QUESTIONS

1 The context and purpose of financial reporting 34 mins

1.1 Who issues International Financial Reporting Standards?

A The IFRS Advisory Committee
B The stock exchange
C The International Accounting Standards Board
D The government (2 marks)

1.2 Which groups of people are most likely to be interested in the financial statements of a sole trader?
1 Shareholders of the company
2 The business's bank manager
3 The tax authorities
4 Financial analysts
A 1 and 2 only A
B 2 and 3 only
C 2, 3 and 4 only C
D 1, 2 and 3 only (2 marks)
C
1.3 Identify, by indicating the relevant box in the table below, whether each of the following statements is
true or false.
A
A supplier of goods on credit is True False
interested only in the statement
of financial position, ie an
G
indication of the current state L
of affairs.
The objective of financial True False O
statements is to provide
information about the financial
B
position, performance and A
changes in financial position of
an entity that is useful to a L
wide range of users in making
economic decisions.
(2 marks) B
1.4 Which of the following are advantages of trading as a limited liability company?
O
1 Operating as a limited liability company makes raising finance easier because additional shares X
can be issued to raise additional cash.
.
2 Operating as a limited liability company is more risky than operating as a sole trader because the
shareholders of a business are liable for all the debts of the business whereas the sole trader is C
only liable for the debts up to the amount he has invested.
O
A 1 only
B 2 only M
C Both 1 and 2
D Neither 1 or 2 (2 marks)

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FFA/FA FINANCIAL ACCOUNTING

1.5 Which of the following best describes corporate governance?

A Corporate governance is the system of rules and regulations surrounding financial reporting.
B Corporate governance is the system by which companies and other entities are directed and
controlled.
C Corporate governance is carried out by the finance department in preparing the financial
statements.
D Corporate governance is the system by which an entity monitors its impact on the natural
environment. (2 marks)

1.6 Identify which of the following statements are true or false.

1 The directors of a company are ultimately responsible for the preparation of financial statements,
even if the majority of the work on them is performed by the finance department.
2 If financial statements are audited, then the responsibility for those financial statements instead
falls on the auditors instead of the directors.
3 There are generally no laws surrounding the duties of directors in managing the affairs of a
company.
A 1 only
B 2 only
C 2 and 3 only
D 1 and 3 only (2 marks)

1.7 Which ONE of the following statements correctly describes the contents of the Statement of Financial
Position?
A A list of ledger balances shown in debit and credit columns
B A list of all the assets owned and all the liabilities owed by a business
C A record of income generated and expenditure incurred over a given period
D A record of the amount of cash generated and used by a company in a given period
(2 marks)

1.8 Which ONE of the following statements correctly describes the contents of the Statement of Profit or
Loss?
A A list of ledger balances shown in debit and credit columns
B A list of all the assets owned and all the liabilities owed by a business
C A record of income generated and expenditure incurred over a given period
D A record of the amount of cash generated and used by a company in a given period
(2 marks)

1.9 Which of the following are TRUE of partnerships?

1 The partners' individual exposure to debt is limited.
2 Financial statements for the partnership by law must be produced and made public.
3 A partnership is not a separate legal entity from the partners themselves.
A 1 and 2 only
B 2 only
C 3 only
D 1 and 3 only (2 marks)

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 QUESTIONS

1.10 Which of the following statements is/are true?

1 Directors of companies have a duty of care to show reasonable competence in their management
of the affairs of a company.
2 Directors of companies must act honestly in what they consider to be the best interest of the
company.
3 A Director's main aim should be to create wealth for the shareholders of the company.
A 1 and 2 only
B 2 only
C 1, 2 and 3
D 1 and 3 only (2 marks)

1.11 Which of the following statements is/are true?

1 The IFRS Interpretations Committee is a forum for the IASB to consult with the outside world.
2 The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the IASB. A
3 One of the objectives of the IFRS Foundation is to bring about convergence of national accounting C
standards and IFRSs.
C
A 1 and 3 only
B 2 only A
C 2 and 3 only
D 3 only (2 marks)

1.12 What is the role of the IASB?

G
A Oversee the standard setting and regulatory process
L
B Formulate international financial reporting standards O
C Review defective accounts
D Control the accountancy profession (2 marks) B
1.13 Which ONE of the following is NOT an objective of the IFRS Foundation? A
A Through the IASB, develop a single set of globally accepted International Financial Reporting L
Standards (IFRSs)
B Promote the use and rigorous application of International Financial Reporting Standards (IFRSs)
C Ensure International Financial Reporting Standards (IFRSs) focus primarily on the needs of
B
global, multi-national organisations O
D Bring about the convergence of national accounting standards and IFRSs (2 marks) X
1.14 Which ONE of the following statements correctly describes how International Financial Reporting .
Standards (IFRSs) should be used?
A To provide examples of best financial reporting practice for national bodies who develop their own
C
requirements O
B To ensure high ethical standards are maintained by financial reporting professionals
internationally
M
C To facilitate the enforcement of a single set of global financial reporting standards
D To prevent national bodies from developing their own financial reporting standards
(2 marks)

(Total = 28 marks)

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