Deck 6: The Balance Sheet: an Overview

Question 1

Under AASB 101,the 'average time between the acquisition of materials entering into a process and their realisation in cash or as an instrument that is readily convertible into cash' is known as:

A) production cycle
B) production line
C) economic cycle
D) operating cycle

Answer 1

D

Question 2

Which statement is incorrect?

A) Under AASB 101, assets and liabilities must not be set-off unless set-off is permitted or required by another accounting standard
B) Between 1979 and 1999, there was no Australian accounting standard dealing specifically with the statement of financial position
C) Under AASB 101, there is no materiality override
D) None of the statements is incorrect

Answer 2

C

Question 3

The statement in relation to AASB 108 and the correction of prior-period errors that is incorrect is:

A) Prior-period errors are material omissions from and misstatements in an entity's statement of financial position and associated notes
B) The correction must not be included in the profit or loss for the period in which the error is discovered
C) Comparative figures for prior periods need not be restated
D) A retrospective correction must be made which will normally affect retained earnings in the current statement of financial position

Answer 3

C

Question 4

The availability of assets to meet financial commitments as they fall due is known as:

A) solvency
B) control over resources
C) gearing
D) asset turnover

Question 5

Which of the following items is a non-monetary asset?

A) Loan
B) Inventories
C) Accounts receivable
D) All of the above are non-monetary assets

Question 6

Additional line items to those disclosed in accordance with paras 68 and Aus68.1 of AASB 101 may be included on the face of the statement of financial position when disclosure of these items is assessed to be relevant to an understanding of the entity's financial position.This assessment is based on which of the following?

A) The nature and liquidity of assets
B) The function of the assets within the entity
C) The amounts, nature and timing of liabilities
D) All of the above

Question 7

'Disclosure of information about the financial position of the reporting entity involves disclosure of information about its control over resources,financial structure,capacity for adaptation and solvency.' SAC2 para 32.
Explain and discuss this statement.

Question 8

Australian standard setters have adopted the view that:

A) there should be some flexibility in the format of financial statements
B) companies should use a fixed format when preparing financial statements
C) Schedule 5 provides an example of a flexible format for preparers of financial statements
D) the statement of financial position is merely a link between successive income statements

Question 9

The tangibility of an asset refers to:

A) whether it is monetary or non-monetary
B) whether it has physical substance
C) whether the asset will be converted into cash within 12 months
D) whether it can be converted into cash at short notice

Question 10

The current/non-current basis of classifying assets and liabilities in the statement of financial position is based on their:

A) marketability
B) longevity
C) source
D) none of the above

Question 11

Separate disclosure,on the face of the statement of financial position,is required under AASB 101 paragraph 54 for:

A) trade and other receivables
B) inventories
C) provisions
D) all of the above

Question 12

Which of these is not included in the SAC2 description of information to be disclosed about the financial position of the reporting entity? Information about its:

A) capacity for adaptation
B) operating capability
C) control over resources
D) financial structure

Question 13

Internally generated tangible assets:

A) are valued at their cost of manufacture or construction
B) are not subject to the impairment test
C) include patents trademarks and brand names
D) all of the above

Question 14

AASB 101 allows which of these statements of financial position formats?

A) Current/non-current format
B) Order-of-liquidity format
C) A mixed basis of presentation using both the current/non-current basis and the order-of-liquidity format for different asset groups
D) All of the above are allowable formats.

Question 15

Which statement concerning the statement of financial position and the requirements of the Corporations Act is not true?

A) The Act requires the statement of financial position to present a 'true and fair view' of the entity's financial position
B) The Act states that if the financial statement would not give a true and fair view, additional information must be included in the notes to the statements in order to provide that view
C) True and fair view is defined in the Act to mean in accordance with generally accepted accounting standards
D) None of the above, i.e., all of the statements are true

Question 16

The correction of errors relating to prior periods is now covered by:

A) AASB 1034
B) AASB 101
C) AASB 108
D) none of the above

Question 17

The fixed format for the statement of financial position required by AASB 101 is:

A) assets = liabilities + equity
B) assets - liabilities = equity
C) assets = equities
D) no fixed format is required

Question 18

Which of these is a non-monetary liability?

A) Bank overdraft
B) Provision for long-service leave
C) Debentures
D) All are non-monetary liabilities

Question 19

The accounting standard relating to the statement of financial position is:

A) AASB 103
B) AASB 101
C) AASB 140
D) AASB 111

Question 20

Current assets,as defined in AASB 101,are those that:

A) are expected to be realised within the normal course of the operating cycle
B) are held primarily for the purpose of being traded
C) are expected to be realised within 12 months after the end of the accounting period
D) any of the above

Question 21

Identify and discuss the requirements concerning the classification of assets contained in AASB 101.

Question 22

Entities are required to disclose comparative information the previous period.Discuss how the correction of prior period errors may impact on the presentation of the financial statements.

Question 23

Identify and discuss the requirements concerning the classification of liabilities contained in AASB 101.