FA_Practice Chapter 1+2

Which groups of people are most likely to be interested in the financial statements of a sole trader?

1. Shareholder of the company
2. The business's bank manager
3. The tax authorities
4. Financial analysts

A

1, 2 and 3 only
 

B

1 and 2 only

C

2 and 3 only

D

2,3 and 4 only

What is the role of the IASB?

A

Review defective accounts
 

B

Formulate international financial reporting standard?

C

Oversee the standard setting and regulatory process

D

Control the accountancy profession

Which of the following statements is/are true?

1. The directors of a company are ultimately responsible for the preparation of financial statements, even if the majority of the work on them is performed by the financial department
2. If financial statements are audited, then the responsibility for those financial statements instead falls on the auditors instead of the directors
3. There are generally no laws surrounding the duties of directors and managing the affairs of a company

A

1 and 2 only

B

1 and 3 only

C

1 only

D

1,2 and 3

Which of the following best describes corporate governance?

A

Corporate governance is carried out by the finance department in preparing the financial accounts

B

Corporate governance is the system by which an entity monitors its impact on the natural environment

C

Corporate governance is the system by which companies and other entities are directed and controlled
 

D

Corporate governance is the system of rules and regulations surrounding financial reporting

Which of the following correctly defines 'equity' according to the IASB's Framework for the Preparation and Presentation of Financial Statements?

A

Equity is the residual interest in the assets of the entity after deducting all its liabilities
 

B

Equity is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefit
 

C

Equity is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities
 

D

Equity is resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity
 

Are the following statements true or false?

One of the objectives of the IFRS Foundation is to bring about convergence of national accounting standards and IFRSs.

A

True

B

False

Are the following statements true or false?

The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the IASB.

A

True

B

False

Are the following statements true or false?

The IFRS Interpretations Committee is a forum for the IASB to consult with the outside world

A

True

B

False

Which of the following statements is/are true?

1. Directors of companies have a duty of care to show reasonable competence in their management of the affairs of a company
2 Directors of companies must act honestly in what they consider to be the best interest of the company
3. A Director's main aim should be to create wealth for the shareholders of the company

A

1 and 3 only

B

1 and 2 only

C

1, 2 and 3

D

2 only

Which of the following are TRUE of partnerships?

1. The partners' individual exposure to debt is limited
2. Financial statements for the partnership by law must be produced and made public
3. A partnership is not a separate legal entity from the partners themselves

A

3 only
 

B

1 and 3 only
 

C

1 and 2 only
 

According to the IASB Framework which of the following is not an objective of financial statements?

A

Providing information regarding the performance of a business

B

Providing information regarding the financial position of a business
 

C

Enabling users to assess the performance of management to aid decision making

D

Helping to assess the going concern status of a business
 

The IASB Framework identifies user groups. Which of the following is not an information need for the 'Investor group?

A

Assessment of repayment ability of an entity
 

B

Taking buysell decisions
 

C

Measuring performance, risk and return
 

D

Taking decisions regarding holding investments

Which of the following statements about accounting concepts and policies is/are correct?

1. Companies should never change the presentation or classification of items in their financial statements, even if there is a significant change in the nature of operations
2. Information in financial statements should be presented so as to be understood by users with a reasonable knowledge of business and accounting
3. Companies should create large provisions in times of company growth so that they can be utilised in more difficult times to keep profits the same

A

2 and 3
 

B

1 and 2

C

2 only
 

D

1 only

Which of the following are advantages of trading as a limited liability company?

1. Operating as a limited liability company makes raising finance easier because additional shares can be issued to raise additional cash
2. Operating as a limited liability company is more risky than operating as a sole trader because the shareholders of a business are liable for all the debts of the business whereas the sole trader is only liable for the debts up to the amount he has invested.
 

A

Neither 1 or 2
 

B

2 only
 

C

1 only

D

Both 1 and 2

Which of the following statements is/are true?

1 The shareholder needs a statement of financial prospects, ie an indication of future progress. However, the supplier of goods on credit needs a statement of financial position, ie an indication of the current state of affairs
2 The objective of financial statements is to provide information about the financial position performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions
 

A

Neither 1 or 2

B

Both 1 and 2

C

1 only
 

D

2 only

Who issues International Financial Reporting Standards?

A

The stock exchange

B

The IFRS Advisory Committee

C

The International Accounting Standards Board
 

D

The government