1.By focusing only on the income statement, we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the period.

Select one:

(a) True

(b) False

2.Total comprehensive income for the year is profit for the year plus other items of comprehensive income

Select one:

(a) True

(b) False

3.All expenses from operating activities must be classified according to either their nature or function.

Select one:

(a) True

(b) False

4. Accounts that represent cash or cash equivalents include:

A. bank overdrafts.

B. accounts receivable.

C. short-term money market deposits.

D. bank overdrafts and short-term money market deposits.

5. Changes in an entity's equity between the beginning and the end of the reporting period reflect

the increase or decrease in its:

A. liabilities during the period.

B. net profit for the period.

C. assets during the period.

D. net assets during the period.

6. 'Exchange rate' is:

A. not defined in AASB 121.

B. the difference between the currency rates.

C. the rate at which one currency can be exchanged for another.

D. all of the given answers.

7.Which of the following statements is an accurate description of the difference between a

legal entity and an economic entity?

A. An economic entity is one that combines one or more legal entities with synergy such that

they each make higher returns than they would individually. If an entity ceases to effectively

produce increased returns in this way it becomes uneconomic. A legal entity is one that is

recognised in law as having a separate existence from its owners.

B. A legal entity is one that uses appropriate corporate governance measures to ensure that it

abides by legislative requirements and other legal regulations. An economic entity may span

more than one legal entity, but is not a legal entity in itself.

C. An economic entity is one that is formed for the purpose of generating a profit and therefore a

return to owners. A legal entity is one that is circumscribed by legal constitution or accounting

standards as constituting a reporting entity.

D. A legal entity refers to an entity that has its own particular legal status such as a company,

trust or partnership. The concept of an economic entity emphasises substance over legal form. It

may operate as a coordinated entity and contain more than one legal entity.