conceptual framework (financial accounting)

RE TEST: ASSUMPTIONS & FINANCIAL REPORTING 1. What is the only underlying assumption mentioned in the Conceptual Framework for Financial Reporting? a. Going concern b. Accounting entity c. Time period d. Monetary unit 2. Which of the following statements best describes the term “going concern”? a. When current liabilities of an entity exceed current assets b. The ability of the entity to continue in operation for the foreseeable future c. The potential to contribute to the flow of cash and cash equivalents to the entity d. The expense exceed income 3. Which of the following is NOT an implication of the going concern assumption? a. The historical cost principle is credible b. Depreciation and amortization policies are justifiable and appropriate c. The current and non-current classification of assets and liabilities is justifiable and significant 4. The relatively stable economic, political and social environment supports a. Conservatism b. Materiality c. Timeliness d. Going concern 5. Which basic assumption may NOT be followed when an entity in bankruptcy reports financial results? a. Economic entity assumption b. Going concern assumption c. Time period assumption d. Monetary unit assumption 6. The financial statements that are prepared for the business are separate and distinct from the financial statements of the owners. a. Going concern assumption b. Matching principle c. Economic entity assumption d. Accounting period assumption 7. The economic entity assumption a. Is inapplicable to unincorporated businesses b. Recognizes the legal aspects of business organizations c. Requires periodic income measurement d. Is applicable to all forms of business organizations 8. Which underlying assumption serves as the basis for the preparing financial statements at regular artificial points in time?

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Page 1: Conceptual Framework (Financial accounting)

RE TEST: ASSUMPTIONS & FINANCIAL REPORTING

1. What is the only underlying assumption mentioned in the Conceptual Framework for Financial Reporting?a. Going concernb. Accounting entityc. Time periodd. Monetary unit

2. Which of the following statements best describes the term “going concern”?a. When current liabilities of an entity exceed current assetsb. The ability of the entity to continue in operation for the foreseeable futurec. The potential to contribute to the flow of cash and cash equivalents to the entityd. The expense exceed income

3. Which of the following is NOT an implication of the going concern assumption?a. The historical cost principle is credibleb. Depreciation and amortization policies are justifiable and appropriatec. The current and non-current classification of assets and liabilities is justifiable and significant

4. The relatively stable economic, political and social environment supportsa. Conservatismb. Materialityc. Timelinessd. Going concern

5. Which basic assumption may NOT be followed when an entity in bankruptcy reports financial results?a. Economic entity assumptionb. Going concern assumptionc. Time period assumptiond. Monetary unit assumption

6. The financial statements that are prepared for the business are separate and distinct from the financial statements of the owners.a. Going concern assumptionb. Matching principlec. Economic entity assumptiond. Accounting period assumption

7. The economic entity assumptiona. Is inapplicable to unincorporated businessesb. Recognizes the legal aspects of business organizationsc. Requires periodic income measurementd. Is applicable to all forms of business organizations

8. Which underlying assumption serves as the basis for the preparing financial statements at regular artificial points in time?a. Accounting entityb. Going concernc. Accounting periodd. Stable monetary unit

9. Which basic accounting assumption is threatened by the existence of severe inflation in an economy?a. Monetary unit assumptionb. Periodicity assumptionc. Going concern assumptiond. Economic entity assumption

10. Which of the following is NOT an important characteristic of the financial statements that accountant currently prepare?

Page 2: Conceptual Framework (Financial accounting)

a. The information in financial statements is expressed in units of money adjusted for changing purchasing power.

b. Financial statements articulate with one another because measuring financial position is related to measuring changes in financial position.

c. The information in financial statements is summarized and classified to help meet user’s needs.d. Financial statements can be justified only if the benefits exceed the costs.

11. This is a complete, comprehensive and single document promulgated by the IASB

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