Online Access Free T7 Practice Test

What are balanced sheets and income statements linked by?

• A.Investing activities
• B.Retained earnings
• C.Expenses
• D.Net income

Which of the following best defines the term "liability"?

• A.Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
• B.Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants
• C.A resource controlled by the entity as a result of past events and from which future
  economic benefits are expected to flow to the entity
• D.A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

Level 2 of the conceptual framework of International Accounting Standards Board (IASB) identifies qualitative characteristics of accounting information. These characteristics distinguish more useful information from less useful information.
To what end is this distinction useful?

• A.For decision-making purposes
• B.For reporting purposes
• C.For organizational vision
• D.For business strategy

What is a constructive obligation?

• A.When a company recognizes the expected cost of profit-sharing and bonus payments
• B.When a change in the company's informal practices would cause unacceptable damage to its relationship with employees
• C.When a company has no realistic alternative but to make payments
• D.The required accounting entry for liabilities or accrued expenses or cash paid

When an employee has provided service in exchange for benefits to be paid in the future, what is it considered in accounting terms?

• A.A long term benefit
• B.A liability
• C.A noncurrent expense
• D.The employee value proposition