FABM Chapter 5 Review Questions

Question 1

Financial statements portray the financial effects of transactions and other events by grouping them
into broad classes according to their economic characteristics. These broad classes are termed as

Answer 1

Elements of Financial Statements

Question 2

The elements directly related to the measurement of financial position are

Answer 2

Assets, Liabilities and Equity

Question 3

The elements directly related to the measurement of financial performance are

Answer 3

Income and Expense

Question 4

These are resources controlled by the business as a result of a past transactions or events and from
which future economic benefits are expected to flow to the business.

Answer 4

Assets

Question 5

Which statement is incorrect concerning assets?

Answer 5

In determining existence of an asset, the right of ownership isn’t essential

Question 6

These are present obligations of a business arising from past transactions or events the settlement
of which is expected to result in an outflow from the business of resources embodying economic
benefits.

Answer 6

Liabilities

Question 7

It is an increase in economic benefit during the accounting period related to an increase in an asset
or a decrease in liability that results in increase in equity other than contribution from owners.

Answer 7

Income

Question 8

It is an decrease in economic benefit during the accounting period related to a decrease in asset or a
increase in liability that results in decrease in equity other than distribution from owners.

Answer 8

Expense

Question 9

It is a decrease in economic benefit during the accounting period related to a decrease in asset or an
increase in liability that results in asset or an increase in liability that results in decrease in equity
other than distribution to owners.

Answer 9

Expense

Question 10

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

Answer 10

Revenue

Question 10

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

Answer 10

Revenue

Question 11

Income encompasses both _____________

Answer 11

Revenue and Gain

Question 12

It is the process of incorporating in the statement of financial position or income statement an item
that meet the definition of an element of the financial statements.

Answer 12

Recognition

Question 13

Revenue should be recognized when

Answer 13

The service is performed