Financial Statements - Theory
Financial Statements - Theory
Financial Statements - Theory
A complete set of financial statements includes all of the following components, except
a. To provide information about the financial position, financial performance and changes in financial
3. The primary responsibility for the preparation of the financial statements is reposed in
b. Internal auditor
c. External auditor
d. Controller
b. Income statement
C. The fact that amounts presented in the financial statements are not entirely comparable.
d. The fact that similar entities in the geographical area in which the entity operates have done so.
b. Accounting policies
C. An auditor's report
5. An entity shall clearly identify each financial statement and display all of the following, except
d. Whether the financial statements cover the individual entity or a group of entities.
1. Which statement is incorrect concerning fair presentation of financial statements?
a. Fair presentation requires the faithful representation of the effects of transactions and other events.
b. Financial statements shall present fairly the financial position, financial performance and cash flows of
an entity.
c. In virtually all circumstances, a fair presentation is achieved by compliance with applicable PFRS.
d. An entity whose financial statements comply with PFRS shall not make an explicit and unreserved
statement of such compliance in notes.
a. To present information in a manner that provides relevant and faithfully represented financial
information.
b. To provide additional disclosures when compliance with specific PFRS is insufficient to understand the
financial position and financial performance.
d. To rectify inappropriate accounting policies either by disclosure of the accounting policies used or by
notes or explanatory information.
c. Management has no realistic alternative but to cease the operations of the entity.
4. An entity is permitted to depart from a particular standard if all of the following conditions are
satisfied, except
b. When management concludes that compliance with the standard would be misleading.
c. When the departure from the standard is necessary to achieve fair presentation.
d. When the Conceptual Framework for Financial Reporting prohibits such a departure.
5. The effects of transactions and other events on economic resources and claims are depicted in the
periods in which those effects occur even if the resulting cash receipts and payments occur in a different
period.
a. Accrual accounting
b. Cash accounting
c. Modified accrual accounting
a. Annually
b. Quarterly
c. Semiannually
d. Gain or loss from disposal of noncurrent asset is reported by deducting from the proceeds the carrying
amount of the asset and the related disposal cost.
8. The presentation and classification of items in the financial statements shall be retained from one
accounting period to the next.
a. Consistency of presentation
b. Materiality
c. Aggregation
d. Comparability
9. A third statement of financial position as at beginning of the earliest comparative period presented is
required
retrospectively.
a. General purpose financial statements do not and cannot provide all of the information that primary
users need.
b. General purpose financial statements are designed to show the value of the reporting entity.
c, General purpose financial statements are intended to provide common information to users.
d. Financial statements are largely based on estimate and judgment rather than exact depiction.
2. Materiality depends on
c. The relative size and nature of the omission or misstatement judged in the surrounding circumstances.
d. The judgment of management.
b. The previous comparable period for all amounts and for all narrative and descriptive information.
c. The previous comparable period for all amounts and for all narrative and descriptive information when
it is relevant to an understanding of the current period's financial statements.
4. When the classification of items in the financial statements is changed, the entity
c. To provide information useful to assess the amount, timing and uncertainty of prospective cash
receipts.
1. During a period when an entity is under the direction of a particular management, financial reporting
will directly provide information about
d. Individual business entities, industries and an economy rather than to members of society as
consumers
a. Financial reporting shall provide information about resources, claims against resources and changes in
them.
c. Financial reporting shall provide information useful in investment, credit and similar decision.
d. Financial reporting shall provide information useful in assessing cash flow prospects.
1. Which would likely prepare the most accurate financial forecast for an entity based on empirical
evidence?
a. Investors using statistical models
b. Corporate management
c. Financial analysts
c. Information regarding the accounting policies used d. Information regarding the results obtained by
using a wide variety of accounting policies
b. It provides a better indication of ability to generate cash flows than cash basis.
c. It recognizes revenue when cash is received and expenses when cash is paid.
c. Are not highly precise because estimate and judgment must be made.