the practice of public accountancy

A

d. To assist the Board of Accountancy in promulgating rules and regulations affecting the practice of public accountancy

26
Q

The Conceptual Framework is intended to establish

a. Generally accepted accounting principles in financial reporting by entities
b. The meaning of “present fairly in accordance with GAAP”
c. The objectives and concepts for use in developing standards of financial accounting and reporting
d. The hierarchy of sources of GAAP

A

c. The objectives and concepts for use in developing standards of financial accounting and reporting

27
Q

A Conceptual Framework should

a. Lead to uniformity of financial statements among entities within the same industry
b. Eliminate alternative accounting principles
c. Guide multinational entities in developing generally accepted auditing standards
d. Define the basic objectives, terms, and concepts of Accounting

A

d. Define the basic objectives, terms, and concepts of Accounting

28
Q

Which of the following is not a purpose of Conceptual Framework?

a. To provide definitions of key terms and fundamental concepts
b. To provide specific guidelines for resolving situations not covered by existing accounting standards
c. To assist accountants in selecting among alternative accounting and reporting methods
d. To assist the IASB in the standard-setting process

A

c. To assist accountants in selecting among alternative accounting and reporting methods

29
Q

In the Conceptual Framework for Financial Reporting, what provides the “why” of accounting?

a. Measurement and Recognition Concept
b. Qualitative Characteristics of accounting information
c. Element of Financial Statement
d. Objective of Financial Reporting

A

d. Objective of Financial Reporting

30
Q

What is the purpose of having a Conceptual Framework?
I. To enable the accountancy profession to solve more quickly emerging practical problems
II. To provide a foundation from which to build more useful financial accounting standards

a. I only
b. II only
c. Both I and II
d. Neither I nor II

A

c. Both I and II

31
Q

Which of the following is not true concerning Conceptual Framework?
I. The Conceptual Framework should be a basis for standard-setting
II. The Conceptual Framework should allow practical problems to be solved more quickly
III. The Conceptual Framework should be based on fundamental truth derived from the law of nature

a. II only
b. III only
c. II and III only
d. I and II only

A

b. III only

32
Q

A soundly developed Conceptual Framework should
I. Increase financial statement users’ understanding and confidence in financial reporting
II. Enhance comparability of financial statements across entities
III. Allow new and emerging practical problems to be solved more quickly

a. I only
b. I and II only
c. I and III only
d. I, II and III

A

d. I, II and III

33
Q

Users of financial reports include which of the following
I. Creditors
II. Government agencies
III. Unions

a. I only
b. I and II only
c. I and III only
d. I, II and III

A

d. I, II and III

34
Q

The “primary users” of financial information include
I. Existing and potential investors
II. Existing and potential lenders and other creditors
III. User group such as employees, customers, governments and their agencies and the public

a. I only
b. I and II only
c. I and III only
d. I, II and III

A

b. I and II only

35
Q

Which of the following is an internal user of financial information?

a. Board of Directors
b. Shareholder
c. Holder of Bonds
d. Creditor with long-term contract

A

a. Board of Directors

36
Q

These users are interested in information about the continuance of an entity, especially when they have a long-term involvement with or are dependent on the entity

a. Customers
b. Employees
c. Trade unions
d. Suppliers

A

a. Customers

37
Q

These users are interested in information in order to regulate the activities of an entity, determine taxation policies and provide a basis for national statistics

a. Government and their agencies
b. Major organization of users
c. Bureau of Internal Revenue
d. Department of Finance

A

a. Government and their agencies

38
Q

These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers

a. the public
b, Government and their agencies
c. finance entities
d. Private entities

A

a. The public

39
Q

What is a major objective of financial reporting?

a. To provide information that is useful to management in making decisions
b. To provide information that clearly portrays nonfinancial transactions
c. To provide information that is useful to assess the amounts, timing and uncertainty of prospective cash receipts
d. To provide information that excludes claims against resources

A

c. To provide information that is useful to assess the amounts, timing and uncertainty of prospective cash receipts

40
Q

One element of the objective of financial reporting is to provide

a. Information about the investors in the entity
b. Information about the liquidation value of the resources held by the entity
c. Information that is useful in assessing cash flow prospects
d. Information that will attract new investors

A

c. Information that is useful in assessing cash flow prospects

41
Q

In measuring financial performance, accrual accounting is used because

a. Cash flows are considered less important
b. It provides a better indication of ability to generate cash flows that cash basis
c. It recognizes revenue when cash is received and expenses when cash is paid
d. It is one of the implicit assumptions

A

b. It provides a better indication of ability to generate cash flows that cash basis

42
Q

Which of the following statements in relation to financial reporting is incorrect?

a. General purpose financial reports do not and cannot provide all of the information that primary users need
b. General purpose financial reports are designed to show the value of the reporting entity
c. General purpose financial reports are intended to provide common information to users
d. Financial reports are largely based on estimate and judgment rather than exact depiction

A

b. General purpose financial reports are designed to show the value of the reporting entity

43
Q

The objectives of financial reporting are based on

a. The need for conservatism
b. Reporting on management stewardship
c. Generally accepted accounting principles
d. The needs of the users of information

A

d. The needs of the users of information

Financial Accounting and Reporting (3 decks)

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