Question 1

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 2

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

Question 3

Which one of the following is not a function of the trustees of the International Financial Reporting Standards Foundation (IFRS Foundation)?

Options :

A : ensuring the financing of the International Accounting Standards Board (IASB)

B : appointing the members of the International Accounting Standards Board (IASB)

C : promoting the application of International Financial Reporting Standards (IFRSs)

D : providing suggestions on technical matters relating to accounting standards

Answer: D

Question 4

A company purchased a machine 10 years ago for $143 890. It is expected that the machine will generate future revenues of $108 495. The machine could be scrapped for $81 232. An equivalent machine in the same condition would cost $94 950 to buy now. What is the deprival value of the asset?

Options :

A : $35 395

B : $81 232

C : $94 950

D : $108 495

Answer: C

Question 5

In the context of a regulatory framework, a principles-based system

Options :

A : is a rule-driven approach.

B : attempts to cover specific eventualities.

C : provides a theoretical basis with broad terms of reference.

D : removes any element of judgement by providing clear requirements.

Answer: C

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