Which of the following statements is correct in relation to the assumptions to be made when preparing financial reports?

Select one:

There is an assumption that more information is better than less.

There is one underlying assumption which is that financial reports are prepared on a going concern basis.

The Conceptual Framework requires that several assumptions be made when preparing financial reports.

There are no assumptions to be made when preparing financial reports.

Information produced using historical cost as the measurement base is considered:

Select one:

Less relevant.

More comparable.

Less faithfully represented.

All of the above.

Which of the following would indicate that market is inactive?

Select one:

Little information is publicly available.

Price quotations don't reflect current information.

Indices are demonstrably uncorrelated with recent indications of fair valuation.

All of the abov

An example of how theory can predict accounting practice is:

Select one:

capital market theory.

asset recognition theory.

agency theory.

corporate social responsibility theory.

How can theories be of benefit in accounting?

Select one:

they assist us in describing and explaining current accounting practice only.

they assist us to improve accounting practice and they provide principles to take into account when taking action or making decisions.

they assist us to predict and improve accounting practice only.

they help to identify problems and deficiencies with current accounting practice but do not assist us in improving accounting practice.

Agency theory would hold that managers on compensation contracts which have bonuses tied to a current measure of performance would prefer to:

Select one:

Expense transactions rather than capitalise them.

Be indifferent to expensing or capitalising transactions.

Smooth income using either expensing or capitalising.

Capitalise transactions rather than expense them.