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Financial Accounting Theory Question Paper

Financial Accounting Theory

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2010

UNIVERSITY EXAMINATIONS: 2009/2010
THIRD YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 301: FINANCIAL ACCOUNTING THEORY - WEEKEND CLASS
DATE: APRIL 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer ONE and Any other TWO Questions
QUESTION ONE
A) State and discuss in detail the following postulates
B) Distinguish between the input-oriented and output-oriented principle
C) Discuss the general underlying rules of operation in the revenue recognition and expense
matching concepts
D) Explain the constraining principles of conservatism, disclosure, materiality and objectivity
E) Explain the concept of comparability from the perspective of the users, and that of consistency
and uniformity, from the perspective of the preparer
[30 Marks]
QUESTION TWO
A) Explain why the discussion of the “usefulness of accounting information” is focused mainly on
investors and creditors. What is your view on this?
B) Discuss the accounting data and models of the firm valuation
C) Discuss the information content of accounting numbers, more so in relation to the efficient markets hypothesis
D) The seminal study, published in 1968, showed that the direction of change in reported
accounting earnings was positively correlated with security price movement. Explain this
statement in relation to the efficient-market hypothesis.
E) Comment on the capital market research on the usefulness of accounting information
[20 Marks]
QUESTION THREE
A) Define inflation and discuss its problems to the historical cost-based system of accounting and
the use of financial reporting to determine accountability
B) Examine some of the principal financial responses to inflation and changing prices—prices
indexes, inflation accounting, general purchasing power adjustment, current value approaches,among others
C) Discuss the problems involved in determining current value depreciation during inflation
D) Explain the problems involved in determining purchasing power gains on long-term debt
during inflation
[20 Marks]
QUESTION FOUR
State and discuss uniformity and disclosure in the direction of policy making, including the concepts
A) Uniformity
B) Disclosure
C) Directions in the standard-setting process [20 Marks]

Financial Accounting Theory Question Paper

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