A bonus issue of shares:
Existing reserves are converted into share capital; total equity remains unchanged.
Accounting and Finance MCQs
Under the imprest system of petty cash, the petty cash is:
The imprest system sets a fixed float that is topped up by the amount spent.
The journal entry for goods sold on credit is:
Receivables (an asset) increase by debit and sales (revenue) increases by credit.
Drawings made by the owner of a sole proprietorship:
Drawings are withdrawals of business assets by the owner for personal use and reduce capital.
The primary goal of financial management is generally considered to be:
Wealth maximization considers risk, timing and size of cash flows, unlike simple profit maximization.
Under IAS 37, a provision is recognized when:
All three conditions must be met for recognition.
A contingent liability is:
Contingent liabilities are disclosed in the notes unless the possibility of outflow is remote.
Goodwill arises in a business combination when:
Goodwill is the excess of the cost of acquisition over the fair value of net identifiable assets.
Which of the following is an intangible asset?
Patents have no physical substance and are intangible assets under IAS 38.
Under IAS 16, property, plant and equipment is initially measured at:
Cost includes the purchase price and directly attributable costs of bringing the asset to its location and condition.
An impairment loss arises when:
Impairment is the write-down of an asset to its recoverable amount.
Under IFRS 15, revenue is recognized when:
IFRS 15 follows a five-step model that recognizes revenue as control is transferred.
The statement of financial position (balance sheet) shows:
It is a snapshot of financial position at a point in time.
The three categories of activities in a statement of cash flows are:
IAS 7 requires cash flows to be classified into operating, investing and financing activities.
Purchase of equipment for cash is classified as a cash flow from:
Acquisition of long-term assets is an investing activity.
Repayment of a long-term bank loan is classified as a cash flow from:
Financing activities relate to changes in the size and composition of equity and borrowings.
The indirect method of preparing the cash flow from operating activities starts with:
The indirect method reconciles profit to net cash from operations.
The quick (acid test) ratio excludes which item from current assets?
Inventory is the least liquid current asset, so it is excluded.
Net profit is Rs. 50,000 and sales are Rs. 400,000. The net profit margin is:
50,000 / 400,000 = 12.5%.
An accrued expense is an expense that has been:
Accrued expenses such as unpaid wages are liabilities at the reporting date.
A prepaid expense is shown in the statement of financial position as:
Payment made in advance gives a future benefit and is therefore an asset.
Unearned (deferred) revenue is reported as:
The entity owes goods or services for the cash received in advance.
The cost of installing a new machine in a factory is:
Costs necessary to bring an asset to working condition are capitalized.
According to IAS 2, inventories are measured at:
This avoids carrying inventory above the amount expected to be recovered.
During a period of rising prices, the FIFO method gives:
FIFO charges older, lower costs to cost of goods sold and leaves recent higher costs in inventory.