ICAEW Q Bank Questions and Answers
Verified by Experts
According to the IASB's Conceptual Framework, information on which two of the following
areas can help users identify the reporting entity's financial strengths and weaknesses?
A The economic resources it controls
B Its financial performance in the past
C The demographic structure of the local economy
D The entity's claims (the entity's liabilities)
E Its management structure Correct Answ_A,D The IASB's Conceptual Framework states
that information about the economic resources (A) and claims (D) of an entity can help users to
identify the reporting entity's financial strengths and weaknesses. That information can then be
used to help users to assess the reporting entity's liquidity and solvency.
According to IAS 1, Presentation of Financial Statements which two of the following are
objectives of financial statements?
A To show the results of management's stewardship of the resources entrusted to it
B To provide a basis for valuing the entity
C To provide information about the financial position, financial performance and cash flows of
an entity that is useful to a wide range of users in making economic decisions
,D To facilitate comparison of financial performance between entities operating in different
industries
E To assist management and those charged with governance in making timely economic
decisions about deployment of the entity's resources Correct Answ_A,C International
Accounting Standard 1 (IAS 1), Presentation of Financial Statements provides the objective of
financial statements. It states that the objective of financial statements is to provide information
about the financial position, financial performance and cash flows of an entity that is useful to a
wide range of users in making economic decisions (C). In addition it states that the financial
statements also show the results of management's stewardship of the resources entrusted to it
(A).
Information is relevant if it is capable of making a difference in the decisions made by users.
According to the IASB's Conceptual Framework, financial information is capable of making a
difference in decisions if it has which of the following?
1 Predictive value 2 Comparative value
3 Historic value 4 Confirmatory value
A 1 and 3 only B 2 and 4 only
C 1 and 4 only D 2 and 3 only Correct Answ_C 1 and 4 only. Financial information can
make a difference to decisions if it has predictive value (it can be used to predict future
outcomes) or confirmatory value (it provides feedback about previous evaluations).
,The accounting principle which, in times of rising prices, tends to understate asset values and
overstate profits, is:
A going concern
B accruals
C consistency
D historical cost Correct Answ_D The historical cost convention
Which of the following statements about accounting concepts and the characteristics of financial
information is correct?
A Financial statements are required to give a true and fair view. These terms have clear
definitions which are included in IAS 1, Presentation of Financial Statements.
B The historical cost concept means that only items capable of being measured in monetary
terms can be recognised in financial statements.
C It may sometimes be necessary to exclude information that is relevant and reliable from
financial statements because it is too difficult for some users to understand.
D A specific disclosure requirement of an IFRS Standard need not be satisfied if the information
is immaterial. Correct Answ_D While financial statements are required to give a true and fair
view, these terms are not defined in statute, they tend to be determined in courts of law or on the
facts (A). Recognition of items on the basis of monetary amounts is the money measurement
, concept, not the historical cost concept (B). Items should not be excluded on the basis of being
difficult to understand (C).
Listed below are two comments on accounting conventions.
1 According to the IASB's Conceptual Framework, financial information must be either relevant
or faithfully represented if it is to be useful.
2 Materiality means that only items having a physical existence may be recognised as assets.
Which, if either, of these comments is correct?
A 1 only
B 2 only
C Both of them
D Neither of them Correct Answ_D 1 Information must be both relevant and faithfully
represented to be useful. 2 Materiality concerns whether an item in the financial statements can
influence users' decisions; there is no absolute amount that makes an item material.
Which of the following is the best description of fair presentation in accordance with IAS 1,
Presentation of Financial Statements?
A The financial statements are accurate.
B The financial statements are as accurate as possible given the accounting systems of the
organisation.
Verified by Experts
According to the IASB's Conceptual Framework, information on which two of the following
areas can help users identify the reporting entity's financial strengths and weaknesses?
A The economic resources it controls
B Its financial performance in the past
C The demographic structure of the local economy
D The entity's claims (the entity's liabilities)
E Its management structure Correct Answ_A,D The IASB's Conceptual Framework states
that information about the economic resources (A) and claims (D) of an entity can help users to
identify the reporting entity's financial strengths and weaknesses. That information can then be
used to help users to assess the reporting entity's liquidity and solvency.
According to IAS 1, Presentation of Financial Statements which two of the following are
objectives of financial statements?
A To show the results of management's stewardship of the resources entrusted to it
B To provide a basis for valuing the entity
C To provide information about the financial position, financial performance and cash flows of
an entity that is useful to a wide range of users in making economic decisions
,D To facilitate comparison of financial performance between entities operating in different
industries
E To assist management and those charged with governance in making timely economic
decisions about deployment of the entity's resources Correct Answ_A,C International
Accounting Standard 1 (IAS 1), Presentation of Financial Statements provides the objective of
financial statements. It states that the objective of financial statements is to provide information
about the financial position, financial performance and cash flows of an entity that is useful to a
wide range of users in making economic decisions (C). In addition it states that the financial
statements also show the results of management's stewardship of the resources entrusted to it
(A).
Information is relevant if it is capable of making a difference in the decisions made by users.
According to the IASB's Conceptual Framework, financial information is capable of making a
difference in decisions if it has which of the following?
1 Predictive value 2 Comparative value
3 Historic value 4 Confirmatory value
A 1 and 3 only B 2 and 4 only
C 1 and 4 only D 2 and 3 only Correct Answ_C 1 and 4 only. Financial information can
make a difference to decisions if it has predictive value (it can be used to predict future
outcomes) or confirmatory value (it provides feedback about previous evaluations).
,The accounting principle which, in times of rising prices, tends to understate asset values and
overstate profits, is:
A going concern
B accruals
C consistency
D historical cost Correct Answ_D The historical cost convention
Which of the following statements about accounting concepts and the characteristics of financial
information is correct?
A Financial statements are required to give a true and fair view. These terms have clear
definitions which are included in IAS 1, Presentation of Financial Statements.
B The historical cost concept means that only items capable of being measured in monetary
terms can be recognised in financial statements.
C It may sometimes be necessary to exclude information that is relevant and reliable from
financial statements because it is too difficult for some users to understand.
D A specific disclosure requirement of an IFRS Standard need not be satisfied if the information
is immaterial. Correct Answ_D While financial statements are required to give a true and fair
view, these terms are not defined in statute, they tend to be determined in courts of law or on the
facts (A). Recognition of items on the basis of monetary amounts is the money measurement
, concept, not the historical cost concept (B). Items should not be excluded on the basis of being
difficult to understand (C).
Listed below are two comments on accounting conventions.
1 According to the IASB's Conceptual Framework, financial information must be either relevant
or faithfully represented if it is to be useful.
2 Materiality means that only items having a physical existence may be recognised as assets.
Which, if either, of these comments is correct?
A 1 only
B 2 only
C Both of them
D Neither of them Correct Answ_D 1 Information must be both relevant and faithfully
represented to be useful. 2 Materiality concerns whether an item in the financial statements can
influence users' decisions; there is no absolute amount that makes an item material.
Which of the following is the best description of fair presentation in accordance with IAS 1,
Presentation of Financial Statements?
A The financial statements are accurate.
B The financial statements are as accurate as possible given the accounting systems of the
organisation.
