Notes and Questions on Financial Accounting PDF

## Chapter 11: Notes to Financial Statements ### Question 11-1 Explain notes to financial statements. ### Answer 11-1 Notes to financial statements provide narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for re...

## Chapter 11: Notes to Financial Statements ### Question 11-1 Explain notes to financial statements. ### Answer 11-1 Notes to financial statements provide narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for recognition. Notes contain information in addition to that presented in the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows. In other words, notes to financial statements are used to report information that does not fit into the body of the statements in order to enhance the understandability of the statements. Notes to financial statements provide additional information and help clarify the items presented in the financial statements. PAS 1, paragraph 113, provides that an entity shall, as far as practicable, present notes in a systematic manner. Each item on the face of the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows shall be cross-referenced to any related information in the notes. ## Chapter 12: Related Party Transactions ### Question 12-9 Financial statements shall include disclosure of material transactions between related parties, except a. Nonmonetary exchange by affiliates. b. Sales of inventory by a subsidiary to the parent when consolidated financial statements are prepared. c. Expense allowance for executives which exceed normal business practice. d. Guarantee of indebtedness to act as surety for a loan to the chief executive officer. ### Answer 12-9 b. ### Question 12-8 Which is not included in key management personnel compensation? a. Short-term benefit b. Share-based payment c. Termination benefit d. Reimbursement of out-of-pocket expenses ### Answer 12-8 d. ### Question 12-7 Related parties include all of the following, except a. Parent, subsidiary and fellow subsidiaries. b. Associates. c. Key management personnel and close family members of such key management personnel d. Two venturers simply because they share joint control over a joint venture. ### Answer 12-7 d. ### Question 12-6 An entity that entered into a related party transaction would be required to disclose all, except a. Nature of the relationship between the parties b. Nature of any future transactions planned between the parties and the terms involved. c. Peso amount of the transaction. d. Amount due from or to related parties. ### Answer 12-6 b. ### Question 12-5 The minimum disclosures about related party transactions include all of the following, except a. The amount of the transaction b. Amount of outstanding balance c. Allowance for doubtful accounts related to the outstanding balance d. Nature of the relationship ### Answer 12-5 d. ### Question 12-4 Related party transactions include all, except a. A venturer sold goods to the joint venture. b. Sold a car to the uncle of the entity’s finance director. c. Sold goods to another entity owned by the daughter of the managing director. d. All of these are related party transactions. ### Answer 12-4 d. ### Question 12-3 Which of the following is not a required minimum disclosure about related party transaction? a. The amount of related party transaction b. The amount of the outstanding balance c. The amount of similar transaction with unrelated parties to establish that comparable related party transaction has been entered at arm’s length. d. Doubtful debt related to the outstanding balance. ### Answer 12-3 c. ### Question 12-2 A related party transaction is a transfer a. Between related parties when a price is charged. b. Between related parties, regardless of whether a price is charged. c. Between unrelated parties when a price is charged. d. Between unrelated parties, regardless of whether a price is charged. ### Answer 12-2 b. ### Question 12-1 Which is not a required related party disclosure? a. The son of the chief executive officer of the entity. b. The parent of the entity. c. An entity that has a common director with the entity. d. Joint venture in which the entity is a venturer. ### Answer 12-1 c. ## Chapter 14 Multiple Choice ### Question 14-18 In the statement of changes in equity, the effect of a change in accounting policy is presented a. Separately for each component of equity. b. In aggregate for total equity. c. In total for the amount attributable to owners of the parent and the noncontrolling interest. d. Separately for the total amount attributable to owners of parent and the noncontrolling interest. ### Answer 14-18 a. ### Question 14-17 The limitations of the income statement include all of the following, except a. Items that cannot be measured reliably are not reported. b. Only actual amounts are reported in net income. c. Income measurement involves judgment. d. Income numbers are affected by the accounting method. ### Answer 14-17 b. ### Question 14-16 Income determination is arrived at by a. Measuring the change in owners’ equity. b. Identifying the change in the purchasing power. c. Using a transaction approach. d. Applying the value added concept. ### Answer 14-16 c. ### Question 14-15 The income statement reveals a. Resources and equity at a point in time. b. Resources and equity for a period of time. c. Net earnings at a point in time. d. Net earnings for a period of time. ### Answer 14-15 d. ### Question 14-14 An analysis of expenses is based on a. The nature of expenses. b. The function of expenses. c. Either the nature of expenses or the function of expenses, whichever provides information that is reliable and more relevant. d. Either the nature of expenses or the function of expenses, whichever the entity would prefer to present. ### Answer 14-14 c. ### Question 14-13 The term comprehensive income a. Must be reported on the face of the income statement. b. Includes all changes in equity except those resulting from investments by and distributions to owners. c. Is the net change in owners' equity for the period. d. Is synonymous with the term net income. ### Answer 14-13 b. ### Question 14-12 What is the purpose of reporting comprehensive income? a. To report transactions with owners. b. To report transactions overall entity performance. c. To replace net income with a better measure of overall entity performance. d. To combine income from continuing operations with income from discontinued operations. ### Answer 14-12 b.