Question

Choose the correct answer from the options

1. The underlying theme of the conceptual framework is (E1-PC1)

• decision usefulness.
• understandability.
• faithful representation.
• comparability.

2. The objective of financial reporting in the International Accounting Standards Board’s (IASB’s) Conceptual Framework (E1-PC1)

• Is the foundation for the Framework.
• Includes the qualitative characteristics that make accounting information useful.
• Is found on the third level of the Framework.
• All of the choices are correct regarding the objective of financial reporting.

3. The second level in the International Accounting Standards Board’s (IASB’s) Conceptual Framework (E1-PC1)

• Identifies the objective of financial reporting.
• Identifies recognition, measurement, and disclosure concepts used in establishing and applying accounting standards.
• Provides the elements of financial statements.
• Includes assumptions, principles, and constraints.

4. A soundly developed conceptual framework of concepts and objectives should (E1-PC1)

• Increase financial statement users’ understanding of and confidence in financial reporting.
• Enhance comparability among companies’ financial statements.
• Allow new and emerging practical problems to be more quickly solved.
• All of these answers are correct.

5. What is a purpose of having a conceptual framework? (E1-PC1)

• To make sure that economic activity can be identified with a particular legal entity.
• To segregate activities among competing companies.
• To provide comparable information for different companies.
• To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

6. The measurement principle includes the (E1-PC4)

• Fair value principle only.
• Historical cost principle only.
• Revenue recognition principle and expense recognition principle.
• Historical cost principle and the fair value principle.

7. Which of the following is an argument against using historical cost in accounting? (E1-PC4)

• Fair values are more relevant.
• Historical costs are based on an exchange transaction.
• Historical costs are reliable.
• Fair values are subjective.

8. Which of the following is a component of the revenue recognition principle? (E1-PC4)

• Cash is received and the amount is material.
• Recognition occurs when the performance obligation is satisfied.
• Production is complete and there is an active market for the product.
• Cash is realized or realizable and production is complete.

9. Recognition of expense related to amortization of an intangible asset illustrates which principle of accounting? (E1-PC4)

• Expense recognition.
• Full disclosure.
• Revenue recognition.
• Historical cost.

10. Under International Financial Reporting Standards (IFRS) revenue is recognized (E1-PC4)

• At the time when cash is collected.
• During production.
• At the end of production.
• When the performance obligation is satisfied.

11. What would be an advantage of having all countries adopt and follow the same accounting standards? (E2-PC1)

• Consistency.
• Comparability.
• Lower preparation costs.
• Comparability and lower preparation costs

12. What is the major objective of financial reporting? (E2-PC1)

• Provide information that is useful to management in making decisions.
• Provide information that clearly portray nonfinancial transactions.
• Provide information that is useful to present and potential equity investors, lenders, and other creditors in making decisions.
• Provide information that excludes claims to the resources.

13. The international financial reporting environment includes challenges in financial reporting including all of the following except: (E2-PC1)

• Political environment.
• Expectations gap.
• Decision-usefulness.
• Ethics.

14. Who issues International Financial Reporting Standards? (E2-PC2)

• The international auditing practices board
• The international stock exchange
• The international accounting standards board
• Representatives from the governments of each country

15. One of the objectives of the International Accounting Standards Committee Foundation is to? (E2-PC2)

• Oversee the standard setting and regulatory process
• Review defective accounts
• Control the accounting profession
• Formulate accounting standards

16. An accounting standard is issued after the following consultation procedure has been carried out: (E2-PC2)

• Research, Goes on the IASB agenda, Discussion paper, Exposure draft, adopted by countries,Post implementation review.
• IASC Foundation decide, Discussion Paper, Exposure Draft, adopted by countries, post
  implementation review.
• IASB decide, Adopted by countries, reviewed after 2 years.
• IASC Foundation, IASB, IFRS issued, reviewed after 2 years.

17. IAS 1 deals with: (E2-PC2)

• The presentation of financial statements
• The valuation of inventories
• The disclosures in the statement of cash flows
• Events after the reporting period

18. AS 7 deals with: (E2-PC2)

• The presentation of financial statements
• The valuation of inventories
• The disclosures in the statement of cash flows
• Events after the reporting period

choose correct answer from every q

Answer 1

( 1) The underlying theme of the conceptual framework is

Ans : ( A) Decision Usefulness

Explanation:

1) Conceptual Framwork is set to provides a framework for setting accounting standards, a basis for resolving accounting disputes, fundamental principles etc.

2) FASB ,has developed conceptual framwork for accounting.

3) Framwork is the foundation of accounting, as it provides standard for financial reporting

4) Based on the, financial reports decisions are taken by internal as well as external stakeholder.

5) so, we can conclude theme of framework is nothing but Decision usefulness.

6) Hence, ( a) is the only correct choice.