Worldatwork t7 practice test

Which of the following describes the concerns of Level 3 of the conceptual framework for financial
reporting?

• A. Basic objective
• B. Recognition, measurement, and disclosure concepts
• C. Fundamental concepts
• D. Elements of financial statements

Level 2 of the conceptual framework of International Accounting Standards Board (IASB) identifies
qualitative characteristics of accounting information. These characteristics distinguish more useful
information from less useful information.
To what end is this distinction useful?

• A. For reporting purposes
• B. For business strategy
• C. For decision-making purposes
• D. For organizational vision

Which fundamental qualitative characteristics make accounting information useful for decision-
making?

• A. Relevance and faithful representation
• B. Cost and materiality
• C. Assets and liability
• D. Income and expenses

Which of the following are ingredients of the fundamental characteristic of relevance?

• A. Cost and materiality
• B. Predictive value and confirmatory value
• C. Relevance and faithful representation
• D. Timeliness and understandability

The concept that numbers and descriptions must match what really existed or happened is
represented by which fundamental qualitative characteristic?

• A. Predictive value
• B. Complete
• C. Faithful representation
• D. Relevance

Which of the following are ingredients of the fundamental qualitative characteristics of faithful
representation?

• A. Complete, neutral, freedom from error
• B. Assets, liabilities, equity
• C. Predictive value, confirmatory value, relevance
• D. Comparability, verifiability, timeliness

Which of the following best defines the term “asset”?

• A. The residual interest in the assets of the entity after deducting all its liabilities.
• B. A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
• C. A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• D. Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants

Which of the following best defines the term “liability”?

• A. A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
• B. A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• C. Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
• D. Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants

Which of the following best defines the term “equity”?

• A. The residual interest in the assets of the entity after deducting all its liabilities
• B. A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• C. Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
• D. Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants

Why is faithful representation important in accounting documentation?

• A. It ensures neutrality on the part of the company’s accounting department
• B. It guarantees that all information is free from error
• C. It is useful if information represents what it purports to represent
• D. It indicates that accountants have confirmed all of the data