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ICAEW Q Bank With Complete Solutions 2024
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ICAEW Q Bank With Complete Solutions 2024
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ICAEW Q Bank With Complete Solutions 2024Which of the following best explains what is meant by 'capital expenditure'? Capital expenditure is
expenditure:
A on non-current assets, including repairs and maintenance
B on expensive items over £10,000
C on the acquisition of non-current assets, or improvement in their earning capacity
D on items relating to owners' capital Answer: C Capital expenditure relates to the acquisition of, or
improvement of the earning capacity of, non-current assets
Which of the following should be accounted for as capital expenditure?
A The annual cost of painting a factory floor
B The repair of a window in a building
C The purchase of a vehicle by a garage for re-sale
D Legal fees incurred on the purchase of a building Answer: D Legal fees incurred on the purchase of
a building - the others are all revenue expenditure.
Which of the following items should be treated as capital expenditure in the financial statements of a
sole trader?
A £500 taken by the proprietor to buy himself a music system
B £800 spent on purchasing a new PC to replace his secretary's old one
C £2,000 on purchasing a machine for resale
D £150 paid to a painter for redecorating his office Answer: B £800 spent on purchasing a new PC to
replace his secretary's old one. Item A is drawings, C is the acquisition of a current asset in the form of
inventory, and D is a revenue expense.
Which of the following is an aspect of relevance, according to the IASB's Conceptual Framework?
,A Neutrality
B Free from error
C Completeness
D Materiality Answer: D Information's relevance is affected by its materiality. A, B and C are all
characteristics contributing to information being a faithful representation of what it claims to represent
According to the IASB's Conceptual Framework, which of the following are enhancing qualitative
characteristics?
A Comparability, understandability, timeliness, verifiability
B Consistency, prudence, measurability, verifiability
C Consistency, reliability, measurability, timeliness
D Materiality, understandability, measurability, reliability Answer: A This is set out in paragraph
2.23-2.36 of the IASB's Conceptual Framework
In relation to the business of a sole trader, which two of the following does the government and its
agencies need to be able to do?
A Establish levels of tax revenue
B Assess whether the business will continue in existence
C Produce national statistics
D Assess the owner's stewardship
E Take decisions about their investment Answer: A,C Both tax and national statistics will apply to
the needs of government and its agencies. Whether the business will continue as a going concern (B) is
an issue for the sole trader, its suppliers, customers and employees. Probably only the sole trader is
interested in their own stewardship (D) of the business's resources; this is really only an issue for
company owners, as is (E).
Information about an entity's financial position is primarily provided in:
A the statement of profit or loss
B the statement of financial position
, C retained earnings
D the statement of cash flows Answer: B The financial position of an entity is reflected in the
resources it controls (assets), financial structure (debt and capital), liquidity (cash) and solvency (ability
to pay its debts). Most of this information is provided in the statement of financial position (B). The
statement of profit or loss primarily provides information about an entity's financial performance, while
the statement of cash flows reflects changes in the financial position. Retained earnings is a figure in the
statement of financial position which accumulates movements over the years in retained earnings.
According to the IASB's Conceptual Framework, information on which two of the following areas can
help users identify the reporting entity's financial strengths and weaknesses?
A The economic resources it controls
B Its financial performance in the past
C The demographic structure of the local economy
D The entity's claims (the entity's liabilities)
E Its management structure Answer: A,D The IASB's Conceptual Framework states that information
about the economic resources (A) and claims (D) of an entity can help users to identify the reporting
entity's financial strengths and weaknesses. That information can then be used to help users to assess
the reporting entity's liquidity and solvency.
According to IAS 1, Presentation of Financial Statements which two of the following are objectives of
financial statements?
A To show the results of management's stewardship of the resources entrusted to it
B To provide a basis for valuing the entity
C To provide information about the financial position, financial performance and cash flows of an entity
that is useful to a wide range of users in making economic decisions
D To facilitate comparison of financial performance between entities operating in different industries
E To assist management and those charged with governance in making timely economic decisions about
deployment of the entity's resources Answer: A,C International Accounting Standard 1 (IAS 1),
Presentation of Financial Statements provides the objective of financial statements. It states that the
objective of financial statements is to provide information about the financial position, financial
performance and cash flows of an entity that is useful to a wide range of users in making economic
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