5012 LBSBW Financial Reporting In Class Test Revision Questions PDF

**5012 LBSBW FINANCIAL REPORTING** **[IN CLASS TEST practice questionS]** In the in-class test assessment, there are 25 questions to be attempted. Most questions are worth 2 marks unless indicated. You must answer ALL the questions and indicate your answers on the Canvas answer area. **Students...

**5012 LBSBW FINANCIAL REPORTING** **[IN CLASS TEST practice questionS]** In the in-class test assessment, there are 25 questions to be attempted. Most questions are worth 2 marks unless indicated. You must answer ALL the questions and indicate your answers on the Canvas answer area. **Students will be provided with the opportunity to ask questions in the week 10 in both the special revision lecture and the seminar workshops.** **Please do not miss your workshops to avoid missing out as NO answers will be published on Canvas.** **In both assessments, students cannot have any web browsers to be open, or any other Canvas module either before or during the examination, except for the assignment portal.** **1. What best describes corporate governance ?** a. The system by which companies are directed, managed, and controlled in order to safeguard the owners. b. The requirement for limited companies above a certain size to have an c. The mechanism by which the government can take control of companies in the event of liquidation. **Answer A** -------------- a. A subsidiary company is one that can control one or more other organisations it trades with. b. A subsidiary company is formed when one business trades alongside another, sharing resources and profits. c. A subsidiary company is one that is owned and controlled by another company. **Answer c -- as it is the parent companys 'sub' company, as the parent company owns more than 50% of it** ------------------------------------------------------------------------------------------------------------ **Answer b** -------------- **Answer** ----------------------------------------------------------------------------------------------------------------------------------- Power to direct relevant activities -- voting rights, rights to appoint or resign or remove key management personnel Exposure or rights to variable return = variable returns is dividends or interest from debt or changes in value of investment Ability to affect the amount of returns=an investor(parent) can have the current ability to direct the activities of the investor a\) As they occur. b\) On a retrospective basis. c\) On a prospective basis. **Answer c -- looking forward** --------------------------------- **a)** Cash, inventories, receivables, prepayments.\ b) Inventories, receivables, prepayments and cash.\ c) Receivables, cash, inventories, and prepayments.\ d) Receivables, inventories, prepayments and cash. **Answer: b -- CASH ALWAYS LAST** ----------------------------------- **Answer A** -------------- a. Review the published financial statements which are subject to an external review. b. Review the internal processes, procedures, carry out risk assessments and any other types of reviews reporting to the Audit Committee. c. Review the financial statements and other supporting documentation and report to the board of directors. d. Review the internal processes, procedures, carry out risk assessments and any other types of reviews, reporting the true and fair view to the board of directors. **Answer B -- they asses and report how well the systems and processes -- they within the organisations governance** ---------------------------------------------------------------------------------------------------------------------- a\) Review the published financial statements and state if they are accurate to the board of directors. **Answer D -- follows a TFV and reports to audit commite** ------------------------------------------------------------ **10. Is a qualified audit opinion a good thing ?** a\) Yes b\) No **Answer b -- means there is an issue with the statements if the opinion is needed** -------------------------------------------------------------------------------------- a\) Timeliness b\) Verifiability c\) Consistency d\) Understandability **Answer C** -------------- **Answer b -- statement of financial positon, statement of profit or loss or comprehensive income, statement of changes in equity and statement of cash flows are REQUIRED for IAS 1** ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- **Answer c and d** -------------------- d\) A principles-based system will seek to cover ever eventuality. Above c and d are correct. Mixed up in the real MQ exam as: c\) A principles-based system will seek to cover ever eventuality. **Answer b and d** -------------------- **15. Which regulations should an unincorporated organisation follow ?** a\) IAS, FRS, and GAAP. b\) IAS and IFRS. c\) IAS and Companies Act. d\) FRS and GAAP. **Answer D** -------------- **16. Which regulations does a public limited company have to follow ?** a\) IAS, FRS, and GAAP. b\) IAS, IFRS and Companies Act. c\) IAS and Companies Act. d\) FRS and GAAP. **Answer b** -------------- **17. What is meant by the going concern concept ?** **Answer B** -------------- **18. What are the directors duties as stated within the Companies** a\) To make the best deals in the company's long-term interests. **Answer B** -------------- **19. What approach is taken with USA GAAP ?** a\) It follows a rules-based approach. b\) It follows a principle-based approach. c\) It does not need to be followed. **Answer a** -------------- **20. Which of the following best describes creative accounting ?** **Answer b** -------------- **21. What type of audit report would an organisation prefer to receive?** a\) An unqualified audit report. b\) A qualified audit report. c\) An ISO qualified audit report. **Answer A** -------------- a\) Profit for the year that a company has generated. b\) Money belonging to the shareholders. c\) Historical profits from prior years after dividends. d\) Cash which has not yet been spent. **Answer C** -------------- a\) One week b\) Two weeks c\) Three weeks d\) Four weeks **Answer C** -------------- a\) As they occur. b\) On a retrospective basis. c\) On a prospective basis. **Answer b** -------------- a\) On a net basis. b\) On an accruals basis. c\) On a gross basis. **Answer C** -------------- **Answer d** -------------- **27. Under IAS 2 inventories -- how should inventory *normally* be** a\) At full cost -- purchase cost. b\) At their replacement cost. c\) On a lower of cost or net realisable value basis. d\) On a FIFO basis. **Answer c** -------------- **Answer c** -------------- **Answer** ------------ **30. When should FRS 102 the financial reporting standard be used ?** a\) When not applying IFRS, FRS 101 or FRS 105. b\) When not applying IAS's only. **Answer** ------------ **31. Who does FRS 102 specifically state it is designed to be used by ?** a\) Sole traders. b\) Small private limited companies. c\) Entities not constituted as companies and not profit-orientated. d\) Charities and other non-profit organisations. **Answer** ------------ **32. Which of the following is opex referring to ?** a\) Capital expenditure. b\) Expenses incurred in running the business. c\) Operational expenditure. **Answer** ------------ **\ 33.** **Using the following information for Perfect Threads Clothing, calculate ratios you feel are as appropriate to appraise their performance.** **[£]** ------------------------------- --------------------- Opening inventory 132,849 Payables due under one year 25,698 Closing inventory 242,849 Accruals 11,490 Revenue 15,583,038 Bank overdraft 34,869 Receivables 127,948 Buildings 1,690,438 Cash at the bank 789,374 Fixture and fittings 644,839 Prepayment 8,494 Bank loan due within one year 15,495 Purchases 6,793,489 Hint think where does the above information fit within a set of financial statements ? This will help for you to calculate the ratios. Current Ratio = CA: CL 13.35 :1 Acid Test -- remove inventory from the CA = 10.57 : 1 Cost of sales = Opening inventory Add: Purchases Less: Closing inventory = Cost of Sales (COS) / cost of goods sold (COGS) Inventory days Receivable / debtor settlement days Payable days When you have calculated them, take a step back and think what are they individually but also collectively advising you of ? **34. Using the following information for Perfect Threads Clothing, calculate ratios you feel are as appropriate to appraise their performance.** **[£]** ------------------------------- --------------------- Opening inventory 589,403 Payables due under one year 489,304 Closing inventory 335,957 Accruals 15,693 Revenue 18,478,358 Bank overdraft 427,840 Receivables 332,048 Buildings 1,839,847 Cash at the bank 938,438 Fixture and fittings 874,303 Prepayment 13,478 Bank loan due within one year 23,940 Purchases 8,976,938 Hint think where does the above information fit within a set of financial statements ? This will help for you to calculate the ratios. When you have calculated them, take a step back and think what are they individually but also collectively advising you of ? Main exam practice questions -- you need to note some areas that you consider to then explore further to prepare ahead of the real exam -- outlines will be shared in the revision sessions but no answers will be published on the Canvas: Q 1 Using the memo information from week 7 and what the Luxexpensive pre-seen information, what additional information do you need regarding the Parent -- Luxexpensive PLC and of the newly acquired subsidiary -- Quick Clothing Limited -- in order to draft a set of financial statements ? -- -- Q 2 From what you have reviewed in the memo indicate what potential issues might arise if these where left unresolved. Indicate where possible how they should have been treated during the consolidation process. Potential issue areas Impact / treatment ----------------------- -------------------- -- -- Q 3 You have previously been advised that the LP group to date have not included any details regarding environmental and sustainable policies or disclosures within their financial statements. -- -- Q 4 Outline in a briefing note for the board of directors as to what disclosures they should have been making and what initial changes would need to take place in order to provide the information for such reporting disclosures to be made. To: Board of Directors From: XX Date: Date of exam Caveat: Date of publication Required disclosures Action needed / changes to provide such disclosure information ---------------------- ---------------------------------------------------------------- -- -- Q5 **Financial reporting has evolved to its current form, with good practice, guidelines, recommendations, and regulations, issued by a plethora of institutions, committees, and regulatory bodies.** **State your opinion as to whether you believe these have been successful in helping to produce purposeful information to a user of such financial statements, using which examples you feel appropriate to support your argument, indicating what, if anything you believe should the future of any such developments be.** +-----------------------------------------------------------------------+ | Combined Code -- separate Chair and Chief Executive | | | | MnS could have advised... | | | | Audit Committee would review decisions-making -- 3 or more | | non-executive directors. | | | | Transparency | | | | Comply or state why | +=======================================================================+ | GAAP -- UK principle-based - good ? opinion or rules ? | | | | IAS / FRS / IFRS's | +-----------------------------------------------------------------------+ | Workshop week 4 | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ | | +-----------------------------------------------------------------------+ **Q 6 With reference to relevant financial reporting and accounting standards, discuss what an entity is required to do, if they select alternative accounting policies in the preparation of their financial statements. This should include if this effects a prior year's financial statements.** -- -- **Q7 In your role as Group Accountant, you have been asked to draft a new procedure over the financial statements consolidation process, involving several subsidiaries who are part of the organisations large group. Previously there has been an inconsistent approach leading to reporting errors with the existing approach.** **Your advice should include what appropriate management tools would be incorporated to ensure a consistent and rigorous approach regardless as to whom is in charge of the process.** -- --