Free Practice Questions for Worldatwork T7 Exam

Question 1

When the quality of information confirms users' earlier expectations, which characteristic is being represented?

AVerifiability

BPredictive value

CConfirmatory value

DFaithful representation

Correct Answer: C. Confirmatory value

Question 2

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

AA resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity

BA 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

CDecreases 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

DIncreases 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

Correct Answer: B. 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

Question 3

What are balanced sheets and income statements linked by?

AInvesting activities

BRetained earnings

CExpenses

DNet income

Correct Answer: B. Retained earnings

Question 4

Which of the following plans obliges an employer to pay a specified amount of benefits to the employee?

APost-employment plan

BDefined contribution plan

CDefined benefit plan

DBonus plan

Correct Answer: C. Defined benefit plan

Question 5

Which of the following are ingredients of the fundamental characteristic of relevance?

ACost and materiality

BPredictive value and confirmatory value

CRelevance and faithful representation

DTimeliness and understandability

Correct Answer: B. Predictive value and confirmatory value

Question 6

An offer of redundancy is an example of which kind of employee benefits?

AShort-term benefits

BPost-employment benefits

CTermination benefits

DLong-term benefits

Correct Answer: C. Termination benefits

Question 7

What is a constructive obligation?

AWhen a company recognizes the expected cost of profit-sharing and bonus payments

BWhen a company has no realistic alternative but to make payments

CWhen a change in the company's informal practices would cause unacceptable damage to its relationship with employees

DThe required accounting entry for liabilities or accrued expenses or cash paid

Correct Answer: C. When a change in the company's informal practices would cause unacceptable damage to its relationship with employees

Question 8

Profit-sharing and bonuses are an example of which kind of employee benefits?

AShort-term benefits

BPost-employment benefits

CTermination benefits

DLong-term benefits

Correct Answer: D. Long-term benefits

Question 9

Which of the following is the best description of liquidity?

AThe historical cost of an asset

BThe fair value of an asset

CThe ease of converting a noncash asset to cash

DLiabilities, minus equity

Correct Answer: C. The ease of converting a noncash asset to cash

Question 10

Which characteristic requires a high degree of consensus among individuals on a given measurement?

AFaithful representation

BVerifiability

CComparability

DNeutral

Correct Answer: B. Verifiability