Question 1

Due process in standard setting involves public consultation with all interested parties.

Accepted Answer

Due process in standard setting requires public consultation with all interested parties to ensure fairness and transparency in the development of standards. This involves giving stakeholders the opportunity to provide feedback and input throughout the process.

Question 2

The authority responsible for enforcing accounting and other corporate rules for companies in Australia is:
A)ASIC.
B)FRC.
C)AASB.
D)both A and C

Accepted Answer

A

Question 3

Which of the following parties is NOT a frequent contributor in the consultation phase of the standard setting process?
A)The professional accounting bodies,CPAA and ICAA
B)Academics
C)ASIC
D)Industry groups

Accepted Answer

ASIC (Australian Securities and Investments Commission) is not a frequent contributor in the consultation phase of the standard setting process. The other options - professional accounting bodies, academics, and industry groups - are common contributors.

Question 4

According to the IASB and adopted by the AASB,the primary objective of financial reporting is to provide information:
A)about the profitability of the business.
B)that is useful for decision making,particularly for investors and lenders.
C)to the federal government.
D)regarding the cash flows of the business.

Accepted Answer

The International Accounting Standards Board (IASB) and the Australian Accounting Standards Board (AASB) have both adopted the primary objective of financial reporting as providing information that is useful for decision making, particularly for investors and lenders. The objective is to provide relevant, reliable, and timely information that helps the users of financial statements in making their investment and lending decisions. While profitability and cash flows are important components of financial reporting, they are not the primary objective. The federal government may also use financial statements, but their needs are not the primary focus of financial reporting.

Question 5

A conceptual framework of accounting is intended to eliminate the need for detailed accounting standards.

Accepted Answer

A conceptual framework of accounting provides a foundation for accounting standards to be developed. It outlines the objectives, principles, and characteristics that should guide the development of accounting standards. However, detailed accounting standards are still necessary to provide specific guidance on how to apply the conceptual framework in practice.

Question 6

Inventory has a cost of $475 000 and a current selling price of $435 000.What amount should be reported on the financial statements and what concept or principle applies?
A)$435 000,conservatism
B)$435 000,going concern
C)$475 000,going concern
D)$475 000,cost

Accepted Answer

The inventory should be reported at the lower of cost or market value, which is $435,000 in this case, according to the conservatism principle.

Question 7

The basic accounting concepts and principles:
A)explain the difference between managerial and financial accounting.
B)provide financial information about the reporting entity that is useful to existing and potential investors,lenders and other creditors in making decisions about providing resources to the entity.
C)are an important way in which management discharges its accountability to investors and other outside users.
D)provide a structure for helping us to judge whether specific rules and methods for calculating and reporting accounting information are consistent with each other.

Accepted Answer

The answer of The basic accounting concepts and principles:
A)explain the...

Question 8

According to the IASB Framework,accounting information should meet all of the following qualitative characteristics,except:
A)comparability.
B)relevance.
C)reliability.
D)reasonableness.

Accepted Answer

"Reasonableness" is not a qualitative characteristic identified in the IASB Framework. The correct qualitative characteristics are relevance, reliability, comparability, and understandability.

Question 9

SAC 2 is titled:
A)Objective of General Purpose Financial Reporting.
B)Qualitative Characteristics of Financial Information.
C)Definition and Recognition of the Elements of Financial Statements.
D)Definition of the Reporting Entity.

Accepted Answer

The answer of SAC 2 is titled:
A)Objective of General Purpose...

Question 10

Management relies much more on special purpose reports rather than the general-purpose information needed by external users.

Accepted Answer

Management needs specific information in order to make informed decisions, which is often not present in general-purpose reports suitable for external users. Therefore, special purpose reports are more valuable to management in their decision-making processes.

Question 11

The objective of financial reporting is to provide useful information to investors,creditors and others to aid in making and evaluating decisions about the allocation of scarce resources.

Accepted Answer

The objective of financial reporting is to provide useful information to investors, creditors, and others to aid in making and evaluating decisions about the allocation of scarce resources. This information helps stakeholders in making informed decisions about investments, lending, or other financial actions.

Question 12

The Financial Reporting Council (FRC)was established by the federal government to oversee the Australian standard-setting process.

Accepted Answer

The Financial Reporting Council (FRC) was established by the federal government in Australia in 2000 to oversee the Australian standard-setting process.

Question 13

Accounting principles initially drew their authority from acceptance by the business community.

Accepted Answer

Accounting principles were originally developed and accepted by the business community to ensure consistent and reliable financial reporting. Over time, these principles have been codified into formal accounting standards, such as GAAP and IFRS, and regulated by accounting boards and government agencies to ensure compliance and transparency in financial reporting.

Question 14

Accounting standards in the USA are issued by:
A)Congress.
B)the Financial Accounting Standards Board.
C)the Securities and Exchange Commission.
D)the Accounting Principles Board.

Accepted Answer

Accounting standards in the USA are issued by the Financial Accounting Standards Board (FASB), which is a private-sector organization recognized by the Securities and Exchange Commission (SEC) as the body responsible for setting accounting standards in the United States. Congress and the Accounting Principles Board (APB) do not issue accounting standards.

Question 15

Which of the following is not a characteristic used to judge whether an entity is a reporting entity that should prepare general purpose financial reports?
A)The structure of the entity,e.g.whether it is a sole trader or a company
B)Whether ownership and management are separate
C)Whether the entity has economic or political importance
D)The size or indebtedness of the entity

Accepted Answer

The structure of the entity, such as whether it is a sole trader or a company, is not a characteristic used to judge whether an entity is a reporting entity that should prepare general purpose financial reports. The other options, ownership and management separation, economic or political importance, and size or indebtedness, are all factors that may be considered in determining whether an entity is a reporting entity.

Question 16

Which of the following are NOT potential users of financial reports as identified in SAC 2?
A)Resource providers,including investors,lenders,creditors,suppliers and employees
B)Recipients of goods and services,such as customers
C)Parties performing a review or oversight function,which may include governments,regulatory agencies (such as ATO),labour unions,financial analysts,employer groups and the media
D)Managers,accountants and standard setters

Accepted Answer

Managers, accountants, and standard setters are involved in the preparation and regulation of financial reports, not typically users of them as identified in SAC 2.

Question 17

Since 2005,the main influence on Australian accounting standards is:
A)U.S.accounting standards.
B)British accounting standards.
C)International accounting standards.
D)All of the above

Accepted Answer

Since 2005, Australia has adopted International Financial Reporting Standards (IFRS) which are developed by the International Accounting Standards Board (IASB). Although the U.S. and Britain have their own accounting standards, Australia's primary influence has been IFRS, which are global accounting standards designed to ensure consistency and comparability of financial reporting across different countries.

Question 18

Accounting principles:
A)should be accepted by people and organisations who need financial information to make decisions.
B)explain financial phenomena.
C)are similar to natural laws,like the law of gravity.
D)apply only to large business organisations.

Accepted Answer

Accounting principles are intended to provide reliable and relevant financial information to users who need it to make informed decisions.

Answer: B 
 Accounting principles are designed to explain financial phenomena, such as the allocation of costs and revenue recognition.

Answer: C 
 Although accounting principles are not as immutable as natural laws, they do provide a framework for consistent and reliable financial reporting.

Answer: D 
 Accounting principles apply to businesses of all sizes, not just large organizations.

Question 19

The body that is responsible for the issue of accounting standards in Australia is:
A)The Australian Securities and Investments Commission.
B)The Australian Accounting Standards Board.
C)The Institute of Chartered Accountants in Australia.
D)CPA Australia.

Accepted Answer

The Australian Accounting Standards Board (AASB) is responsible for developing and issuing accounting standards in Australia. They work in conjunction with the International Accounting Standards Board (IASB) to ensure that Australian accounting standards are aligned with international standards. The other options listed are professional organizations or regulatory bodies but are not responsible for issuing accounting standards.

Question 20

AASB stands for Australian Accounting Standards Board.

Accepted Answer

AASB stands for Australian Accounting Standards Board.

Quiz 17: The Framework of Accounting

Due process in standard setting involves public consultation with all interested parties.

The authority responsible for enforcing accounting and other corporate rules for companies in Australia is:

Which of the following parties is NOT a frequent contributor in the consultation phase of the standard setting process?

According to the IASB and adopted by the AASB,the primary objective of financial reporting is to provide information:

A conceptual framework of accounting is intended to eliminate the need for detailed accounting standards.

Inventory has a cost of $475 000 and a current selling price of $435 000.What amount should be reported on the financial statements and what concept or principle applies?

The basic accounting concepts and principles:

According to the IASB Framework,accounting information should meet all of the following qualitative characteristics,except:

SAC 2 is titled:

Management relies much more on special purpose reports rather than the general-purpose information needed by external users.

The objective of financial reporting is to provide useful information to investors,creditors and others to aid in making and evaluating decisions about the allocation of scarce resources.

The Financial Reporting Council (FRC)was established by the federal government to oversee the Australian standard-setting process.

Accounting principles initially drew their authority from acceptance by the business community.

Accounting standards in the USA are issued by:

Which of the following is not a characteristic used to judge whether an entity is a reporting entity that should prepare general purpose financial reports?

Which of the following are NOT potential users of financial reports as identified in SAC 2?

Since 2005,the main influence on Australian accounting standards is:

Accounting principles:

The body that is responsible for the issue of accounting standards in Australia is:

AASB stands for Australian Accounting Standards Board.