Financial Accounting and Reporting
Foundation exam revision questions and
Answers Graded A+
1 Which of the following are correct?
I. The term 'reporting entity' may be used to describe a group of companies.
II. The principal function of financial statements is to provide information to
parties external to a
business.
III. The main purpose of financial reporting is to
provide information aimed at running a business
more efficiently.
A I and II only
B I and III only
C II and III only
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,D I, II and III - Correct answer-A The provision of information aimed at running a
business more efficiently is an objective of
management accounting rather than financial accounting. The aim of financial
reporting is the
provision of information to meet the needs of external users.
2 Which of the following groups of users of accounts is interested primarily in the
liquidity of a
company?
A Suppliers
B The government
C The management
D The tax authorities - Correct answer-A Suppliers' interest in their customers'
accounts lies in the fact that they wish to be repaid in a
timely fashion. They are therefore interested primarily in the liquidity of a
company.
3 Consider the following two statements:
I. The IASB operates a rules-based system of setting accounting standards.
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,II. The US FASB operates a principles-based system of setting accounting
standards.
Which of these statements are correct?
A I only
B II only
C Both I and II
D Neither I nor II - Correct answer-D In each case the reverse is correct: US
accounting standards are rules-based and IFRS are
principles-based.
4 Which bodies does the IFRS Foundation oversee?
A IASB and the Monitoring Board
B IASB and IFRS Interpretations Committee only
C IFRS Interpretations Committee and IFRS Advisory Council
D IFRS Advisory Council, IASB and IFRS Interpretations Committee - Correct
answer-D The IFRS Foundation is the overseeing body for the IASB, IFRS
Interpretations Committee and
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, IFRS Advisory Council. The Monitoring Board serves as a mechanism for
communication
between capital markets authorities and the IFRS Foundation.
5 Which of the following is
not
a role of the IFRS Advisory Council?
A To consult on all major IASB projects
B To issue International Financial Reporting Standards
C To advise on the prioritisation of the work of the IASB
D To comment on the implications of the work of the IASB on users of financial
statements - Correct answer-B The IASB is responsible for issuing IFRS.
6 Consider the following two statements:
I. The Australian Accounting Standards Board (AASB)
has adopted the content of IFRS with some
minor changes.
II. Both Australian companies' legislation and IFRS allow an entity to depart from
the requirements
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Foundation exam revision questions and
Answers Graded A+
1 Which of the following are correct?
I. The term 'reporting entity' may be used to describe a group of companies.
II. The principal function of financial statements is to provide information to
parties external to a
business.
III. The main purpose of financial reporting is to
provide information aimed at running a business
more efficiently.
A I and II only
B I and III only
C II and III only
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,D I, II and III - Correct answer-A The provision of information aimed at running a
business more efficiently is an objective of
management accounting rather than financial accounting. The aim of financial
reporting is the
provision of information to meet the needs of external users.
2 Which of the following groups of users of accounts is interested primarily in the
liquidity of a
company?
A Suppliers
B The government
C The management
D The tax authorities - Correct answer-A Suppliers' interest in their customers'
accounts lies in the fact that they wish to be repaid in a
timely fashion. They are therefore interested primarily in the liquidity of a
company.
3 Consider the following two statements:
I. The IASB operates a rules-based system of setting accounting standards.
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,II. The US FASB operates a principles-based system of setting accounting
standards.
Which of these statements are correct?
A I only
B II only
C Both I and II
D Neither I nor II - Correct answer-D In each case the reverse is correct: US
accounting standards are rules-based and IFRS are
principles-based.
4 Which bodies does the IFRS Foundation oversee?
A IASB and the Monitoring Board
B IASB and IFRS Interpretations Committee only
C IFRS Interpretations Committee and IFRS Advisory Council
D IFRS Advisory Council, IASB and IFRS Interpretations Committee - Correct
answer-D The IFRS Foundation is the overseeing body for the IASB, IFRS
Interpretations Committee and
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, IFRS Advisory Council. The Monitoring Board serves as a mechanism for
communication
between capital markets authorities and the IFRS Foundation.
5 Which of the following is
not
a role of the IFRS Advisory Council?
A To consult on all major IASB projects
B To issue International Financial Reporting Standards
C To advise on the prioritisation of the work of the IASB
D To comment on the implications of the work of the IASB on users of financial
statements - Correct answer-B The IASB is responsible for issuing IFRS.
6 Consider the following two statements:
I. The Australian Accounting Standards Board (AASB)
has adopted the content of IFRS with some
minor changes.
II. Both Australian companies' legislation and IFRS allow an entity to depart from
the requirements
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