FAC1601 - Assessment 01 Solutions - 2026 Semester 2 - Distinction

LEARNING UNIT 1:

QUESTION 1

Which of the following statements is correct:

1. A liability is a future obligation of a reporting entity to transfer an economic resource as a
result of a past event.
2. The accounting equation is: Liabilities + Assets = equity
3. The value of a reporting entity lies in the net assets (assets minus liabilities) under its
control. (Study guide feedback 1.2.5)
4. Equity is the residual interest in the assets of the entity after deducting all the expenses.

QUESTION 2

The definition of an asset is:

1. A present economic resource controlled by a reporting entity as a result of a future event.
2. A future economic resource controlled by a reporting entity as a result of a past event.
3. A future economic resource controlled by a reporting entity as a result of a future event.
4. A present economic resource controlled by a reporting entity as a result of a past event.
(Study guide feedback 1.4)

QUESTION 3

Which of the following measurement bases will often be encountered in a set of financial
statements:

1. Present value
2. Historical cost
3. Fair value
4. All of the above (Study guide 1.2.7)

QUESTION 4

The statement of financial position consists of three elements namely:

1. assets, income and expenses
2. assets, liabilities and equity (paragraph 1.4.5.2)
3. liabilities, equity and expenses
4. liabilities, income and expenses

QUESTION 5

BenMo purchased a MAN printing press for their printing business. Which one of the following
expenses should not be included in the cost the machine:

1. Maintenance and repair costs (learning unit 1 – exercise 1.3 principle)

, 2. Delivery costs
3. Installation costs
4. Printing press machine cost

QUESTION 6

Insurance expenses paid in advance by an entity at the end of its financial year is recorded in
the financial statements as:

1. an expense in the statement of changes in equity
2. a prepayment in the current assets section of the statement of financial position. (Learning
unit 1, principles under 1.2.5)
3. a prepayment in the non-current assets section of the statement of financial position.
4. an expense in the statement of profit or loss and other comprehensive income.

QUESTION 7

Which one of the following alternatives is incorrect?

1. The purpose of the Conceptual Framework is to assist in harmonising legislation and
reducing the number of alternative accounting treatments.
2. The purpose of the Conceptual Framework is to override any particular disclosure or
measurement requirement in any IFRS (Learning unit 1 Feedback 1.1)
3. The purpose of the Conceptual Framework is to assist in developing future standards.
4. The purpose of the Conceptual Framework is to assist users in interpreting the information
in interpreting the financial statements when compiled according to IFRS.

QUESTION 8

Telephone expense in arrears (unpaid) at the end of an entity’s financial year will be recorded
in the general journal of the entity by:

1. Debiting telephone expense and crediting bank
2. Debiting accrued expense and crediting bank
3. Debiting telephone expense and crediting accrued expense (Learning unit 1 principles in
1.2.5 and learning unit 2 accrued expense referenced in exercise 2.1)
4. Debiting bank and crediting telephone expense

QUESTION 9

Relevance and faithful representation are the…

1. enhancing qualitative characteristics of financial reporting as stipulated in the Conceptual
Framework.
2. fundamental qualitative characteristics of financial reporting as stipulated in IFRS.
3. fundamental qualitative characteristics of financial reporting as stipulated in the
Conceptual Framework. (Learning unit 1, Activity 1.3)
4. enhancing qualitative characteristics of the disclosure requirements as stipulated in IFRS.