Economics - ACC313 Aug 2013 Flashcards by Ian Morton

The abbreviation “GAAP” stands for:
A Globally accepted accounting practice
B Generally accepted accounting practice
C Globally accepted accounting principles
D Generally accepted accounting principles

D Generally accepted accounting principles

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The body to which the International Accounting Standards Board is responsible is:		
A	The IFRS Advisory Council	
B	The IFRS Interpretations Committee	
C	The IFRS Foundation	
D	The Monitoring Board

C The IFRS Foundation

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The role of the IFRS Advisory Council is to:
A Chair the meetings of the IASB
B Interpret the application of international standards
C Appoint members to the IASB
D Inform the IASB of the Council’s views on standard-setting projects

D Inform the IASB of the Council’s views on standard-setting projects

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The word "entity" as used by the IASB refers to:	
A	Profit-oriented organisations only
B	Companies only
C	Not-for-profit organisations only
D	Corporations only

A Profit-oriented organisations only

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D Inform the IASB of the Council’s views on standard-setting projects

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The word "entity" as used by the IASB refers to:	
A	Profit-oriented organisations only
B	Companies only
C	Not-for-profit organisations only
D	Corporations only

A Profit-oriented organisations only

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Which of the following is not a contributory factor towards faithful representation?	
A	Completeness
B	Freedom from error
C	Neutrality
D	Predictive value

D Predictive value

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An entity which complies with IFRS may depart from the requirements of an international standard:
A Whenever it wishes to do so
B If compliance would produce misleading information
C If compliance costs would be excessive
D Never

C If compliance costs would be excessive

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The notes to the financial statements should provide information:
A About the entity’s accounting policies
B As required by international standards, if not presented elsewhere in the financial statements
C Which is relevant to an understanding of the financial statements
D All of the above

D All of the above

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Which of the following is not a component of a complete set of financial statements?	
A	A statement of changes in equity
B	A management commentary
C	A set of notes
D	A statement of cash flows

B A management commentary

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A change in accounting policy which does not result from the initial application of an international standard must normally be accounted for:
A Retrospectively
B Prospectively
C Either retrospectively or prospectively
D Prospectively unless it is impracticable to do so

A Retrospectively

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C If compliance costs would be excessive

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Items of financial information are material if:
A They are insignificant
B They could not influence the economic decisions made by the users of financial statements
C They could influence the economic decisions made by the users of financial statements
D They are aggregated with other items

C They could influence the economic decisions made by the users of financial statements

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Which of the following would generally not be classified as a current asset?
A An asset held for the purpose of being traded
B A cash equivalent
C An asset intended for consumption within the entity’s normal operating cycle
D An asset held for long-term use within the entity

D An asset held for long-term use within the entity

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D All of the above

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An entity may change one of its accounting policies:
A Whenever it wishes to do so
B If this would result in the provision of reliable and more relevant information
C If this would reduce the cost of preparing the financial statements
D Never

B If this would result in the provision of reliable and more relevant information

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A Retrospectively

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A change in an accounting estimate should be accounted for:
A Retrospectively
B Prospectively
C Either retrospectively or prospectively
D Retrospectively unless it is impracticable to do so

B Prospectively

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Prior period errors could be caused by:	
A	Fraud
B	Mistakes in applying accounting policies
C	Mathematical errors
D	Any of the above

D Any of the above

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Which of the following items qualifies as property, plant and equipment?
A A machine bought for resale to a customer
B A machine bought for use during a single accounting period
C A machine bought for use in more than one accounting period
D Computer software bought for use in more than one accounting period

C A machine bought for use in more than one accounting period

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If investment property is measured using the fair value model, a gain arising from a change in the fair value of an investment property must be:
A Recognised in the calculation of profit or loss
B Recognised as other comprehensive income
C Credited to a revaluation reserve
D Ignored

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A Recognised in the calculation of profit or loss

Goodwill does not fall within the IAS38 definition of an intangible asset because:
A It is a monetary asset
B It is not separable
C It may not generate future economic benefits
D None of the above

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B It is not separable

Which of the following would not be included in the cost of a separately acquired intangible asset?
A Non-refundable value added tax
B Employee costs incurred in preparing the asset for its intended use
C Costs incurred in using the asset
D Testing costs

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C Costs incurred in using the asset

How should research and development expenditure be dealt with in an entity’s financial statements?
A Research and development expenditure should always be written off as an expense
B Research and development expenditure should always be capitalised as an intangible asset
C Research expenditure should always be written off as an expense but development expenditure should always be capitalised as an intangible asset
D Research expenditure should always be written off as an expense but development expenditure should be capitalised as an intangible asset if it satisfies certain conditions

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D Research expenditure should always be written off as an expense but development expenditure should be capitalised as an intangible asset if it satisfies certain conditions

An impairment loss is: A The amount by which the recoverable amount of an asset exceeds its carrying amount B The amount by which the recoverable amount of an asset exceeds its written down value C The amount by which the carrying amount of an asset exceeds its recoverable amount D The amount by which the carrying amount of an asset exceeds its market value

C The amount by which the carrying amount of an asset exceeds its recoverable amount

Which of the following is not an external indication of impairment? A An unexpected decline in the asset's market value B The asset becoming idle C An adverse technological change D An adverse change in the market in which the entity operates

B The asset becoming idle

An asset's recoverable amount is equal to: A The lower of the asset's fair value less costs to sell and its value in use B The lower of the asset's value in use and its carrying amount C The higher of the asset's value in use and its carrying amount D The higher of the asset's fair value less costs to sell and its value in use

D The higher of the asset's fair value less costs to sell and its value in use

Which of the following situations would normally lead to a lease being classified as a finance lease? A The lease does not transfer ownership of the leased asset to the lessee by the end of the lease term B The lessee has the option to purchase the asset at a price which makes it reasonably certain that this option will be exercised C The lease term is not for the major part of the asset's economic life D At the inception of the lease, the present value of the minimum lease payments does not amount to substantially all of the fair value of the asset

B The lessee has the option to purchase the asset at a price which makes it reasonably certain that this option will be exercised

In relation to operating leases, which of the following statements is not true? A The lessee has not taken on the risks and rewards incidental to ownership B The leased item is not shown as an asset in the lessee's financial statements C The lease payments are recognised as an expense in the lessee's financial statements D The leased item is not shown as an asset in the lessor's financial statements

D The leased item is not shown as an asset in the lessor's financial statements

At the commencement of a finance lease, IAS17 requires that the lessee should recognise both an asset and a liability to the lessor. These should be measured at: A The fair value of the leased item B The present value of the minimum lease payments C The lower of the fair value of the leased item and the present value of the minimum lease payments D The higher of the fair value of the leased item and the present value of the minimum lease payments

C The lower of the fair value of the leased item and the present value of the minimum lease payments

Which of the following items should be included in the cost of inventories? A Conversion costs B The cost of abnormal wastage of materials and labour C Selling costs D The cost of storing finished goods

A Conversion costs

Which of the following items cannot be included in the cost of inventories? A Irrecoverable import duties payable on the acquisition of inventories B Fixed production overheads C The cost of abnormal wastage of materials and labour D Variable production overheads

C The cost of abnormal wastage of materials and labour

The FIFO cost formula assumes that: A The inventory items which are sold or consumed are those acquired most recently B The inventory items which are sold or consumed are those acquired longest ago C The inventory items which are sold or consumed are a mixture of those acquired in the last 12 months D Newer inventory items are sold or consumed before older inventory items

B The inventory items which are sold or consumed are those acquired longest ago

On 31 December 2011, a company has partly-completed inventory with a cost to date of £26,300. It is expected that further costs of £8,900 will be incurred in order to complete the inventory. It will then be sold for £47,500. Selling costs will be £2,000. ``` The cost and the net realisable value of this inventory at 31 December 2011 are: A £26,300 and £36,600 B £26,300 and £38,600 C £35,200 and £45,500 D £35,200 and £47,500 ```

A £26,300 and £36,600

The net realisable value of inventories is defined by IAS2 as: A Selling price B Cost price C Selling price less costs of completion D Selling price less costs of completion and selling costs

D Selling price less costs of completion and selling costs

In order that a provision should be recognised in an entity's financial statements, it is necessary that: A The entity has a present obligation B The entity has a legally enforceable obligation C The entity has a constructive obligation D It is possible that an outflow of economic benefits will be required

A The entity has a present obligation

Contingent assets are: A Always recognised in the statement of financial position B Always disclosed in the notes to the financial statements C Disclosed in the notes if an inflow of economic benefits is probable D Disclosed in the notes unless an inflow of economic benefits is only remotely possible

C Disclosed in the notes if an inflow of economic benefits is probable

The amount of a provision should be the "best estimate" of the expenditure required to settle the obligation concerned. This estimate: A Should always be discounted to present value B Should not be adjusted to reflect future events that may affect the amount of the required expenditure, whether or not those events are likely to occur C Must always be made on the basis of advice from independent experts D Should be the amount that would rationally be paid to settle or transfer the obligation

D Should be the amount that would rationally be paid to settle or transfer the obligation

Contingent liabilities are: A Always recognised in the statement of financial position B Always disclosed in the notes to the financial statements C Recognised in the statement of financial position unless the possibility of an outflow of economic benefits is remote D Disclosed in the notes unless the possibility of an outflow of economic benefits is remote

D Disclosed in the notes unless the possibility of an outflow of economic benefits is remote

``` The accounting principle applied by standard IAS18 when determining whether or not revenue should be recognised in respect of a sale and repurchase agreement is: A Relevance B Verifiability C Prudence D Substance over form ```

D Substance over form

If the selling price of goods includes an amount for after-sales servicing and support, then: A This amount should be recognised as revenue as soon as the seller has transferred the risks and rewards of ownership of the goods to the buyer B This amount should be deferred and not recognised as revenue until the servicing and support period has come to an end C This amount should be deferred and recognised as revenue over the period in which the servicing and support services are provided D The amount of revenue associated with servicing and support services is equal to the expected costs of providing these services

C This amount should be deferred and recognised as revenue over the period in which the servicing and support services are provided

Which of the following is a cash inflow or outflow arising from investing activities? A Cash received from the repayment of loans made to other parties B Royalties received C Cash repaid to lenders D Cash received on the issue of loan stock

A Cash received from the repayment of loans made to other parties

Which of the following is not a cash inflow or outflow arising from financing activities? A Cash proceeds of a share issue B Cash proceeds from issuing debentures C Cash payments to acquire equity of other entities D Cash repayments of amounts borrowed

C Cash payments to acquire equity of other entities

A company uses the indirect method for reporting cash flows from operating activities. During an accounting period, inventories have risen by £5,000, trade receivables have fallen by £4,000 and trade payables have risen by £3,000. When calculating the net cash inflow or outflow from operating activities, the required adjustments are as follows: A Subtract £5,000, Add £4,000, Subtract £3,000 B Add £5,000, Subtract £4,000, Add £3,000 C Add £5,000, Subtract £4,000, Subtract £3,000 D Subtract £5,000, Add £4,000, Add £3,000

D Subtract £5,000, Add £4,000, Add £3,000

``` A company's figures for an accounting period include sales £25m, cost of sales £15m and equity £5m. The gross profit margin for the period is: A 60% B 50% C 40% D 30% ```

C 40%

``` A company's current assets and current liabilities at the end of an accounting period are £6m and £2.4m respectively. Current assets include inventories of £1.8m. The current ratio and the quick assets ratio at the end of the period are: A 2.5 and 0.75 B 2.5 and 1.75 C 1.75 and 2.5 D 2.5 and 0.7 ```

B 2.5 and 1.75

``` A company's profit after tax for an accounting period is £12m. The company's issued share capital consists of 50m ordinary shares of 50p each and 10m preference shares of £1 each. The preference dividend is £1m. Earnings per share for the period are: A 22p B 20p C 34.3p D 44p ```

A 22p

``` A company's average trade receivables and trade payables for an accounting period are £12.5m and £18m respectively. Credit sales and credit purchases for the period are £210m and £78m respectively. The trade receivables collection period and the trade payables collection period are: A 59 days and 31 days B 16.8 days and 4.3 days C 6.2 days and 11.7 days D 22 days and 84 days ```

22 days and 84 days

Which of the following is a characteristic of an operating segment, as defined by international standard IFRS8? A It engages in business activities from which it may earn revenues and incur expenses B Its operating results are regularly reviewed by the chief operating decision maker C Discrete financial information is available D All of the above

D All of the above

A reportable segment is an operating segment which meets any of several 10% thresholds. Which of the following is not one of these thresholds? A Segment assets are at least 10% of the total assets of all operating segments B Segment liabilities are at least 10% of the total liabilities of all operating segments C Segment revenue is at least 10% of the total revenue of all operating segments D Segment profit or loss is at least 10% of the greater of the total profit of all profitable operating segments and the total loss of all loss-making operating segments

B Segment liabilities are at least 10% of the total liabilities of all operating segments

Economics - ACC313 Aug 2013 Flashcards

(50 cards)