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CPA Australia Financial-Accounting-and-Reporting PDF Questions - Exceptional Practice To CPA Financial Accounting and Reporting Exam
NEW QUESTION 35
A company sold some old operating equipment from its factory. After depreciation was accounted for, a small gain on sale was recorded. According to the revised IAS 1 Presentation of Financial Statements, this transaction will be shown as a separate item 'gain on sale of equipment'. This item will be shown in the statement of
- A. financial position.
- B. cash flow.
- C. comprehensive income.
- D. changes in equity.
Answer: C
NEW QUESTION 36
Which one of the following statements is correct in relation to presenting the financial position of an entity?
- A. Liquidity is the ability to repay long-term financial commitments, whereas solvency is the ability to repay short-term commitments.
- B. Solvency is the availability of total assets over a long-term, while liquidity is the availability of total assets over the short-term to meet financial commitments as they fall due.
. - C. Solvency is the availability of cash over the long-term, while liquidity is the availability of funds over the short-term to meet financial commitments as they fall due.
- D. Liquidity represents cash holdings, while solvency is long-term profitability.
Answer: C
NEW QUESTION 37
Which one of the following is not a principal motivation for creative accounting?
- A. public good
- B. personal incentives
- C. benefits from shares and share options
- D. bonus-related pay
Answer: A
NEW QUESTION 38
Current cost accounting reflects an approach to capital maintenance based on maintaining which one of the following?
- A. cost of assets in the business
- B. financial capability of the business
- C. operating capability of the business
- D. profitability of the business
Answer: C
NEW QUESTION 39
In individual countries, Generally Accepted Accounting Principles (GAAP) is primarily a combination of
- A. national company law, national accounting standards and local stock exchange requirements.
- B. national company law and local stock exchange requirements.
- C. national company law and national accounting standards.
- D. company law, accounting standards, local stock exchange requirements and international accounting standards.
Answer: A
NEW QUESTION 40
Which one of the following bases of measurement is used to implement an approach to capital maintenance based on maintaining the operating capability of a business?
- A. deprival value
- B. current purchasing power
- C. fair value
- D. current value
Answer: A
NEW QUESTION 41
Which one of the following statements is correct about using judgement in the financial reporting process?
- A. Accountants should not be allowed to use their own judgement.
- B. Use of individual judgement is required to choose between alternative methods available within accounting standards.
- C. Judgement can be allowed in the statement of comprehensive income but not in the statement of financial position.
- D. A true and fair view cannot be assured if individual judgement is allowed.
Answer: B
NEW QUESTION 42
A decrease in assets is most likely to be recognised in the financial report as
- A. a liability.
- B. revenue earned.
- C. an expense.
- D. a change in equity.
Answer: C
NEW QUESTION 43
Venturer Ltd has received fees from venture capital activities and has engaged you as the accountant to prepare the financial report for 31 December 20X0. Unable to find a specific reference to venture capital fees in either the conceptual framework or the accounting standards, you establish the appropriate accounting treatment by
- A. consulting with the International Accounting Standards Board.
- B. referring to the fundamental accounting assumptions and conventions.
- C. using your professional judgment and referring to the conceptual framework's definitions and recognition criteria.
- D. using your professional judgment and referring to generally accepted accounting principles and practice.
Answer: C
NEW QUESTION 44
Which one of the following best describes the objective of the International Financial Reporting Standards (IFRS) Foundation?
- A. to co-ordinate the accounting profession on a global scale by issuing and establishing international standards
- B. to guide investors who compare the financial statements of one entity in one country with those of another entity located elsewhere
- C. to promote the application, convergence and use of International Financial Reporting Standards (IFRS) as a high quality reporting solution
- D. to develop an International regulatory framework in the national jurisdictions of countries that produce accountants
Answer: C
NEW QUESTION 45
Which one of the following practices is not considered creative accounting?
- A. aggressive earnings management
- B. trading in derivatives
- C. profit smoothing
- D. window dressing
Answer: B
NEW QUESTION 46
The Framework for the Preparation and Presentation of Financial Statements which assists the development of the International Financial Reporting Standards (IFRS) was originally approved by the
- A. International Accounting Standards Committee (IASC).
- B. IFRS Interpretations Committee (IFRIC).
- C. International Accounting Standards Board (IASB).
- D. International Federation of Accountants (IFAC).
Answer: A
NEW QUESTION 47
Which accounting theory is best described by the statement 'An approach to accounting is one where a theory is thought of as a body of knowledge that explains and attempts to predict actual accounting practice'?
- A. normative accounting theory
- B. historical cost accounting theory
- C. general accounting theory
- D. positive accounting theory
Answer: D
NEW QUESTION 48
In relation to financial statements, the 'true and fair override' indicates that
- A. departure is allowed from accounting standards under specific instances to show a fair presentation.
- B. the true and fair requirement need not be complied with by certain industries.
- C. statements need not always be true and accurate.
- D. accounting standards must be complied with under all circumstances.
Answer: A
NEW QUESTION 49
In the context of a regulatory framework, a principles-based system
- A. attempts to cover specific eventualities.
- B. removes any element of judgement by providing clear requirements.
- C. is a rule-driven approach.
- D. provides a theoretical basis with broad terms of reference.
Answer: D
NEW QUESTION 50
Which one of the following is an advantage of current purchasing power accounting?
- A. It provides a clear use of indices which approximates the measurement of value.
- B. It enables raw data to be just easily verifiable but not auditable.
- C. It provides a stable monetary unit that values profit and capital.
- D. It supposes that value of net assets clearly reflects general goods and services are bought once assets were released.
Answer: C
NEW QUESTION 51
Financial information is reliable if it
I)prefers substance over legal form.
II)is neutral and without any material error.
III)is complete and has been made with prudence.
IV)is understandable to those with no knowledge of accounting.
- A. II, III and IV only
- B. I, II and III only
- C. I, III and IV only
- D. I, II and IV only
Answer: B
NEW QUESTION 52
Which one of these concepts suggests that stock prices react to new information almost instantly?
- A. incentive substitution
- B. market power
- C. efficient market
- D. bargaining power
Answer: C
NEW QUESTION 53
PLO Advertising Ltd (PLO) buys a new stretch limousine for $40 000. A number of individuals have expressed an interest in buying the limousine from PLO for $60 000. The board members decide that the limousine is worth between $65 000 and $70 000. What is the fair value of the limousine?
- A. $40 000
- B. $70 000
- C. $60 000
- D. $65 000
Answer: C
NEW QUESTION 54
The International Federation of Accountants (IFAC) was established by
- A. the International Accounting Standards Board.
- B. the United Nations.
- C. various professional accounting bodies.
- D. the Organization for Economic Co-operation & Development.
Answer: C
NEW QUESTION 55
The IASB evaluates the merits of adding a potential item to its agenda mainly by reference to the needs of
- A. investors.
- B. suppliers.
- C. regulatory authorities.
- D. tax agencies.
Answer: A
NEW QUESTION 56
Which one of the following describes the key advantage of the manual system of accounting?
- A. A thorough understanding of the business can be gained through it.
- B. Processing is maintained at a reasonable speed even while dealing with large volumes of data.
- C. The quality of output is not necessarily an issue.
- D. Corrections are easily managed as updating or recreating the whole document is not difficult.
Answer: A
NEW QUESTION 57
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