Question 1

Which one of the following statements is the IASB's definition of an asset?
A) A right that has the potential to produce economic benefits.
B) A present obligation of the entity to transfer an economic resource as a result of past events.
C) A present economic resource controlled by the entity as a result of past events.
D) A present economic resource that has the potential to produce economic benefits.

Accepted Answer

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

Question 2

The International Accounting Standards Board's Conceptual Framework for Financial Reporting defines an asset as:
A) A resource not purchased for resale in the normal course of business, held for long-term use in the business to produce goods or services.
B) A present obligation of the entity to transfer an economic resource as a result of past events.
C) A short term resource that is constantly changing.
D) A present economic resource controlled by the entity as a result of past events.

Accepted Answer

An asset is defined as a present economic resource controlled by the entity as a result of past events, which is expected to provide future economic benefits.

Question 3

Which one of the following statements most accurately describes an asset?
A) Something an entity owes, the value of which can be faithfully represented.
B) Something an entity owes which will result in the transfer of cash.
C) Something an entity controls which it uses to generate cash.
D) Something an entity owns for long term use within its business.

Accepted Answer

An asset is something an entity controls and uses to generate cash or other economic benefits.

Question 4

An asset can be recognised in an entity's statement of financial position when: Please select all that apply.
A) A past event gives rise to an economic resource controlled by the entity.
B) The value of the resource can be measured in such a way that a faithful representation is achieved.
C) The resource will give rise to a transfer of economic resources.
D) Profit will be generated by the resource.

Accepted Answer

The answer of An asset can be recognised in an...

Question 5

The International Accounting Standards Board's Conceptual Framework for Financial Reporting defines an asset as "a present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits.". In addition, the IASB Cocneptual Framework only allows entities to recognise assets when their value can be measured in such a way that a faithful representation is achieved. In which one of the following situations would a manufacturing company not recognise an asset on its statement of financial position?
A) A new piece of plant and equipment is purchased for use in the production process.
B) Raw materials for use in production are bought by the company.
C) A trade receivable that owes money to the company goes into liquidation with no likelihood that it will be able to pay what is owed.
D) Cash that is not required to finance day to day trading operations is invested in a bank account paying a fixed rate of interest for a fixed term of three years.

Accepted Answer

A trade receivable that goes into liquidation with no likelihood of payment does not meet the criteria of an asset, as it no longer has the potential to produce economic benefits.

Question 6

The International Accounting Standards Board's Conceptual Framework for Financial Reporting defines an asset as "a present obligation of the entity to transfer an economic resource as a result of past events."

Accepted Answer

The definition provided describes a liability, not an asset. An asset is defined as 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.

Question 7

PhonesForUs has a stock of old smart phones bought three years ago from a supplier. The phones have been counted up and it has been found that there are 100 of them. These phones originally cost £50 each three years ago. However, no one has bought one of these phones in the past 18 months and much newer models with much greater levels of features and connectivity have rendered these phones out of date. The accountant has decided that the phones can no longer be recognised as an asset in the statement of financial position of PhonesForUs. What is the reason for the accountant's decision?
A) The cost of the phones cannot be measured in such a way that a faithful representation is achieved.
B) There is no potential to produce economic benefits for the entity.
C) There is no past event giving rise to the asset.
D) The smart phones are not controlled by PhonesForUs

Accepted Answer

The phones are outdated and have not been sold in 18 months, indicating they no longer have the potential to generate economic benefits for the company.

Question 8

Which one of the following statements is the IASB's definition of a liability?
A) A present economic resource controlled by the entity as a result of past events.
B) A right that has the potential to produce economic benefits.
C) A present obligation of the entity as a result of past events.
D) A present obligation of the entity to transfer an economic resource as a result of past events.

Accepted Answer

The IASB defines a liability as a present obligation of the entity to transfer an economic resource as a result of past events.

Question 9

Liabilities can only be recognised in the statement of financial position if their value can be measured in such a way that a faithful representation is achieved.

Accepted Answer

Liabilities must be measurable to ensure that they provide a faithful representation of the financial position, as per accounting standards.

Question 10

A liability can be described as:
A) Something an entity owes, the value of which just needs to be estimated.
B) Something an entity owes which will result in the payment of cash by the entity.
C) Something an entity controls which it uses to generate cash.
D) Something an entity owns for long term use within its business.

Accepted Answer

A liability is an obligation that an entity owes, which typically results in the payment of cash or other resources in the future.

Question 11

A liability can be recognised in an entity's statement of financial position when: Please select all that apply.
A) There is a present obligation as a result of past events.
B) There is an expectation that the obligation can be avoided.
C) There is a contractual or legal claim against the entity.
D) There is expected to be a transfer of an economic resource.

Accepted Answer

A liability is recognized when there is a present obligation from past events (A), a contractual or legal claim (C), and an expected transfer of an economic resource (D). B is incorrect because liabilities cannot be avoided.

Question 12

In which one of the following circumstances would an organization not recognise a liability on its statement of financial position?
A) When the obligation cannot be measured, in such a way that a faithful representation is achieved.
B) When the obligation cannot be avoided.
C) When the entity has an obligation at the statement of financial position date.
D) When a transfer of an economic resource will take place.

Accepted Answer

When the obligation cannot be measured, in such a way that a faithful representation is achieved.

Question 13

Which one of the following would be recognized as a non-current asset in the statement of financial position of a mining company?
A) A licence to mine land for minerals.
B) A pile of ore ready for shipment.
C) A loan to the mining company which is due for repayment in 10 years' time.
D) Money owed by the mining company's customers.

Accepted Answer

A licence to mine land for minerals is a non-current asset because it provides long-term economic benefits to the company, allowing it to extract minerals over an extended period.

Question 14

Which one of the following would not be recognized as a non-current asset in the statement of financial position of a professional football club?
A) The contracts of players purchased from other football clubs.
B) Grass cutting machinery purchased during the year.
C) The stadium owned by the football club.
D) The contracts of players who joined the club after successfully completing their apprenticeship with the club.

Accepted Answer

The contracts of players who joined the club after completing their apprenticeship are not recognized as non-current assets because they are internally generated and do not meet the recognition criteria for intangible assets.

Question 15

Which one of the following would not be recognized as inventory on the statement of financial position of a house building company?
A) Roof tiles on a building site.
B) Timber beams for roofing.
C) Equipment hire paid in advance.
D) A finished house sold subject to contract.

Accepted Answer

Equipment hire paid in advance is a prepaid expense and not inventory. Inventory typically includes items that are held for sale or used in the production of goods for sale, such as materials and finished goods.

Question 16

Which of the following would be classified as intangible non-current assets in the statement of financial position of a publisher? Please select all that apply.
A) Publishing rights.
B) A shareholding in another company.
C) Trademarks.
D) Licences.

Accepted Answer

Publishing rights, trademarks, and licenses are all intangible non-current assets because they are non-physical assets that have a long-term value for the publisher.

Question 17

Why can an entity not recognise its workforce as an asset on its statement of financial position? Please select all that apply.
A) The entity does not control its workforce.
B) There is no past event giving rise to an asset.
C) There is no potential to produce economic from the workforce.
D) The value of the workforce cannot be measured in such a way that a faithful representation is achieved.
Topic: Liability classification

Accepted Answer

The entity does not control its workforce and the value of the workforce cannot be measured in such a way that a faithful representation is achieved.

Question 18

Which one of the following would be classified as a current liability in a building company with a financial year end date of 30 September 2019?
A) A loan used to acquire the building firm's head office. This loan is repayable in full on 30 June 2028.
B) A trade receivable from a customer for work completed during the year.
C) An amount owed to a brick manufacturer for bricks supplied during September 2019.
D) The share capital of the company.

Accepted Answer

An amount owed to a supplier for goods received, such as bricks supplied in September 2019, is a current liability as it is expected to be settled within the company's operating cycle or within 12 months.

Question 19

On 30 September 2019, the last day of the company's financial year, Billdit Limited orders 500 timber roof beams from its supplier at a cost of £50 per beam, the timber roof beams to be delivered on 7 October 2019. Why can Billdit Limited not recognise a trade payable liability for these timber roof beams on its statement of financial position at 30 September 2019? Please select all that apply.
A) The liability is not measureable in such a way that a faithful representation is achieved.
B) There is no past event giving rise to an obligation.
C) The obligation is avoidable.
D) There is no present obligation at the statement of financial position date.

Accepted Answer

The answer of On 30 September 2019, the last day...

Question 20

Which of the following would be recognised as trade and other payables in the statement of financial position of a book publishing company? Please select all that apply.
A) Amounts due to a paper supplier.
B) Amounts due from a bookseller.
C) Amounts due to authors for royalties on books sold.
D) Amounts due to HM Revenue and Customs for taxes due on profits.
Topic: The accounting equation

Accepted Answer

Amounts due to a paper supplier and amounts due to authors for royalties on books sold are both considered trade and other payables in the statement of financial position of a book publishing company.

Quiz 2: The Statement of Financial Position

Which one of the following statements is the IASB's definition of an asset?

The International Accounting Standards Board's Conceptual Framework for Financial Reporting defines an asset as:

Which one of the following statements most accurately describes an asset?

An asset can be recognised in an entity's statement of financial position when: Please select all that apply.

The International Accounting Standards Board's Conceptual Framework for Financial Reporting defines an asset as "a present obligation of the entity to transfer an economic resource as a result of past events."

Which one of the following statements is the IASB's definition of a liability?

Liabilities can only be recognised in the statement of financial position if their value can be measured in such a way that a faithful representation is achieved.

A liability can be described as:

A liability can be recognised in an entity's statement of financial position when: Please select all that apply.

In which one of the following circumstances would an organization not recognise a liability on its statement of financial position?

Which one of the following would be recognized as a non-current asset in the statement of financial position of a mining company?

Which one of the following would not be recognized as a non-current asset in the statement of financial position of a professional football club?

Which one of the following would not be recognized as inventory on the statement of financial position of a house building company?

Which of the following would be classified as intangible non-current assets in the statement of financial position of a publisher? Please select all that apply.

Why can an entity not recognise its workforce as an asset on its statement of financial position? Please select all that apply.

Which one of the following would be classified as a current liability in a building company with a financial year end date of 30 September 2019?

Which of the following would be recognised as trade and other payables in the statement of financial position of a book publishing company? Please select all that apply.