Question 1

Profit is:

Accepted Answer

A)  an ideal measure of the 'well-offness' of a firm because income and expenses are clearly defined. 
B)  only a measure of financial performance and therefore not useful in decision-making. 
C)  directly affected by the accounting policy choices implemented by management. 
D)  comparable across all firms as it is simply calculated by subtracting expense from revenues. 
A)  an ideal measure of the 'well-offness' of a firm because income and expenses are clearly defined. 
B)  only a measure of financial performance and therefore not useful in decision-making. 
C)  directly affected by the accounting policy choices implemented by management. 
D)  comparable across all firms as it is simply calculated by subtracting expense from revenues.

Question 2

A statement displaying components of profit or loss is referred to in AASB 101 as a(n):

Accepted Answer

A)  profit and loss statement. 
B)  statement of income. 
C)  statement of financial performance. 
D)  income statement. 
A)  profit and loss statement. 
B)  statement of income. 
C)  statement of financial performance. 
D)  income statement.

Question 3

A statement of comprehensive income that includes revenue,cost of sales,selling expenses,financial expenses would have been prepared using the:

Accepted Answer

A)  nature of expense method. 
B)  narrative method. 
C)  revenues and gains approach. 
D)  function of expense approach. 
A)  nature of expense method. 
B)  narrative method. 
C)  revenues and gains approach. 
D)  function of expense approach.

Question 4

Hicks' notion of income is that:

Accepted Answer

A)  An individual's income is what they consume. 
B)  An individual's income is the minimum value that they can consume during a period and still be as well off at the end as they were in the beginning. 
C)  An individual's income is the difference between their revenues and expenses. 
D)  An individual's income is the maximum value that they can consume during a period and still be as well off at the end as they were in the beginning. 
A)  An individual's income is what they consume. 
B)  An individual's income is the minimum value that they can consume during a period and still be as well off at the end as they were in the beginning. 
C)  An individual's income is the difference between their revenues and expenses. 
D)  An individual's income is the maximum value that they can consume during a period and still be as well off at the end as they were in the beginning.

Question 5

Different measurement models affect the determination of income and expenses.The different measurement models include:

Accepted Answer

A)  historical cost, fair value, present value. 
B)  historical cost, direct costs, indirect costs. 
C)  current cost, historical cost, overhead cost. 
D)  market value, opportunity cost, historical cost. 
A)  historical cost, fair value, present value. 
B)  historical cost, direct costs, indirect costs. 
C)  current cost, historical cost, overhead cost. 
D)  market value, opportunity cost, historical cost.

Question 6

Discuss the accounting treatment prescribed by AASB 101 Presentation of Financial Statements for reclassification adjustments from components of other comprehensive income to profit and loss.

Accepted Answer

AASB 101 requires an entity to disclose

Question 7

If it is found that an error had been made in a prior period:

Accepted Answer

A)  The error should be rectified by including the item of income or expense in the period in which the error was discovered. 
B)  AASB 101 does not cover this concept and so no entry is required. 
C)  AASB 108 requires that errors are corrected via an adjustment to opening balance of retained earnings. 
D)  Material errors discovered in the current reporting period must be included in that period's statement of comprehensive income, while non-material errors may be corrected with an adjustment to opening retained earnings. 
A)  The error should be rectified by including the item of income or expense in the period in which the error was discovered. 
B)  AASB 101 does not cover this concept and so no entry is required. 
C)  AASB 108 requires that errors are corrected via an adjustment to opening balance of retained earnings. 
D)  Material errors discovered in the current reporting period must be included in that period's statement of comprehensive income, while non-material errors may be corrected with an adjustment to opening retained earnings.

Question 8

Government departments are now required to embrace traditional accounting methods.The broad effect of this requirement is to:

Accepted Answer

A)  emphasise the reporting of the service role of government departments. 
B)  emphasise the use of cash accounting by government departments. 
C)  introduce accrual accounting and an emphasis on profit. 
D)  introduce value added reporting. 
A)  emphasise the reporting of the service role of government departments. 
B)  emphasise the use of cash accounting by government departments. 
C)  introduce accrual accounting and an emphasis on profit. 
D)  introduce value added reporting.

Question 9

AASB 118 Revenue requires a number of disclosures,including information about:

Accepted Answer

A)  rents, interest, royalties and dividends. 
B)  accounting policies adopted for the recognition of revenues. 
C)  methods adopted to determine the stage of completion of contracts involving the rendering of services. 
D)  all of the given answers. 
A)  rents, interest, royalties and dividends. 
B)  accounting policies adopted for the recognition of revenues. 
C)  methods adopted to determine the stage of completion of contracts involving the rendering of services. 
D)  all of the given answers.

Question 10

Reports in the financial press that a particular company reported healthy profits despite increased wage costs are indicative of:

Accepted Answer

A)  the negative impact of reporting payments to employees as expenses while payments to owners are treated as distributions of profits. 
B)  the implied emphasis on the returns to owners being good and returns to other stakeholders such as employees as being bad. 
C)  the effect of reporting employees as expenses and not reporting the social costs of unemployment on decisions to restructure companies to reduce the workforce. 
D)  all of the given answers. 
A)  the negative impact of reporting payments to employees as expenses while payments to owners are treated as distributions of profits. 
B)  the implied emphasis on the returns to owners being good and returns to other stakeholders such as employees as being bad. 
C)  the effect of reporting employees as expenses and not reporting the social costs of unemployment on decisions to restructure companies to reduce the workforce. 
D)  all of the given answers.

Question 11

How does AASB 101 define 'extraordinary items'? Discuss the current arrangements for accounting for such items.

Accepted Answer

A SIGNIFICANT CHANGE INTRODUCED IN AUSTR

Question 12

Estimations are frequently made in the financial statements in relation to items such as bad debts,inventory obsolescence,an asset's useful life and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the financial statements is to:

Accepted Answer

A)  increase the variability of profits. 
B)  make the statement unreliable. 
C)  reduce the relevance of the profit figures reported. 
D)  None of the given answers are correct. 
A)  increase the variability of profits. 
B)  make the statement unreliable. 
C)  reduce the relevance of the profit figures reported. 
D)  None of the given answers are correct.

Question 13

AASB 108 requires all errors that relate to prior reporting periods to be corrected by adjusting the opening balance of retained earnings and restating comparative information.

Accepted Answer

A) True 
 B)False

Question 14

When there is a change made to the useful life of an asset:

Accepted Answer

A)  It must be recognised as a change in an accounting estimate and the impact of the reported change must be disclosed in the notes to the accounts. 
B)  It must be recognised as an error and all previous financial statements must be restated. 
C)  It must be recognised as an error and opening retained earnings and opening balances of the asset must be restated. 
D)  It is recognised as a change in an accounting estimate and the opening retained earnings and opening balances of the asset must be restated. 
A)  It must be recognised as a change in an accounting estimate and the impact of the reported change must be disclosed in the notes to the accounts. 
B)  It must be recognised as an error and all previous financial statements must be restated. 
C)  It must be recognised as an error and opening retained earnings and opening balances of the asset must be restated. 
D)  It is recognised as a change in an accounting estimate and the opening retained earnings and opening balances of the asset must be restated.

Question 15

'Profit is a measure of financial performance'.How might it be deficient as a measure of an entity's overall performance?
 What is typically excluded from newspaper reports discussing an entity's performance?

Accepted Answer

Profit is indeed a measure of financial

Question 16

Discuss the components required to be disclosed in the statement of changes in equity as prescribed in AASB 101 Presentation of Financial Statements.

Accepted Answer

The statement of changes in equity, as p

Question 17

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a required disclosure pertaining to payments made to auditors?

Accepted Answer

A)  the amounts paid to an auditor for an audit of financial statements of the entity 
B)  the amounts payable to an auditor for a review of financial statements of the entity 
C)  the amounts paid to assurors of corporate sustainability reports 
D)  the nature of each of the non-audit services provided by the auditor 
A)  the amounts paid to an auditor for an audit of financial statements of the entity 
B)  the amounts payable to an auditor for a review of financial statements of the entity 
C)  the amounts paid to assurors of corporate sustainability reports 
D)  the nature of each of the non-audit services provided by the auditor

Question 19

Changes in an entity's equity between the beginning and the end of the reporting period reflect the increase or decrease in its:

Accepted Answer

A)  liabilities during the period. 
B)  net profit for the period. 
C)  assets during the period. 
D)  net assets during the period. 
A)  liabilities during the period. 
B)  net profit for the period. 
C)  assets during the period. 
D)  net assets during the period.

Question 20

The choice of classification between nature and function of expenses from ordinary activities depends on:

Accepted Answer

A)  the size of the items that would be reported under the possible classifications. 
B)  the historical evidence about the probability of the items recurring. 
C)  the classification that provides information that is reliable and more relevant. 
D)  the classification that best reflects the way expenses vary directly or indirectly with the entity's level of activity. 
A)  the size of the items that would be reported under the possible classifications. 
B)  the historical evidence about the probability of the items recurring. 
C)  the classification that provides information that is reliable and more relevant. 
D)  the classification that best reflects the way expenses vary directly or indirectly with the entity's level of activity.

Exam 16: The Statement of Comprehensive Income and Statement of Changes in Equity

Profit is:

A statement displaying components of profit or loss is referred to in AASB 101 as a(n):

A statement of comprehensive income that includes revenue,cost of sales,selling expenses,financial expenses would have been prepared using the:

Hicks' notion of income is that:

Different measurement models affect the determination of income and expenses.The different measurement models include:

Discuss the accounting treatment prescribed by AASB 101 Presentation of Financial Statements for reclassification adjustments from components of other comprehensive income to profit and loss.

If it is found that an error had been made in a prior period:

Government departments are now required to embrace traditional accounting methods.The broad effect of this requirement is to:

AASB 118 Revenue requires a number of disclosures,including information about:

Reports in the financial press that a particular company reported healthy profits despite increased wage costs are indicative of:

How does AASB 101 define 'extraordinary items'? Discuss the current arrangements for accounting for such items.

Estimations are frequently made in the financial statements in relation to items such as bad debts,inventory obsolescence,an asset's useful life and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the financial statements is to:

AASB 108 requires all errors that relate to prior reporting periods to be corrected by adjusting the opening balance of retained earnings and restating comparative information.

When there is a change made to the useful life of an asset:

'Profit is a measure of financial performance'.How might it be deficient as a measure of an entity's overall performance? What is typically excluded from newspaper reports discussing an entity's performance?

Discuss the components required to be disclosed in the statement of changes in equity as prescribed in AASB 101 Presentation of Financial Statements.

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101.

Which of the following is not a required disclosure pertaining to payments made to auditors?

Changes in an entity's equity between the beginning and the end of the reporting period reflect the increase or decrease in its:

The choice of classification between nature and function of expenses from ordinary activities depends on:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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