PAS 26 Employee Benefits Quiz: Test Your Knowledge

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Questions and Answers

How does PAS 19 define employee benefits?

Goods and services provided only to the employee

All forms of consideration given by an entity in exchange for service rendered by employees (correct)

Benefits provided only to dependents of employees

Cash payments only

What is the recognition treatment for employee benefits under PAS 19?

Always treated as liabilities

Recognized as expenses, except when they form part of the cost of another asset (correct)

Completely disregarded in financial statements

Recognized as income for the employer

Who is included in the definition of 'employees' according to PAS 19?

Only top management employees

Only regular employees

All employees irrespective of their employment status (regular, part-time, or casual) (correct)

Only full-time employees

Which of the following is not a category of employee benefits under PAS 19?

Retirement benefits Signup and view all the answers

How are short-term employee benefits recognized?

Expensed immediately when incurred Signup and view all the answers

What gives rise to employee benefits according to PAS 19?

Contractual agreements, legislation, and informal practices Signup and view all the answers

What is the main focus of cash flows from operating activities?

Principal revenue-producing activities Signup and view all the answers

Why are cash flows from buying and selling held for trading securities classified as operating activities?

Similar to inventories Signup and view all the answers

What type of cash flows are considered as examples of operating activities?

Cash receipts from selling goods Signup and view all the answers

Why are loan transactions of financial institutions classified as operating activities?

Main revenue-producing activity Signup and view all the answers

In the statement of cash flows, what do cash flows from investing activities involve?

Acquisition and disposal of noncurrent assets Signup and view all the answers

Which activity involves the acquisition and disposal of property, plant, and equipment?

Investing activities Signup and view all the answers

What type of investments qualify as cash equivalents?

Debt instruments acquired within 3 months of maturity Signup and view all the answers

How do cash flows differ from cash equivalents?

Cash flows represent sources and uses of cash, while cash equivalents are specific investments. Signup and view all the answers

What does the statement of cash flows help users assess?

The entity's need to utilize cash flows Signup and view all the answers

How can an entity have negative cash flows despite reporting profits?

By reporting profit under accrual basis but facing negative operating cash flows Signup and view all the answers

Which of the following is considered as 'cash' according to PAS 7?

Money deposited in a bank account Signup and view all the answers

Why are debt instruments acquired more than 3 months before maturity not considered cash equivalents?

They may be influenced by changes in market conditions Signup and view all the answers

Study Notes

Employee Benefits (PAS 19)

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.
This includes cash, goods, or services provided to employees or their dependents.
Employees include regular, part-time, or casual workers, regardless of position.
Employee benefits are recognized as expenses, except when they form part of the cost of another asset.
Unpaid employee benefits are recognized as liabilities.
Employee benefits arise from contractual agreements, legislation, and informal practices that create constructive obligations.

Categories of Employee Benefits (PAS 19)

Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Termination benefits

Statement of Cash Flows (PAS 7)

Presents cash flows according to three classifications: Operating Activities, Investing Activities, and Financing Activities.
Provides information about the sources and utilization of cash and cash equivalents during the period.

Classification of Cash Flows (PAS 7)

Operating Activities: Cash flows from principal revenue-producing activities, including cash inflows and outflows from income and expenses.
- Examples: cash receipts from sales, cash payments for purchases, operating expenses, and income taxes.
- Special items: cash flows from buying and selling held for trading securities, and loan transactions of financial institutions.
Investing Activities: Cash flows from acquisition and disposal of noncurrent assets and other investments.
- Examples: cash receipts and payments for property, plant, and equipment, investment property, intangible assets, and other noncurrent assets.

Cash and Cash Equivalents (PAS 7)

Cash: cash on hand and cash in bank.
Cash Equivalents: short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value.
- Examples: 1-year treasury bill, 90-day money market instrument, 3-month time deposit.
Only debt instruments acquired within 3 months or less before their maturity date can qualify as cash equivalents.

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Description

This quiz covers the accounting principles prescribed by PAS 19 for employee benefits, excluding those covered by PFRS 2 and PAS 26. It includes topics such as different forms of employee benefits and reporting by employee benefit plans.

PAS 19 - Employee Benefits Accounting Quiz

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