Free Financial-Accounting-and-Reporting Practice Test Questions 2026

Which one of the following bases of measurement is used to implement an approach to capital maintenance based on maintaining the operating capability of a business?

A. fair value

B. current value

C. deprival value

D. current purchasing power

The chairperson of XYZ Company is concerned about the readability of the annual financial report that is about to be published on its website. XYZ Company is obliged to comply with International Financial Reporting Standards, and the report contains all of the required financial statements, the auditor's report, corporate governance statements, declarations of accounting policy, explanatory notes and a section that addresses the company's corporate social responsibility program.
The chairperson is wondering whether the report can be condensed. The issue that is concerning the chairperson is known as

A. information overload.

B. the cost of compliance.

C. the agency costs of monitoring

D. the costs of social responsibility reporting

Which one of the following is not an advantage of accounting regulation?

A. It provides quality of information in and across financial statements.

B. It provides flexibility in the way accounting information is presented to users.

C. It provides the required accounting information to all necessary shareholders.

D. It instils public confidence in the accounting system employed in commerce and industry.

Which one of the following is an accurate definition of fair value of an asset?

A. The cost of replacing an asset with an identical item.

B. The price for which an asset could be sold net of disposal costs.

C. The amount yet to be written off over the remainder of the asset's useful life.

D. The price for which an asset could be sold in an orderly transaction between market participants at the measurement date.

Which one of the following is the correct treatment of sales?

A. Cash sales are recorded in the receivables ledger prior to posting to the general ledger.

B. Credit sales are recorded in the receivables ledger prior to posting to the general ledger.

C. Cash and credit sales are recorded in the receivables ledger prior to posting to the general ledger.

D. Credit sales are not recorded in the receivables ledger prior to posting to the general ledger.

A company sold some old operating equipment from its factory. After depreciation was accounted for, a small gain on sale was recorded. According to the revised IAS 1 Presentation of Financial Statements, this transaction will be shown as a separate item 'gain on sale of equipment'. This item will be shown in the statement of

A. cash flow.

B. financial position.

C. changes in equity.

D. comprehensive income.

A rules-based approach to standard setting

A. provides a broad framework for standard setting.

B. helps a standard-setting body to prioritise matters.

C. prescribes standards that attempt to cover all eventualities a business may face.

D. ensures there are no conflicts within accounting standards as each issue is handled just once.

Which one of the following best describes the objective of the International Financial Reporting Standards (IFRS) Foundation?

A. to co-ordinate the accounting profession on a global scale by issuing and establishing international standards

B. to develop an International regulatory framework in the national jurisdictions of countries that produce accountants

C. to guide investors who compare the financial statements of one entity in one country with those of another entity located elsewhere

D. to promote the application, convergence and use of International Financial Reporting Standards (IFRS) as a high quality reporting solution

Which one of the following statements differentiates semi-strong form efficiency from strong form efficiency in the context of the efficient market hypothesis?

A. Semi-strong form efficiency addresses operational efficiency whereas strong form efficiency aims to address allocative efficiency.

B. Semi-strong form efficiency reflects all past price movements whereas strong form efficiency reflects future share price movements.

C. Semi-strong form efficiency does not reflect all publicly available information whereas strong form efficiency does incorporate all publicly available information.

D. Semi-strong form efficiency does not reflect knowledge whereas strong form efficiency considers knowledge in addition to publicly available information and past price movements.

Which one of the following includes social reporting guidelines?

A. Global Reporting Initiative (GRI)

B. International Accounting Standards (IAS)

C. Generally Accepted Accounting Principles (GAAP)

D. International Financial Reporting Standards (IFRS)

The use of the principle of substance over form is found in which one of the following accounting treatments?

A. accounting for inventories

B. accounting for finance leases

C. accounting for non-current assets

D. accounting for property, plant and equipment

According to IASB's Conceptual Framework, an expense is a decrease in economic benefits in the form of I.
outflows.
II.
decreases of assets.
III.
incurrences of liabilities.
IV.
contributions to equity holders.

A. I, II and III only

B. I, II and IV only

C. I, III and IV only

D. II, III and IV only