• Tutorial work/Multiple-choice
• >Political contracts refer to the relationship between an entity and the following parties, except:

government.

lobby groups.

trade unions.

creditors.

• >Considering whether to use historical cost or fair value relates to which of the following components in accounting policy decisions:

		Definition.
		Recognition.
		Measurement.
		Disclosure.

• >The way that lenders charge a higher interest rate for loans assessed to be of higher risk is known as:

		risk aversion.
		wealth maximisation.
		claim dilution.
		price protection.

• >Sally observes that the cash account is an asset account and has a debit balance. She also notices that inventories account is an asset account and has a debit balance. Therefore, Sally comes into conclusion that all asset accounts have a debit balance. Which approach does Sally use in developing her theory about all asset accounts having a debit balance?

		Deductive reasoning.
		Inductive reasoning.
		Conceptual reasoning.
		Conclusive reasoning.

a restriction in the amount of dividends distributed as a percentage of profit.

a maximum interest cover of 2.5 times.

a restriction in undertaking mergers and takeovers unless approved by the lender.

a maximum leverage ratio of 60%re.

>Which of the following processes describe how positive theories are developed:

		Principles Assumptions Objectives Definitions/Actions.
		Objectives Definitions/Actions Assumptions Principles.
		Definitions/Actions Principles Assumptions Objectives.
		Objectives Assumptions Principles Definitions/Actions.

>The risk aversion problem in shareholder-manager agency relationships arises because:

		managers are more risk-averse than shareholders.
		shareholders prefer less risk than do managers.
		managers have less capital invested in the entity than shareholders.
		shareholders are not able to diversify their risk.