Question 3

Question 3.1

In which financial statement would the balance of shares be disclosed?

1. Statement of financial position

2. Statement of profit or loss and other comprehensive income

3. Statement of cash flows

4. Statement of changes in equity

Question 3.2

Recognition is the process of:

1. Capturing, for inclusion in the statement of financial position or the statement(s) of financial profit or loss and other comprehensive income, an item that meets the definition of one of the elements of the financial statements; an asset, a liability, equity, income or expenses.

2. Determining where an item should be presented in the financial statements

3. Adding together of assets, liabilities, equity, income or expenses that have shared characteristics

4. Sorting assets, liabilities, equity, income or expenses on the basis of shared characteristics

Question 3.3 The best definition of assets is the.

1. Owners investment in the business.

2. Collections of resources belonging to the business and the claims on these resources.

3. Cash owned by the business.

4. Resources belonging to a business that have future benefit to the business.

Question 3.4

The fundamental qualitative characteristics of useful financial information are:

1. Comparability and relevance

2. Comparability, relevance and faithful representation

3. Relevance and reliability

4. Relevance and faithful representation

Question 3.5 The objective of general purpose financial reporting as described in the Conceptual Framework is to:

1. Provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity.

2. Support the entity on matters relating to tax return and compliance thereto.

3. Meet the information needs of an entitys stakeholders.

4. Provide information to regulators.

Question 3.6

The purpose of the Conceptual Framework is:

1. To establish a framework that can override any specific requirement of International Financial Reporting Standard.

2. To assist the International Accounting Standards Board to develop International Financial Reporting Standards.

3. To assist accountants to understand and interpret International Financial Reporting Standards.

4. To assist preparers of financial statements to develop consistent accounting policies in instances when there is a Standard applicable to a particular transaction or other event, or when a Standard allows a choice of accounting policies.

Question 3.7 The right to receive money in the future is called a..

1. Revenue

2. Liability

3. Account receivable

4. Account payable

Question 3.8 The year-end of Mbuzana Traders, a business entity owned by Mr Zulu, is 31 December. On 1 January 2021, the statement received from the municipality showed that the company had overpaid by R2 500. Mbuzana Traders received electricity accounts for the four quarters starting 1 January 2021 and ending 31 December 2021 for R3 500, R3 570, R2 750 and R3 000 respectively. On 31 December 2021, the municipal account reflected a balance of R2 000 owing. Which one of the following alternatives represents the correct amount that must be disclosed as electricity expense in the statement of profit or loss and other comprehensive income of Mbuzana Traders for the year ended 31 December 2021?

1. R12 500

2. R17 320

3. R17 500

4. R13 500

5. R 8 500

Question 3.9 Under what circumstances can the profit on an equity instrument carried at fair value be recorded in other comprehensive income?

1. When the profit or loss is capable of recycling

2. When the equity investment is available for sale

3. When the equity investment is held for trading

4. When the equity investment is not held for trading

Question 3.10

Which one of the following alternatives is correct?

1. All income and expenses included in profit or loss arise from ordinary activities of the entity.

2. Income and expenses included in other comprehensive income are always recycled into the statement of profit or loss at the end of the holding period of the related asset or liability.

3. The statement of profit or loss is the only source of information about an entitys financial performance for the period.

4. In principle, all income and expenses are included in the statement of profit or loss.

Question 3.11

Which one of the following expenses should be included in cost of inventories sold during the year?

1. Carriage on purchases

2. Insurance on deliveries

3. Carriage on sales

4. Depreciation on delivery vehicle

Question 3.12

Which one of the following measurement bases is not categorised as part of the current value measurement base in the Conceptual Framework?

1. Value in use

2. Current cost

3. Fair value

4. Transaction cost

Question 3.13 Which one of the following statements is correct?

1. The statement of profit or loss and other comprehensive income has to show the results for one year

2. The statement of profit or loss and other comprehensive income includes dividends paid.

3. The statement of profit or loss and other comprehensive income illustrates a business financial performance.

4. The statement of profit or loss and other comprehensive income illustrates a business financial position.

Question 3.14

Which type of adjustment occurs when cash is either received or paid, but the related income or expense is not reportable in the current period?

1. Offsetting

2. Aggregation

3. Accrual

4. Cash