Question 1

Liquidity of a company is based on its ability to

Options :

A : buy back shares.

B : meet long term commitments.

C : pay dividends to shareholders.

D : meet short term commitments.

Answer: D

Question 2

Which one of the following statements regarding the IASB's Conceptual Framework for Financial Reporting is correct?

Options :

A : It overrides any local or international accounting standard.

B : It specifies the concepts that underlie the preparation and presentation of special purpose financial statements.

C : It specifies the concepts that underlie the preparation and presentation of general purpose financial statements.

D : It specifies the concepts that underlie the preparation and presentation of only consolidated financial statements.

Answer: C

Question 3

Which of the following statements are correct in the context of accounting concepts and principles?

I)The going concern assumption requires that assets be carried at their cost values.

II)Prudence allows the creation of contingency reserves and more generous provisions.

III)Financial information is considered complete even if it excludes non-material information.

IV)Understandability does not require complex information to be excluded from financial reports.

Options :

A : I and III only

B : II and III only

C : II and IV only

D : III and IV only

Answer: D

Question 4

Which one of the following statements is correct in relation to presenting the financial position of an entity?

Options :

A : Liquidity represents cash holdings, while solvency is long-term profitability.

B : Liquidity is the ability to repay long-term financial commitments, whereas solvency is the ability to repay short-term commitments.

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 : 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.

Answer: C

Question 5

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

Options :

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 generally accepted accounting principles and practice.

D : using your professional judgment and referring to the conceptual framework's definitions and recognition criteria.

Answer: D

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