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CPA Australia CPA Financial Accounting and Reporting Sample Questions:

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

A) 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.
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B) 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.
C) Liquidity represents cash holdings, while solvency is long-term profitability.
D) Liquidity is the ability to repay long-term financial commitments, whereas solvency is the ability to repay short-term commitments.

2. LMN Ltd recently changed the measurement base for their assets. They should I)treat this like a change in an estimate.
II)treat this like a change in the accounting policy.
III)disclose this in the notes to financial statements.

A) I only
B) II and III only
C) I and III only
D) III only

3. Which one of the following statements is correct?

A) Accounting standards are developed and maintained using a consultative process with the OECD.
B) Accounting standards prescribe the possible accounting treatments.
C) Accounting standards provide the basic knowledge upon which the conceptual framework is developed.
D) Australian accounting standards are based on the US GAAP.

4. Which one of the following is not an Australian Securities Exchange (ASX) principle of good corporate governance?

A) Respect the rights of shareholders.
B) Safeguard the environment.
C) Remunerate fairly and responsibly.
D) Promote ethical and responsible decision-making.

5. Which accounting theory is best described by the statement 'An approach to accounting is one where a theory is thought of as a body of knowledge that explains and attempts to predict actual accounting practice'?

A) normative accounting theory
B) historical cost accounting theory
C) general accounting theory
D) positive accounting theory

Solutions: