Chapter 10

The statements concerning the matching concept that is correct is:
i) The matching concept forms the basis of historical cost accounting
ii) The matching concept forms the basis of accrual accounting
iii) In practice proper matching is a relatively easy task
iv) In practice proper matching is a relatively difficult task

When the 'percentage-of-completion' method is used for construction contracts, how are expenses recorded?

The FASB, the US standard setter, unlike the IASB, distinguished between expenses and losses.

Treating assets as expenses is a way to overstate profits for a period.

A criticism of the 'cause and effect' matching method is:

Which of these is an expense that will normally be recognised using the 'immediate recognition' principle?

The Framework specifically states that the matching concept should not be applied in such a way as to allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities.

Which of these expenses normally requires a significant degree of estimation?

For an outflow to be recognised as an expense it must be probable that the outflow of future economic benefits has occurred or the expense must be able to be measured with reliability.

Under the IAS accounting standards a provision for maintenance cannot be recognised unless there is an obligation to an external party and it meets the recognition criteria.

The cause and effect method of matching is based upon the costs attach concept.

Which of these is considered to be the 'ideal' way to match expenses?

If an employee renders services to the firm, without pay, in order to gain experience, an expense must be recorded by the firm.

The Framework links the definition of expenses to their relationship to revenue.

Which of these is not one of the three basic methods of matching costs and revenue that are commonly relied on?

The Framework in relation to conservatism:

IFRS Conceptual Framework distinguishes between expenses and losses by categorising items as abnormal or extraordinary in the income statement.

When depreciating assets using the allocation of costs method which of the following methods is best?

Which item is usually not given immediate recognition as an expense?

Treating expenses as assets:

An example where accountants normally decide that a cause and effect relationship exist between revenue and expenses is: