Accounting
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Questions and Answers

What is the purpose of financial statements?

  • To regulate the preparation of financial statements.
  • To provide information on a company's business for stakeholders. (correct)
  • To supervise the stock exchange
  • To unify social values of economic operators.

    • What is the purpose of the trial balance?

  • To record financial transactions
  • To provide additional information about accounting principles
  • To create the statement of financial position
  • To test the adequacy of double entry posting before preparing the final accounts (correct)

    • What is the difference between trade receivables and notes receivables?

  • Trade receivables are classified as non-current assets while notes receivables are classified as current assets.
  • Trade receivables are recorded at their nominal amount while notes receivables are reported at the net realizable value
  • Trade receivables are expected to be recovered while notes receivables are not expected to be recovered
  • Trade receivables represent the right to receive cash or cash equivalent while notes receivables are formal, written instruments of credit. (correct)

    • What is the primary purpose of accounting?

    <p>To classify and record monetary transactions</p> Signup and view all the answers

    What is VAT?

    <p>An indirect tax on goods</p> Signup and view all the answers

    What is VAT?

    <p>An indirect tax on goods</p> Signup and view all the answers

    What is the most commonly used method of accounting?

    <p>Double entry bookkeeping</p> Signup and view all the answers

    Which financial reporting standards govern the rules for receivables?

    <p>IFRS 15 and IFRS 9</p> Signup and view all the answers

    What determines the classification of assets and liabilities as current or non-current?

    <p>The nature of operations and operating cycle</p> Signup and view all the answers

    What is the most commonly used method of accounting?

    <p>double entry bookkeeping</p> Signup and view all the answers

    Which of the following is NOT a document included in the International Accounting Framework?

    <p>GAAP</p> Signup and view all the answers

    Which financial standard(s) govern(s) the treatment of receivables?

    <p>Both IFRS 15 and IFRS 9</p> Signup and view all the answers

    What is the International Accounting Framework composed of?

    <p>International accounting standards issued by IASB</p> Signup and view all the answers

    Which of the following is a requirement of IAS 2 for inventories that are damaged or obsolete?

    <p>Impairment must be written off</p> Signup and view all the answers

    Which of the following is an example of an intangible asset?

    <p>Trademark</p> Signup and view all the answers

    What is the purpose of a balance sheet?

    <p>To show the assets, liabilities, and equity of a company</p> Signup and view all the answers

    Which inventories require impairment under IAS 2?

    <p>Inventories that are damaged or obsolete</p> Signup and view all the answers

    What is the definition of accounting?

    <p>The classification and recording of monetary transactions</p> Signup and view all the answers

    What determines the classification of assets and liabilities as current or non-current?

    <p>The nature of operations and operating cycle</p> Signup and view all the answers

    What is the definition of intangible assets?

    <p>Assets without physical substance that are not monetary</p> Signup and view all the answers

    What is the purpose of financial statements?

    <p>To provide information on a company's business for stakeholders</p> Signup and view all the answers

    What determines the classification of current vs. non-current assets and liabilities?

    <p>Nature of operations and operating cycle</p> Signup and view all the answers

    What is the definition of intangible assets?

    <p>Identifiable non-monetary assets without physical substance</p> Signup and view all the answers

    What are investments?

    <p>Titles of ownership over cash flows of a company</p> Signup and view all the answers

    What is the purpose of a balance sheet?

    <p>To show a company's assets, liabilities, and equity</p> Signup and view all the answers

    Which of the following inventory evaluation methods is not allowed by IAS 2?

    <p>LIFO</p> Signup and view all the answers

    What is the purpose of the trial balance?

    <p>To test the adequacy of double entry posting</p> Signup and view all the answers

    What are investments?

    <p>Titles of rights over cash flows of an owned company.</p> Signup and view all the answers

    Which of the following is NOT a part of the International Accounting Framework?

    <p>GAAP</p> Signup and view all the answers

    What is the most commonly used method of accounting?

    <p>double entry bookkeeping</p> Signup and view all the answers

    Who charges VAT?

    <p>State governments</p> Signup and view all the answers

    What are the primary qualitative characteristics of financial statements according to the Conceptual Framework?

    <p>Relevance, faithful representation, and substance over form</p> Signup and view all the answers

    Do post balance sheet events affect the classification of assets and liabilities as current or non-current?

    <p>No</p> Signup and view all the answers

    Which of the following are the primary qualitative characteristics of financial statements according to the Conceptual Framework?

    <p>Relevance, faithful representation, and substance over form</p> Signup and view all the answers

    What is the basis for estimating net realizable value?

    <p>Reliable available information</p> Signup and view all the answers

    How is net realizable value estimated under IAS 2?

    <p>Based on reliable available information</p> Signup and view all the answers

    What are transactions?

    <p>Events that cause a change in a company's financial position</p> Signup and view all the answers

    What are fixed assets?

    <p>Long-term tangible property used to generate income</p> Signup and view all the answers

    What is the basis for estimating net realizable value of inventories?

    <p>Reliable available information</p> Signup and view all the answers

    What is the difference between cash basis and accrual basis accounting?

    <p>Cash basis recognizes revenues when cash is received and expenses when they are paid, while accrual basis records income and expenses when the firm has given or received benefit from a transaction.</p> Signup and view all the answers

    What do trade receivables represent?

    <p>The right to receive cash or cash equivalent</p> Signup and view all the answers

    What does the accrual basis of accounting record?

    <p>Income and expenses when the firm has given or received benefit from a transaction</p> Signup and view all the answers

    Who charges VAT?

    <p>The state government</p> Signup and view all the answers

    Where are trade receivables classified in the balance sheet?

    <p>Within current assets</p> Signup and view all the answers

    What are the two methods of accounting?

    <p>Cash and accrual basis</p> Signup and view all the answers

    Which model of credit loss was introduced under IFRS 9?

    <p>Expected credit loss model</p> Signup and view all the answers

    What are the components of the statement of financial position?

    <p>Assets, liabilities, and equity</p> Signup and view all the answers

    What are transactions in accounting?

    <p>Events that cause a change in a company's financial position</p> Signup and view all the answers

    How can investments be classified?

    <p>As subsidiaries, joint control/joint operations, associates, or others.</p> Signup and view all the answers

    Which of the following is not a classification of investments?

    <p>Bonds</p> Signup and view all the answers

    What are the components of the statement of financial position?

    <p>Assets, liabilities, and equity</p> Signup and view all the answers

    Which of the following is an example of an intangible asset?

    <p>Trademarks</p> Signup and view all the answers

    When did the move towards a global accounting system begin?

    <p>In the early 2000s</p> Signup and view all the answers

    Which of the following is an example of an intangible asset?

    <p>Trademarks</p> Signup and view all the answers

    Which accounting standard is applied to every intangible asset except for goodwill, financial assets, deferred tax assets, assets held for sale, and assets arising from specific industries?

    <p>IAS 38</p> Signup and view all the answers

    Who regulates the preparation of financial statements?

    <p>Accounting principles</p> Signup and view all the answers

    What are fixed assets?

    <p>Long-term tangible property used to generate income</p> Signup and view all the answers

    Which of the following documents are included in the set of international accounting standards?

    <p>IAS, IFRS, IFRIC interpretations, and Practice Statements</p> Signup and view all the answers

    Do post balance sheet events affect the classification of assets and liabilities as current or non-current?

    <p>No</p> Signup and view all the answers

    What is the difference between assets and liabilities?

    <p>Assets are the company's possessions, while liabilities are debts owed by the company.</p> Signup and view all the answers

    What are subsidiaries?

    <p>Investees on which the investor has control.</p> Signup and view all the answers

    When is VAT generated?

    <p>When invoices are issued</p> Signup and view all the answers

    What is the net worth of a firm?

    <p>The difference between assets and liabilities</p> Signup and view all the answers

    Is impairment a one-time event or must it be repeated in subsequent periods?

    <p>Must be repeated in subsequent periods</p> Signup and view all the answers

    Which of the following is NOT an enhancing qualitative characteristic of financial statements according to the Conceptual Framework?

    <p>Materiality</p> Signup and view all the answers

    When is VAT generated?

    <p>When invoices are issued</p> Signup and view all the answers

    What are subsidiaries?

    <p>Investees on which the investor has control</p> Signup and view all the answers

    What are the two parts of each IAS/IFRS?

    <p>Mandatory and optional</p> Signup and view all the answers

    What are the different types of transactions in accounting?

    <p>Cash, credit, barter, or paper transactions</p> Signup and view all the answers

    How often must impairment be reassessed for inventories?

    <p>Only when significant changes occur</p> Signup and view all the answers

    Which standard is applied to every intangible asset except for goodwill, financial assets, deferred tax assets, assets held for sale, and assets arising from specific industries?

    <p>IAS 38</p> Signup and view all the answers

    What does the statement of comprehensive income include?

    <p>Mandatory line items and non-owner changes in equity</p> Signup and view all the answers

    What are the two approaches to even out financial information globally?

    <p>Standardization and harmonization</p> Signup and view all the answers

    Which standard is applied to every intangible asset except for goodwill, financial assets, deferred tax assets, assets held for sale, and assets arising from specific industries?

    <p>IAS 38</p> Signup and view all the answers

    What types of transactions can occur?

    <p>Cash, credit, barter, or paper transactions</p> Signup and view all the answers

    What is the main requirement for an intangible asset to be recognized?

    <p>It should provide future economic benefits</p> Signup and view all the answers

    Which of the following is NOT one of the enhancing qualitative characteristics of financial statements according to the Conceptual Framework?

    <p>Materiality</p> Signup and view all the answers

    When did the move towards a global accounting system begin?

    <p>Early 2000s</p> Signup and view all the answers

    Which of the following is not a type of fixed asset?

    <p>Financial liabilities</p> Signup and view all the answers

    What are the three rules of accounting?

    <p>Debit the receiver and credit the giver, debit what comes in and credit what goes out, and debit all expenses and credit all gains and profits.</p> Signup and view all the answers

    What are notes receivables?

    <p>Amount customers owe for which a formal, written instrument of credit has been issued</p> Signup and view all the answers

    What are the types of fixed assets?

    <p>Property, plant and equipment, intangibles, and financial assets</p> Signup and view all the answers

    How are notes receivables reported in financial statements?

    <p>At the net realizable value</p> Signup and view all the answers

    What does the Statement of Comprehensive Income include?

    <p>Mandatory line items and separates owner and non-owner changes in equity</p> Signup and view all the answers

    When does cash basis recognize revenues and expenses?

    <p>When cash is received and expenses are paid</p> Signup and view all the answers

    What is the purpose of an allowance for bad debts?

    <p>To estimate the losses a company expects to have each year</p> Signup and view all the answers

    What does the statement of comprehensive income include?

    <p>Both owner and non-owner changes in equity</p> Signup and view all the answers

    What is double entry bookkeeping?

    <p>Recording transactions twice to ensure accuracy</p> Signup and view all the answers

    Can income and expenses be presented in one statement or two statements?

    <p>Either in one or two statements</p> Signup and view all the answers

    How are notes receivables reported?

    <p>At the net realizable value</p> Signup and view all the answers

    What criteria must intangible assets arising from the development phase of an internal project meet to be recognized?

    <p>They must meet certain criteria</p> Signup and view all the answers

    What are the three rules of accounting?

    <p>Debit what comes in and credit what goes out, debit the receiver and credit the giver, and debit all expenses and credit all gains and profits.</p> Signup and view all the answers

    How many statements can income and expenses be presented in?

    <p>One or two statements</p> Signup and view all the answers

    What is the cost constraint in the Conceptual Framework?

    <p>A limitation on the information that can be included in financial statements</p> Signup and view all the answers

    What is the purpose of financial statements?

    <p>To evaluate the financial health of a company</p> Signup and view all the answers

    Which inventory evaluation methods are allowed under IAS 2?

    <p>Specific cost, weighted average cost, and FIFO</p> Signup and view all the answers

    How is VAT calculated?

    <p>On the net difference of VAT on purchases and sales</p> Signup and view all the answers

    How can income and expenses be presented in financial statements?

    <p>In one or two statements</p> Signup and view all the answers

    What are associates?

    <p>Entities over which a company has significant influence</p> Signup and view all the answers

    What does accrual basis record?

    <p>Income and expenses when the firm has given or received benefit from a transaction</p> Signup and view all the answers

    What are the two approaches to even out financial information globally?

    <p>Standardization and harmonization</p> Signup and view all the answers

    What is the net difference of VAT on purchases and sales?

    <p>VAT paid to the government</p> Signup and view all the answers

    What are the primary qualitative characteristics included in the Conceptual Framework?

    <p>Relevance, faithful representation, and substance over form</p> Signup and view all the answers

    What are associates?

    <p>Entities over which a company has significant influence</p> Signup and view all the answers

    Which financial statement shows the company's revenue, expenses, and net income over a period of time?

    <p>Income statement</p> Signup and view all the answers

    Which of the following is NOT a distinctive element of financial statements?

    <p>Gross profit</p> Signup and view all the answers

    How are PP&E initially measured?

    <p>At cost</p> Signup and view all the answers

    What is the main requirement for an intangible asset?

    <p>It should provide future economic benefits</p> Signup and view all the answers

    What is factoring?

    <p>A financial transaction through which a company obtains cash by transferring its account receivables</p> Signup and view all the answers

    Which inventory evaluation methods are allowed by IAS 2?

    <p>Specific cost, weighted average cost, and FIFO</p> Signup and view all the answers

    What does equity represent?

    <p>Assets minus liabilities</p> Signup and view all the answers

    What is the requirement for an intangible asset to be recognized?

    <p>It should provide future economic benefits</p> Signup and view all the answers

    What are monetary events?

    <p>Events that involve a transfer of money and result in a change in the company's financial position</p> Signup and view all the answers

    What is the purpose of ledger accounts?

    <p>To summarize all transactions related to a person, asset, income, or expense that have taken place during a specific period</p> Signup and view all the answers

    How are PP&E initially measured?

    <p>Cost, including installation and assembly costs</p> Signup and view all the answers

    What is the aim of the journey towards a universal accounting language?

    <p>To unify social values of economic operators</p> Signup and view all the answers

    What are monetary events in accounting?

    <p>Events that involve a transfer of money and result in a change in the company's financial position</p> Signup and view all the answers

    What is the expected credit loss (ECL) model?

    <p>A model that anticipates the expected credit loss in the financial statements</p> Signup and view all the answers

    What information does the cash flow statement provide?

    <p>Information on the company's ability to generate cash and cash equivalents</p> Signup and view all the answers

    What are non-monetary events in accounting?

    <p>Events that do not affect a company's financial position</p> Signup and view all the answers

    What are non-monetary events?

    <p>Events that are not related to any exchange of money</p> Signup and view all the answers

    What is the purpose of ledger accounts?

    <p>To summarize all transactions related to a person, asset, income or expense that have taken place during a specific period</p> Signup and view all the answers

    What is the difference between debits and credits?

    <p>Debits refer to money received, while credits refer to money paid or owed</p> Signup and view all the answers

    What is double entry?

    <p>Recording two separate and distinct aspects of a transaction</p> Signup and view all the answers

    What are the four main types of financial statements?

    <p>Balance sheet, income statement, cash flow statement, and statement of change in equity</p> Signup and view all the answers

    What do explanatory notes provide in financial statements?

    <p>Additional information about accounting principles, estimates, policies, and events that impacted the business</p> Signup and view all the answers

    Who systematized the accounting system in the 15th century?

    <p>Luca Pancioli</p> Signup and view all the answers

    What is the aim of the journey towards a universal accounting language?

    <p>To unify social values of economic operators.</p> Signup and view all the answers

    Which of the following is an enhancing qualitative characteristic included in the Conceptual Framework?

    <p>Comparability</p> Signup and view all the answers

    Which of the following is a distinctive element of financial statements?

    <p>Share capital</p> Signup and view all the answers

    Which of the following is NOT included in the financial statements prescribed by IAS 1?

    <p>Gross profit</p> Signup and view all the answers

    What information does the cash flow statement provide?

    <p>Information on the enterprise's ability to generate cash and cash equivalents</p> Signup and view all the answers

    What information does the Cash Flow Statement provide?

    <p>Information on the enterprise's ability to generate cash and cash equivalents</p> Signup and view all the answers

    What regulates PP&E accounting?

    <p>IAS 16</p> Signup and view all the answers

    What regulates PP&E accounting?

    <p>IAS 16</p> Signup and view all the answers

    When should the cost of an intangible asset be recognized as an asset?

    <p>If it is probable that future economic benefits associated with the item will flow to the entity</p> Signup and view all the answers

    What criteria must intangible assets arising from the development phase of an internal project meet to be recognized?

    <p>They must have a defined useful life</p> Signup and view all the answers

    What criteria must intangible assets arising from the development phase of an internal project meet to be recognized?

    <p>All of the above</p> Signup and view all the answers

    What are joint ventures?

    <p>Joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture</p> Signup and view all the answers

    What are joint ventures?

    <p>Joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture</p> Signup and view all the answers

    What is the difference between factoring with recourse and factoring without recourse?

    <p>Factoring with recourse transfers the risks of bad debts to the bank while factoring without recourse does not.</p> Signup and view all the answers

    What do credit notes do?

    <p>Cancel a whole or part of a previously issued invoice</p> Signup and view all the answers

    What is factoring?

    <p>A financial transaction through which a company obtains cash by transferring its account receivables</p> Signup and view all the answers

    What are inventories?

    <p>Assets held for sale, in production, or raw materials/supplies</p> Signup and view all the answers

    What are inventories?

    <p>Assets held for sale or production</p> Signup and view all the answers

    What information must be disclosed about equity according to IAS 1?

    <p>Both share capital and nature and purpose of each reserve within equity</p> Signup and view all the answers

    What does equity represent?

    <p>Assets minus liabilities</p> Signup and view all the answers

    What does equity represent?

    <p>The difference between assets and liabilities</p> Signup and view all the answers

    What information is included in the notes to the financial statements?

    <p>Accounting policies, disclosures, and significant judgements</p> Signup and view all the answers

    Which of the following is NOT included in the notes to financial statements prescribed by IAS 1?

    <p>All of the above are included</p> Signup and view all the answers

    What is the purpose of the statement of financial position?

    <p>To show the value of the company's assets and liabilities at a particular point in time</p> Signup and view all the answers

    What is the purpose of IFRS 15?

    <p>To regulate the accounting of revenue from contracts with customers</p> Signup and view all the answers

    What does the business cycle involve?

    <p>Financing, purchasing fixed and current assets, processing and producing, and selling finished goods</p> Signup and view all the answers

    How can investments be evaluated?

    <p>At cost, equity method, or fair value</p> Signup and view all the answers

    What are the three rules of accounting?

    <p>Debit the receiver and credit the giver, debit what comes in and credit what goes out, and debit all expenses and credit all gains and profits</p> Signup and view all the answers

    Is the cost constraint considered a qualitative characteristic in the Conceptual Framework?

    <p>No</p> Signup and view all the answers

    What does IAS 1 require disclosure of within equity?

    <p>Share capital and nature and purpose of each reserve</p> Signup and view all the answers

    What does the statement of changes in equity show?

    <p>Total comprehensive income, changes in equity components, and dividends</p> Signup and view all the answers

    What does the business cycle involve?

    <p>Financing, purchasing fixed and current assets, processing and producing, and selling finished goods</p> Signup and view all the answers

    What is the balance sheet equation?

    <p>A = L + E</p> Signup and view all the answers

    What is depreciation?

    <p>The systematic allocation of the depreciable amount of an asset over its useful life</p> Signup and view all the answers

    Who systematized the accounting system in the 15th century?

    <p>Luca Pancioli</p> Signup and view all the answers

    What is depreciation?

    <p>The systematic allocation of the depreciable amount of an asset over its useful life</p> Signup and view all the answers

    What is net realizable value?

    <p>Estimated selling price less completion and selling costs</p> Signup and view all the answers

    What do debits and credits refer to in accounting?

    <p>Debits refer to money received, while credits refer to money paid or owed</p> Signup and view all the answers

    What is net realizable value?

    <p>The estimated selling price less completion and selling costs</p> Signup and view all the answers

    How should an entity assess the probability of expected future economic benefits of an intangible asset?

    <p>Using supportable assumptions</p> Signup and view all the answers

    What information is included in the Notes to the Financial Statements?

    <p>Accounting policies, disclosures, and significant judgements</p> Signup and view all the answers

    In which country was the financial statement first viewed as a source of protection for social creditor rights in the 17th century?

    <p>France</p> Signup and view all the answers

    What is the difference between factoring with and without recourse?

    <p>Factoring with recourse transfers the risks of bad debts to the bank, while factoring without recourse does not.</p> Signup and view all the answers

    What does IAS 1 require disclosure of within equity?

    <p>Share capital and nature and purpose of each reserve within equity</p> Signup and view all the answers

    Under what condition shall the cost of intangible assets be recognized as an asset?

    <p>If it is probable that future economic benefits associated with the item will flow to the entity</p> Signup and view all the answers

    What is the balance in accounting?

    <p>The difference between debit and credit</p> Signup and view all the answers

    What information is included in the notes to the financial statements?

    <p>All of the above</p> Signup and view all the answers

    When should the cost of intangible assets be recognized as an asset?

    <p>When it is probable that future economic benefits associated with the item will flow to the entity</p> Signup and view all the answers

    How are account receivables recorded at initial recognition?

    <p>At their nominal amount</p> Signup and view all the answers

    What is the purpose of financial statements?

    <p>To provide a comprehensive view of a company's financial performance</p> Signup and view all the answers

    How can investments be evaluated?

    <p>At cost, equity method, or fair value</p> Signup and view all the answers

    What is the difference between external and internal financing?

    <p>External financing involves receiving money from an external institution, while internal financing involves receiving money from shareholders</p> Signup and view all the answers

    What is carrying amount?

    <p>The amount at which an asset is recognized after deducting any accumulated depreciation and accumulated impairment losses</p> Signup and view all the answers

    Which statement is NOT included in the set of general purpose financial statements under IFRS?

    <p>Statement of taxation</p> Signup and view all the answers

    What is fair value?

    <p>The value at which an asset can be exchanged or a liability paid</p> Signup and view all the answers

    In which century was the financial statement first viewed as a source of protection for social creditor rights in France?

    <p>17th century</p> Signup and view all the answers

    What is carrying amount?

    <p>The amount at which an asset is recognized after deducting any accumulated depreciation and accumulated impairment losses</p> Signup and view all the answers

    Which type of financial statement shows the company's cash receipts and payments over a period of time?

    <p>Cash flow statement</p> Signup and view all the answers

    What is fair value?

    <p>The value at which an asset can be exchanged or a liability paid</p> Signup and view all the answers

    What is the structure of a ledger?

    <p>Columns for date, journal number, description, debit, credit, and balance</p> Signup and view all the answers

    What does the statement of changes in equity show?

    <p>Total comprehensive income, changes in equity components, and dividends</p> Signup and view all the answers

    What does the statement of changes in equity show?

    <p>Total comprehensive income, changes in equity components, and dividends</p> Signup and view all the answers

    Which of the following is NOT required for fair presentation of financial statements according to IAS 1?

    <p>Use of historical cost for all assets and liabilities</p> Signup and view all the answers

    What are the two accounting models to evaluate intangible assets?

    <p>Cost model and revaluation model</p> Signup and view all the answers

    How should an entity assess the probability of expected future economic benefits of an intangible asset?

    <p>Using reasonable and supportable assumptions</p> Signup and view all the answers

    What is secured borrowing?

    <p>A financial transaction through which a company obtains cash by pledging its account receivables</p> Signup and view all the answers

    What is the net realizable value of notes receivables?

    <p>The amount of notes receivables after deducting an allowance for bad debts</p> Signup and view all the answers

    What are financial statements?

    <p>Formal records of the financial activities and position of a business</p> Signup and view all the answers

    When was the Securities and Exchange Commission (SEC) established in the US?

    <p>1934</p> Signup and view all the answers

    What is external financing in accounting?

    <p>Receiving money from an external institution</p> Signup and view all the answers

    What is the allowance for bad debts?

    <p>An estimation of losses one expects to have each year</p> Signup and view all the answers

    What are impairment tests?

    <p>Tests required annually to measure the recoverable amount of investments.</p> Signup and view all the answers

    What is required for every business transaction?

    <p>A debit entry and a corresponding credit entry</p> Signup and view all the answers

    What do financial statements give a true representation of?

    <p>The financial effects of transactions and events</p> Signup and view all the answers

    How should an entity assess the probability of expected future economic benefits of an intangible asset?

    <p>Using reasonable and supportable assumptions</p> Signup and view all the answers

    What does IAS 8 cover?

    <p>All of the above</p> Signup and view all the answers

    What are impairment tests used for?

    <p>To measure the recoverable amount of investments</p> Signup and view all the answers

    What does IAS 8 cover?

    <p>Accounting policies, changes in accounting estimates, and errors</p> Signup and view all the answers

    What is the impact of IAS 8 adjustments on retained earnings?

    <p>They require adjustments to the opening balance of retained earnings</p> Signup and view all the answers

    What does IAS 8 cover?

    <p>Accounting policies, changes in accounting estimates, and errors</p> Signup and view all the answers

    What is the balance in accounting?

    <p>The difference between debit and credit.</p> Signup and view all the answers

    What are the distinctive elements of financial statements?

    <p>Assets, liabilities, equity, revenues, and expenses</p> Signup and view all the answers

    Which items are excluded from IAS 2?

    <p>All of the above</p> Signup and view all the answers

    What is included in a ledger?

    <p>Accounts for assets, liabilities, owners' equity, revenues, and expenses.</p> Signup and view all the answers

    When was the Securities and Exchange Commission (SEC) established in the US?

    <p>1934</p> Signup and view all the answers

    What do adjustments required by IAS 8 require adjustments to?

    <p>The opening balance of retained earnings</p> Signup and view all the answers

    How are fixed assets recorded in accounting?

    <p>As assets</p> Signup and view all the answers

    What does IFRS 9 distinguish between?

    <p>Financial instruments whose changes in value are classified within OCI and those classified within P&amp;L</p> Signup and view all the answers

    What is recoverable amount?

    <p>The higher of an asset’s fair value less costs of disposal and its value in use</p> Signup and view all the answers

    When was the Financial Accounting Standard Board (FASB) established in the US?

    <p>1973</p> Signup and view all the answers

    How are transactions recorded in the ledger?

    <p>As they occur</p> Signup and view all the answers

    What is the consequence of accounts receivable being unrecoverable?

    <p>It results in the derecognition of account receivables</p> Signup and view all the answers

    What is the result of accounts receivable not being recoverable?

    <p>It could result in bankruptcy</p> Signup and view all the answers

    What is the purpose of notes in financial statements?

    <p>To present material information not included in the financial statements</p> Signup and view all the answers

    What does IFRS 8 require disclosure of?

    <p>Segment reporting only</p> Signup and view all the answers

    What are explanatory notes?

    <p>Additional information about accounting principles, estimates, policies, and events that impacted the business</p> Signup and view all the answers

    What is recoverable amount?

    <p>The fair value of an asset less costs of disposal</p> Signup and view all the answers

    What does IFRS 8 require disclosure of?

    <p>Segment reporting</p> Signup and view all the answers

    What is the net worth of a company?

    <p>The difference between assets and liabilities</p> Signup and view all the answers

    What is the impact of adjustments required by IAS 8 on retained earnings?

    <p>Adjustments reduce retained earnings</p> Signup and view all the answers

    Who decides on dividends and how do they impact equity?

    <p>Shareholders, and they decrease equity against payables to shareholders</p> Signup and view all the answers

    Which of the following is covered under IAS 2?

    <p>Finished goods inventory</p> Signup and view all the answers

    How many accounting models are there to evaluate intangible assets?

    <p>Two</p> Signup and view all the answers

    How many accounting models are there to evaluate intangible assets, and what are they?

    <p>Two models: cost model and revaluation model</p> Signup and view all the answers

    Which of the following is NOT required for presentation and classification of financial statements according to IAS 1?

    <p>Use of fair value for all assets and liabilities</p> Signup and view all the answers

    What do ledger accounts summarize?

    <p>All transactions related to a person, asset, liability, owners' equity, revenue, or expense that have taken place during a specific period</p> Signup and view all the answers

    How are fixed assets recorded?

    <p>As assets</p> Signup and view all the answers

    What does IFRS 8 require?

    <p>Disclosure of segment reporting</p> Signup and view all the answers

    When does the depreciation of an intangible asset begin and end?

    <p>It begins when it is available for use and ends when it is classified as held for sale or derecognized</p> Signup and view all the answers

    What does IFRS 9 distinguish between?

    <p>Financial instruments whose changes in value are classified within OCI and those classified within P&amp;L.</p> Signup and view all the answers

    What happens to the risks of bad debts in secured borrowing?

    <p>The risks of bad debts are not transferred to the bank</p> Signup and view all the answers

    What types of items are represented in OCI and specific reserves in equity?

    <p>Changes in exchange rate and post-employment benefits</p> Signup and view all the answers

    What does IFRS 1 regulate?

    <p>The first-year adoption of IFRS</p> Signup and view all the answers

    What is the balance sheet equation?

    <p>A = L + E</p> Signup and view all the answers

    What does IFRS 1 regulate?

    <p>The first-year adoption of IFRS only</p> Signup and view all the answers

    What does IFRS 1 regulate?

    <p>First-year adoption of IFRS</p> Signup and view all the answers

    When was the Financial Accounting Standard Board (FASB) established in the US?

    <p>1973</p> Signup and view all the answers

    What is entity-specific value?

    <p>The present value of the cash flows an entity expects to arise from the continuing use of an asset</p> Signup and view all the answers

    Who decides dividends?

    <p>The shareholders</p> Signup and view all the answers

    What is entity-specific value?

    <p>The present value of the cash flows an entity expects to arise from the continuing use of an asset</p> Signup and view all the answers

    When was the International Accounting Standards Board (IASB) established?

    <p>2000</p> Signup and view all the answers

    What is the basis for determining the useful life of an asset?

    <p>Its expected utility to the entity</p> Signup and view all the answers

    What does the depreciation of intangible assets depend on?

    <p>Whether they have a defined or undefined useful life</p> Signup and view all the answers

    Which financial statement shows the value of the company's assets, liabilities, and equity at a particular point in time?

    <p>Balance sheet</p> Signup and view all the answers

    What is inventory in accounting?

    <p>The recording of all finished products and raw materials at the end of the year</p> Signup and view all the answers

    What does the depreciation of intangible assets depend on?

    <p>Whether they have a defined or undefined useful life</p> Signup and view all the answers

    What is the purpose of the cash flow statement?

    <p>To show the company's cash receipts and payments over a period of time</p> Signup and view all the answers

    What is terminal value?

    <p>The value of the company beyond the explicit period of the plan</p> Signup and view all the answers

    What does terminal value express?

    <p>The value of the company beyond the explicit period of the plan.</p> Signup and view all the answers

    How do journal entries and ledger accounts affect financial statements?

    <p>They affect both the income statement and balance sheet</p> Signup and view all the answers

    What is the purpose of IFRS 9?

    <p>To regulate the accounting of financial instruments</p> Signup and view all the answers

    What is the purpose of the bank account ledger?

    <p>To record all financial transactions related to a bank account</p> Signup and view all the answers

    What did IFRS 9 replace for banks after the financial crisis of 2008?

    <p>IAS 39</p> Signup and view all the answers

    How is a bank account ledger balanced?

    <p>By taking the total of both sides and calculating the sum of each side</p> Signup and view all the answers

    What is allowance for bad debts?

    <p>An estimation of losses one expects to have each year</p> Signup and view all the answers

    How are inventories evaluated?

    <p>At the lowest between cost and net realizable value</p> Signup and view all the answers

    How are inventories evaluated?

    <p>At the lowest between cost and net realizable value</p> Signup and view all the answers

    What is inventory?

    <p>The recording of all finished products and raw materials at the end of the year</p> Signup and view all the answers

    Who decides on dividends and how do they impact equity?

    <p>Shareholders; reduce equity against payables to shareholders</p> Signup and view all the answers

    Which assumption is necessary for financial statements according to IFRS?

    <p>Going concern</p> Signup and view all the answers

    Which of the following is NOT a primary component of the balance sheet equation?

    <p>Revenue</p> Signup and view all the answers

    What is the purpose of impairment tests?

    <p>To recognize a durable loss in value of assets.</p> Signup and view all the answers

    What types of items are represented in OCI and specific reserves in equity?

    <p>Both changes in exchange rate and post-employment benefits</p> Signup and view all the answers

    What happens to an intangible asset with an undefined useful life?

    <p>It does not have to be depreciated</p> Signup and view all the answers

    What is bookkeeping?

    <p>The routine recording of business transactions</p> Signup and view all the answers

    What are the four main types of financial statements?

    <p>Balance sheet, income statement, cash flow statement, and statement of change in equity</p> Signup and view all the answers

    When should the residual value and useful life of an asset be reviewed?

    <p>At least every financial year-end</p> Signup and view all the answers

    When should the residual value and useful life of an asset be reviewed?

    <p>At least every financial year-end</p> Signup and view all the answers

    When was the International Accounting Standards Board (IASB) established?

    <p>2000</p> Signup and view all the answers

    What happens to an intangible asset with an undefined useful life?

    <p>It is subject to annual impairment test</p> Signup and view all the answers

    What are FIFO and weighted average cost?

    <p>Methods used to determine inventory cost</p> Signup and view all the answers

    Which of the following is NOT a mandatory part of an IAS/IFRS?

    <p>An optional part</p> Signup and view all the answers

    Which basis is used for transactions and events in financial statements according to IFRS?

    <p>Accrual basis</p> Signup and view all the answers

    What is bookkeeping in accounting?

    <p>The routine recording of business transactions</p> Signup and view all the answers

    What is the expected credit loss (ECL) model?

    <p>A new model of credit loss introduced under IFRS 9</p> Signup and view all the answers

    What are impairment tests required for?

    <p>To recognize a durable loss in value of assets</p> Signup and view all the answers

    How should differences between IFRS and local GAAP be recorded?

    <p>As equity</p> Signup and view all the answers

    What is the main difference between the depreciation of an intangible asset with a defined useful life and one with an undefined useful life?

    <p>The former is subject to annual impairment test</p> Signup and view all the answers

    How should differences between IFRS and local GAAP be recorded?

    <p>As equity</p> Signup and view all the answers

    What is the consequence of unrecoverable accounts receivable?

    <p>It results in bankruptcy</p> Signup and view all the answers

    What is represented in OCI and specific reserves in equity?

    <p>Changes in exchange rate and post-employment benefits</p> Signup and view all the answers

    When did Italy adopt all IASB documents?

    <p>2003</p> Signup and view all the answers

    How should differences between IFRS and local GAAP be recorded?

    <p>As equity</p> Signup and view all the answers

    What is the balance?

    <p>The difference between debit and credit</p> Signup and view all the answers

    Which IAS prescribes the basis for presentation of financial statements for comparability?

    <p>IAS 1</p> Signup and view all the answers

    What are FIFO and weighted average cost?

    <p>Methods used to determine inventory cost</p> Signup and view all the answers

    How is the bank account ledger balanced?

    <p>By taking the total of both sides and calculating the sum of each side</p> Signup and view all the answers

    What is the purpose of recording transactions in the moment in which they occur?

    <p>To ensure that the trial balance is accurate</p> Signup and view all the answers

    What is the purpose of journal entries and ledger accounts?

    <p>To affect both the income statement and balance sheet</p> Signup and view all the answers

    What is the difference between Italian GAAP and IAS 38 regarding intangible assets?

    <p>Italian GAAP has a wider class of intangible assets than IAS 38</p> Signup and view all the answers

    What is factoring?

    <p>A financial transaction through which a company obtains cash by transferring its account receivables</p> Signup and view all the answers

    Which of the following is NOT an element of the International Accounting Framework?

    <p>GAAP</p> Signup and view all the answers

    What is the basis for determining the useful life of an asset?

    <p>Its expected utility to the entity</p> Signup and view all the answers

    How many items must be included in the summarization services disclosure requirements?

    <p>9</p> Signup and view all the answers

    When should transactions be recorded?

    <p>In the moment in which they occur</p> Signup and view all the answers

    What is the main difference between Italian GAAP and IAS 38 regarding the revaluation model for intangible assets?

    <p>Italian GAAP does not allow the revaluation model for intangible assets</p> Signup and view all the answers

    When did Italy make IFRS mandatory for public companies and those within the scope of consolidation?

    <p>2006</p> Signup and view all the answers

    Why are inventory journal entries important?

    <p>To track material and product purchases</p> Signup and view all the answers

    What is double entry bookkeeping?

    <p>The routine recording of business transactions in a replicable manner</p> Signup and view all the answers

    How are land and buildings accounted for?

    <p>Separately as two assets</p> Signup and view all the answers

    Which of the following statements are included in general purpose financial statements under IFRS?

    <p>Financial position, comprehensive income, changes in equity, and cash flows</p> Signup and view all the answers

    Why are inventory journal entries important?

    <p>To track material and product purchases</p> Signup and view all the answers

    When did Italy adopt all IASB documents?

    <p>2003</p> Signup and view all the answers

    What is the purpose of impairment tests?

    <p>To determine if the benefit from an asset is greater than its cost</p> Signup and view all the answers

    What is the purpose of OIC 11?

    <p>To give the golden rules for preparing Italian financial statements</p> Signup and view all the answers

    How many items must be included in the disclosure requirements for equity according to the text?

    <p>9</p> Signup and view all the answers

    What is the purpose of double entry bookkeeping in accounting?

    <p>To record transactions in a replicable manner</p> Signup and view all the answers

    Which of the following is NOT required for presentation of financial statements under IFRS?

    <p>Materiality and aggregation</p> Signup and view all the answers

    Is it required for financial statements to always be comparable under IFRS?

    <p>Yes</p> Signup and view all the answers

    What must be prepared at the date of transition to IFRS?

    <p>An opening balance sheet</p> Signup and view all the answers

    What is the difference between subsidiaries and associates?

    <p>Subsidiaries are investees on which the investor has control, while associates are entities over which a company has significant influence</p> Signup and view all the answers

    What is included in the ledger structure?

    <p>Columns for date, journal number, description, debit, credit, and balance</p> Signup and view all the answers

    Which of the following is not a classification of investments according to the text?

    <p>Bonds</p> Signup and view all the answers

    What must be prepared at the date of transition to IFRS?

    <p>An opening balance sheet</p> Signup and view all the answers

    What is required for fair presentation of financial statements according to IFRS?

    <p>Compliance with IFRS and all required standards</p> Signup and view all the answers

    Which of the following is not a method for evaluating investments according to the text?

    <p>Market value</p> Signup and view all the answers

    How are costs for unsold or unproduced items adjusted?

    <p>Through an increase in inventory on the balance sheet and a credit in the income statement</p> Signup and view all the answers

    What are the nine items that must be included in the disclosure requirements for summarization services?

    <p>Share capital, share premium reserve, revaluation reserve, legal reserve, own shares reserve, statutory reserves, other reserves, profit (loss) carryforward, and result of the year</p> Signup and view all the answers

    What is the balance sheet?

    <p>A financial statement that shows the financial position of a company at a specific point in time</p> Signup and view all the answers

    Where are the golden rules for preparing Italian financial statements found?

    <p>OIC 11</p> Signup and view all the answers

    Which of the following is NOT one of the primary qualitative characteristics of financial statements according to the Conceptual Framework?

    <p>Comparability</p> Signup and view all the answers

    What is the difference between Italian GAAP and IAS 38 regarding intangible assets?

    <p>Italian GAAP does not allow the revaluation model for intangible assets</p> Signup and view all the answers

    What does OIC 16 not allow?

    <p>Capitalization of dismantling and restoring costs</p> Signup and view all the answers

    What information is included in financial statement notes?

    <p>Accounting policies and explanatory notes</p> Signup and view all the answers

    How are costs for unsold or unproduced items accounted for?

    <p>They are suspended in inventory at the end of the year</p> Signup and view all the answers

    What are the fundamental elements of Italian financial statements?

    <p>Clarity, fair representation, and correctness</p> Signup and view all the answers

    What is the derecognition of PPE?

    <p>The disposal of PPE or when no future economic benefits are expected</p> Signup and view all the answers

    When did Italy make IFRS mandatory for public companies and those within the scope of consolidation?

    <p>2006</p> Signup and view all the answers

    Which companies cannot use IFRS?

    <p>Companies with simplified requirements for financial statements</p> Signup and view all the answers

    How do the disclosure requirements for equity in the text compare to those in IAS/IFRS?

    <p>They are the same</p> Signup and view all the answers

    What is the balance sheet in accounting?

    <p>A statement that shows financial position at a specific point in time</p> Signup and view all the answers

    What is the difference between factoring with and without recourse?

    <p>With recourse, the risks of bad debts are transferred to the bank, while without recourse, they are not</p> Signup and view all the answers

    Study Notes

    1. Accounting involves the classification and recording of monetary transactions.
    2. Transactions are events that cause a change in a company's financial position.
    3. Transactions can be cash, credit, barter, or paper transactions.
    4. Monetary events involve a transfer of money and result in a change in the company's financial position.
    5. Non-monetary events are not related to any exchange of money.
    6. The business cycle involves financing, purchasing fixed and current assets, processing and producing, and selling finished goods.
    7. External financing involves receiving money from an external institution, while internal financing involves receiving money from shareholders.
    8. Fixed assets are recorded as assets, while current expenses are recorded as costs.
    9. Inventory is the recording of all finished products and raw materials at the end of the year.
    10. Bookkeeping is the routine recording of business transactions.
    • Double entry bookkeeping records transactions in a replicable manner
    • Business transactions bring a double change in financial position
    • Assets represent valuable things a company owns
    • Liabilities represent obligations claimed by creditors
    • Equity represents dotation of capital received by owners
    • Changes in assets must be reflected in equal measure in liabilities and equity
    • Balance sheet shows financial position at a specific point in time
    • Income statement summarizes results of operating for a period of time
    • Income statement records all costs and revenues during a period
    • Revenue and expenses are recorded in the income statement.

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    Description

    Test your knowledge of basic accounting concepts with this informative quiz. From understanding the different types of transactions to the principles of double-entry bookkeeping, this quiz covers it all. Get ready to dive into the business cycle, learn about assets, liabilities, and equity, and discover how to read a balance sheet and income statement. Whether you're a business student or simply interested in learning more about accounting, this quiz is the perfect way to test and expand your knowledge.

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