Which one of the following statements is correct in relation to presenting the financial position of an entity?

A. Liquidity represents cash holdings, while solvency is long-term profitability.

B. Liquidity is the ability to repay long-term financial commitments, whereas solvency is the ability to repay short-term commitments.

C. Solvency is the availability of cash over the long-term, while liquidity is the availability of funds over the short-term to meet financial commitments as they fall due.

D. Solvency is the availability of total assets over a long-term, while liquidity is the availability of total assets over the short-term to meet financial commitments as they fall due.

A decision has been made to change the value of a major non-current asset, upon which depreciation is based, from original cost to a revalued amount. This results in a change in

A. measurement basis and must be disclosed.

B. accounting estimate and must be disclosed.

C. measurement basis and does not need to be disclosed.

D. accounting estimate and does not need to be disclosed.

JK Ltd intentionally over-valued its closing inventories to increase profitability for the year 20X8. This would help them to better price a planned share issue in 20X9. By doing this they have breached the concept of

A. neutrality.

B. completeness.

C. understandability.

D. substance over form.

In an efficient market, normally if interest rates rise, share prices will

A. rise due to the overall positive sentiment.

B. fall since investors expect a higher return.

C. rise since banks invest their increased profits.

D. fall in anticipation of a reversal in the interest rate cycle.

Which of the following statements are correct in the context of accounting concepts and principles?
I)The going concern assumption requires that assets be carried at their cost values.
II)Prudence allows the creation of contingency reserves and more generous provisions.
III)Financial information is considered complete even if it excludes non-material information.
IV)Understandability does not require complex information to be excluded from financial reports.

A. I and III only

B. II and III only

C. II and IV only

D. III and IV only

Which one of the following contributes to an efficient capital market?

A. having stock markets in every country

B. information about the stock market can be obtained cheaply

C. stock markets ensuring that companies do not overcharge for their products

D. stock markets being managed by directors of companies that are listed on the stock market

According to the IASB Conceptual Framework, income is an increase in economic benefits in the form of I)inflows.
II)decreases of liabilities.
III)enhancements of assets.
IV)contributions from 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

The International Accounting Standards Board's Conceptual Framework for Financial Reporting for the preparation and presentation of financial statements is concerned with the information needs of most users, but not for each possible user.
Which one of the following stakeholders would not be one of the users that the Conceptual Framework is concerned about?

A. potential investors in the company

B. governments and regulatory bodies

C. a company's executive management

D. members of the public who have small investment holdings in the company

Historical cost accounting provides financial information that is

A. relevant for decision making.

B. relevant and reliable for decision making.

C. relevant but may not be reliable for decision making.

D. reliable but may not be relevant for decision making.

Which one of the following statements is correct?

A. Australian accounting standards are based on the US GAAP.

B. Accounting standards prescribe the possible accounting treatments.

C. Accounting standards are developed and maintained using a consultative process with the OECD.

D. Accounting standards provide the basic knowledge upon which the conceptual framework is developed.

Financial managers will benefit in a strongly efficient market by

A. being able to take more risks without shareholders' consent.

B. having their shareholders invest more money into expanding the company's operations.

C. being able to decide what information needs to be made available to shareholders.

D. having their shareholders be tolerant of low profits if higher profits are expected in the future.

According to the IASB's Conceptual Framework, the key reason general purpose financial statements are produced is to satisfy the information needs of

A. employees.

B. management.

C. internal users

D. capital providers.