Question 1

The accounting standards require a statement of changes in ______________ to be prepared by all reporting entities.

Accepted Answer

equity

Question 2

The statement of profit or loss:

Accepted Answer

A)   reports the assets, liabilities and equity at a specific point in time.
B)   summarises the change in retained earnings over a specific period of time.
C)   presents the income and expenses of an entity for a specific period of time.
D)   reports the changes in assets, liabilities and equity over a period of time. C

Question 3

Which of the following must exist before income can be recognised?

Accepted Answer

A)   The increase in future economic benefits related to an increase in an asset or a decrease in a liability must have arisen.
B)   The increase in future economic benefits must be able to be measured reliably.
C)   All options must exist.
D)   Income recognition must occur at the same time as the recognition of increases in assets or reductions in liabilities. C

Question 4

A financial analyst is more interested in:

Accepted Answer

A)   post-tax profit as a means of assessing profitability.
B)   pre-tax profit as it

Question 5

If sales = $455 000,purchases = $225 000,beginning inventory = $150 000 and ending inventory = $118 000,gross profit is:

Accepted Answer

A)   $198 000
B)   $257 000
C)   $75 000
D)   $230 000

Question 6

An ______________ expense is recognised when the value of an asset is determined to be lower than its carrying amount.

Accepted Answer

The answer of An ______________ expense is recognised when the...

Question 7

In order to comply with accounting standards,reporting entities are required to classify expenses:

Accepted Answer

A)   without aggregation.
B)   by nature or function.
C)   by function only.
D)   in no particular way.

Question 8

If profit after tax and interest is $400 000,interest expense is $50 000 and taxation expense is $84 000,profit before interest and tax is:

Accepted Answer

A)   $450 000
B)   $291 000
C)   $534 000
D)   $484 000

Question 9

Which of these is the best measure of an entity's profitability?

Accepted Answer

A)   Pro forma earnings.
B)   Profit before tax.
C)   Profit post material items.
D)   There is no one 'best' profit measure; it depends on the requirements of the user.

Question 10

Equity is decreased by:

Accepted Answer

A)   liabilities.
B)   expenses.
C)   income.
D)   assets.

Question 11

Expenses classified by function would be categorised as:

Accepted Answer

A)   marketing expenses.
B)   borrowing expenses.
C)   selling and distribution expenses.
D)   all of the above.

Question 12

Under the current accounting standards,which of the following items is not included in the measurement of profit in the statement of profit or loss?

Accepted Answer

A)   Loss on the disposal of non-current assets.
B)   Gain on asset revaluation.
C)   Cost of sales.
D)   Dividends received.

Question 13

When determining whether an item of expenditure is material,the following must be considered:

Accepted Answer

A)   the size and/or nature of the expense.
B)   whether its non-disclosure could have an impact on users' decision making.
C)   whether a related asset has been impaired.
D)   all of the above options must be considered.

Question 14

When an asset's __________ amount is lower than its carrying amount,the asset is deemed to have been __________.

Accepted Answer

The answer of When an asset's __________ amount is lower...

Question 15

Under the accounting standard governing the presentation of the statement of profit or loss,the item that is not required to be presented on the face of the statement for a retail entity is:

Accepted Answer

A)   cost of sales.
B)   finance costs.
C)   depreciation.
D)   tax expense.

Question 16

A loss reported on the statement of profit or loss decreases the __________ section of the balance sheet.

Accepted Answer

The answer of A loss reported on the statement of...

Question 17

Which of the following will be classified as income?

Accepted Answer

A)   Interest received.
B)   Fees charged for services provided.
C)   Gain on sale of equipment.
D)   All of the above.

Question 18

For a transaction to be recognised as income in the statement of profit or loss the elements must satisfy both the ________________ and ________________criteria as specified in the Conceptual Framework.

Accepted Answer

The answer of For a transaction to be recognised as...

Question 19

Increases in assets or decreases in liabilities that result in increases in equity,other than those relating to contributions from holders of equity claims,is the Framework's definition of ____________________.

Accepted Answer

The answer of Increases in assets or decreases in liabilities...

Question 20

Which of the following profit measures represents the raw operating earnings of an entity?

Accepted Answer

A)   Profit after taxation.
B)   Earnings before interest and taxation (EBIT) .
C)   Gross profit.
D)   Earnings before interest, taxation, depreciation and amortisation (EBITD
A)  .

Exam 6: Statement of Profit or Loss and Statement of Changes in Equity