ACC341 - Topic 7

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Quiz by mentor, updated more than 1 year ago
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Quiz on ACC341 - Topic 7, created by mentor on 15/09/2014.

Resource summary

Question 1

Question
If historical cost profits are all distributed in dividends during times of rising inventory prices, this will lead to (assuming other things being equal):
Answer
  • A reduction in financial capital
  • An erosion of operating capacity
  • No effect on capital
  • None of the given options is correct.

Question 2

Question
Which of the following statements about holding gain (cost savings) in the CCA model is false?
Answer
  • Unrealised savings include gains (cost saving) from holding inventory that has increased in price, which have yet to be realised.
  • Realised savings relate to cost savings in inventory actually incurred, and gains (cost savings) relate to depreciation actually incurred.
  • Unrealised savings include gains (cost savings) from holding depreciable assets (with higher replacement costs) not yet realised through the process of depreciation.
  • All of the given options are correct.

Question 3

Question
Which of the following characteristics is not included in Continuously Contemporary Accounting (CoCoA), as proposed by Chambers?
Answer
  • It provides information about an entity's capacity to adapt to changing circumstances using its cash and cash equivalents.
  • All assets are valued in the Balance Sheet based on their exit (net selling) prices.
  • Profit is defined as the amount that can be distributed while maintaining operating capacity intact.
  • Unlike CCA, CoCoA does not make a distinction between realised and unrealised gains (cost savings).

Question 4

Question
Which of the following is not a perceived advantage in developing a conceptual framework project?
Answer
  • Standard-setters will be less accountable for their decisions.
  • Setting accounting standards will be more economical, despite the resources needed to develop the conceptual framework and standards.
  • It will result in a reduced number of accounting standards where issues are covered by the conceptual framework.
  • It will provide a defence and enhance the legitimacy of the accounting profession.

Question 5

Question
What does the political legitimacy argument, as outlined by Hines (1991), suggest?
Answer
  • The accounting profession consists of experts in technical knowledge of accounting and should therefore be given authority to regulate accounting.
  • The accounting profession used the development of the conceptual framework as a strategy to promote their self-regulation interests.
  • The conceptual framework provides the authority to resolve technical issues with authority and legitimacy.
  • As users are politically involved in developing the conceptual framework, the outcome has political legitimacy.
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