Course Introduction
Accounting for Business Review Questions
Accounting for Business introduces students to the fundamental principles of accounting and their application in business environments. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, and the role of accounting information in decision-making. Students will learn how to record business transactions, interpret financial data, and understand the regulatory framework for accounting practices. Emphasizing both theoretical concepts and practical skills, the course enables students to effectively use accounting information to support business planning, control, and performance evaluation.
Recommended Textbook
Understanding Australian Accounting Standards 1st Edition by Janice Loftus
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798 Verified Questions
798 Flashcards
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Page 2
Chapter 1: Accounting Regulation and the Conceptual Framework
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Sample Questions
Q1) Which of the followings satisfy the definition of expenses?
A) Cash withdrawal by owner.
B) Payment of dividends to shareholders.
C) Purchase of equipment.
D) Payment of salaries to employees.
Answer: D
Q2) Section 297 of the Corporations Act states that financial statements must provide a true and fair view of an entity's financial position and performance. However, when compliance with the accounting standards results in financial statements which would not produce a true and fair view, the Corporations Act requires the entity to:
A) not comply with the accounting standards.
B) not comply with the accounting standards and write a letter to the shareholders explaining the non-compliance.
C) still comply with the accounting standards and provide additional information in the notes to the financial statements to give a true and fair view.
D) request an exemption from the AASB.
Answer: C
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3
Chapter 2: Application of Accounting Theory
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Sample Questions
Q1) An example of bonding costs is:
A) auditor's fees.
B) cost of implementing a management remuneration plan.
C) cost of preparing quarterly financial reports.
D) cost of setting up company's code of conducts.
Answer: C
Q2) Sally observes that 'Cash' account is an asset account and has a debit balance. She also notices that 'Inventory' account is an asset account and has a debit balance. Therefore, Sally comes into conclusion that all asset accounts have a debit balance. Which approach does Sally use in developing her theory about all asset accounts having a debit balance?
A) Deductive reasoning
B) Inductive reasoning
C) Conceptual reasoning
D) Conclusive reasoning
Answer: B
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Chapter 3: Shareholders Equity: Share Capital and Reserves
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Sample Questions
Q1) Gains or losses that arise as a result of translating foreign currency denominated operations into the reporting currency are recognised in income:
A) in the reporting period in which they arise;
B) only when the interest in the foreign operation is sold;
C) only if they are material items;
D) only when they are settled in cash.
Answer: B
Q2) The bonus issue of shares has the following impact on the equity of a company;
A) total equity increases;
B) total equity decreases;
C) one equity account increases and another equity account decreases by an equal amount;
D) only the amount of issued share capital changes.
Answer: C
Q3) In respect to the issue of shares by a company, what is an IPO?
A) Investment in Preference and Ordinary shares;
B) Initial Public Offering of shares;
C) Investment Prospectus for an issue of Options;
D) Instruments Providing Options to ordinary shareholders.
Answer: B
Page 5
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Chapter 4: Fair Value Measurement
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Sample Questions
Q1) Which of the following is an example of a liability where there is no corresponding asset?
A) a provision for decommissioning
B) a debenture issued by a listed company
C) a loan owing to a financial institution
D) a provision for warranties.
Q2) Which are the two most common measures used in Accounting Standards?
A) fair value less costs to sell and cost
B) value in use and cost
C) cost and fair value
D) net realisable value and fair value.
Q3) In measuring an equity instrument at fair value the objective is to estimate an exit price at measurement date from the perspective of:
A) the issuer of the equity instrument
B) the party to whom the instrument will be transferred
C) the party who intends to repurchase the instrument.
D) a market participant who holds the instrument as an asset.
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6
Chapter 5: Revenue
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Q1) Which of the following is incorrect in relation to consignment sales?
A) A consignment sale is one where the owner transfers possession of the goods but not legal title to a third party (agent).
B) On sale of an item held on consignment, the agent remits the proceeds to the owner (normally less commission).
C) The owner will recognise revenue on consignment sales at the time of sale of the item to the ultimate customer.
D) Consignment sales are a common way of increasing revenue at or near the end of a period.
Q2) Using the relative fair value approach the amount of revenue recognised in relation to the on-call advice is:
A) indeterminable based on the facts provided
B) $1000
C) $2167
D) $2600
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Chapter 6: Provisions, Contingent Liabilities and Contingent Assets
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Q1) Entity A has provided a bank guarantee to a bank in relation to a loan provided to entity B. Entity B is solvent and shows no signs of defaulting on the loan. The treatment of the bank guarantee in the records of entity A is to:
A) recognise a liability
B) recognise a provision
C) recognise a contingent liability
D) do nothing
Q2) According to AASB 137 Provisions, Contingent Liabilities and Contingent Assets, when providing for the future, a future event such as the clean-up of a contaminated site, gains and other cash inflows that are expected to arise on the sale of asset related to the clean-up, must be treated as follows:
A) set-off against the provision for the clean-up;
B) measured separately of the provision;
C) recognised directly in equity in the period in which the cash inflows arose;
D) recognised as a deferred asset.
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Chapter 7: Income Taxes
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Sample Questions
Q1) A taxable temporary difference is expected to lead to the payment of:
A) more tax in the future and gives rise to a deferred tax asset
B) less tax in the future and gives rise to a deferred tax asset
C) more tax in the future and gives rise to a deferred tax liability
D) less tax in the future and gives rise to a deferred tax liability.
Q2) Differences between the carrying amounts of an entity's net assets determined under accounting standards and accrual accounting, and the tax bases of those net assets determined under the Income Tax Assessment Act, are described as:
A) temporary differences
B) permanent differences
C) tax losses
D) the current income tax liability.
Q3) ABC Limited has an asset with a carrying value of $50 000. The tax base of this asset is $40 000. The tax rate is 30%. As a result, which of the following deferred tax items does Roland Limited have?
A) A deferred tax asset of $10 000.
B) A deferred tax liability of $3000.
C) A deferred tax liability of $10 000;
D) A deferred tax asset of $3000;
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Page 9
Chapter 8: Financial Instruments
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Sample
Questions
Q1) Company A has convertible notes on issue. These notes are convertible to ordinary shares of the Company after 3 years. The distributions made to the note holders by Company A are classified by Company A as follows:
A) interest expense.
B) dividends distributed.
C) a portion representing interest expense and a portion representing dividends distributed
D) indeterminable based on the information provided.
Q2) When first issued, AASB 139 was:
A) More rule-based than other AASB standards
B) Less rule-based than other AASB standards
C) Wider in scope that other AASB standards
D) Narrower in scope that other AASB standards
Q3) The risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss is referred to as:
A) interest rate risk;
B) liquidity risk;
C) market risk;
D) credit risk.
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Page 10
Chapter 9: Share-Based Payments
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Q1) On 1 July 2013, Leo Limited granted 250 options to each of its 50 employees. The options are conditional on the employees remaining with the company for the 2 year vesting period. The options have a fair value of $10 at vesting date. In addition, the shares will vest as follows:
On 30 June 2014 if the company's earnings have increased by more than 15%
On 30 June 2015 if the company's earnings have increased by more than 12% averaged across the 2 year period
At 30 June 2014 Leo's earnings have increased by 12% and 3 employees have left. The company expects that earnings will continue to increase at a similar rate during the year to 30 June 2015 and that the shares will vest at that time. It also expects that a further 4 employees will leave during the year.
The remuneration expense for the year ended 30 June 2014 for Leo is:
A) $35 833
B) $53 750
C) $58 750
D) $117 500
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Chapter 10: Translation of the Financial Statements of Foreign Entities
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Sample Questions
Q1) The general rule for translating liabilities denominated in a foreign currency into the functional currency is to:
A) translate all liabilities using the current rate existing at end of reporting period; B) first classify the liabilities into current and non-current; C) first classify the liabilities as monetary or non-monetary; D) translate all liabilities using the rate current on entering into the transaction.
Q2) If foreign currency denominated non-monetary items are measured using the fair value method, they must be translated into the functional currency using the:
A) exchange rate at the date when the value was determined; B) exchange rate current at end of reporting period; C) closing exchange rate for the financial year; D) exchange rate at the transaction date.
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Chapter 11: Employee Benefits
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Q1) AASB 119 does NOT prescribe the accounting treatment for:
A) contributions to defined contribution post-employment benefit funds
B) contributions received by a defined contribution post-employment benefit fund
C) assets arising from defined benefit post-employment benefit plans from the perspective of the employer
D) liabilities arising from defined benefit post-employment benefit plans from the perspective of the employer
Q2) Benefits paid to members of a defined contribution post-employment fund are based on:
I\(\quad\) the level of contributions made to the fund
II \(\quad\)remuneration levels while employed
III \(\quad\)number of year's service
IV \(\quad\)investment returns generated by the fund
A) I and II only
B) II and III only
C) III and IV only
D) I and IV only
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Chapter 12: Inventories
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Sample Questions
Q1) AASB 102 allows which of the following to be capitalised into the cost of inventory?
A) storage costs for finished goods
B) selling costs
C) normal wastage costs
D) administrative overheads
Q2) The terms '2/7' appearing on an invoice for the sale/purchase of inventory means that the buyer:
A) will receive a 2% discount if paid within 7 days of the invoice date;
B) will receive a 7% discount if paid within 2 days of the invoice date;
C) has 7 days from the invoice date to pay or will be charged a 2% surcharge;
D) has 2 days from the invoice date to pay or will be charged a 7% surcharge.
Q3) AASB 102 prohibits which of the following from being included in the cost of inventory?
A) trade discounts received
B) freight (where the terms of sale are FOB destination)
C) production overheads
D) import duties
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Chapter 13: Property, Plant and Equipment
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Sample Questions
Q1) When applying a revaluation measurement model to assets, the model:
A) applies to the entire class of non-current assets;
B) may only be applied to current assets;
C) is applied permanently and may not be changed;
D) is applied to individual assets within a class of non-current assets.
Q2) An entity acquired an item of Plant in exchange for an item of Equipment. The Equipment has a carrying value of $5000 and a fair value of $6000. The journal entry to record the acquisition of the Plant will show:
A) a loss on acquisition of $1000;
B) proceeds on sale of Equipment of $1000;
C) a gain on sale of $1000;
D) proceeds on sale of Plant of $1000.
Q3) When an asset is sold the resulting gain or loss is:
A) reported in other comprehensive income, normally with separate disclosure of income and the carrying amount of the asset
B) reported in other comprehensive income, normally on a net basis
C) reported in current period profit or loss, normally with separate disclosure of income and the carrying amount of the asset
D) reported in current period profit or loss, normally on a net basis
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Page 15
Chapter 14: Leases
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Q1) Which of the following is NOT one of the situations provided in AASB 117 in relation to the classification of leases as finance leases?
A) Losses from the fluctuation of the fair value of the residual accrue to the lessee
B) Leased assets are of a specialised nature
C) The lessee has provided a guarantee that they will acquire the asset at the end of the lease term
D) The lease is for a major part of the economic life of the asset.
Q2) Which of the following is an appropriate journal entry for the initial recognition by a lessee of an operating lease arrangement?
A) DR Leased asset: CR Lease liability
B) DR Lease rental expense: CR Cash/Accounts payable
C) DR Leased asset: CR Cash/Accounts payable
D) DR Lease asset: CR Lease interest expense
Q3) On inception date, the present value of the minimum lease payments is:
A) $60 359
B) $64 170
C) $64 584
D) $69 000
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Chapter 15: Understanding Australian Accounting Standards
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Sample Questions
Q1) The characteristic that distinguishes the goodwill from other intangible assets is:
A) identifiability
B) its nature as a monetary asset
C) that is has a physical embodiment
D) it can be separated from the entity and sold individually.
Q2) The two key characteristics of intangible assets are that they are identifiable and that they:
A) have physical substance
B) are monetary assets
C) represent current obligations of the entity
D) lack physical substance
Q3) Which of the following assets is regarded as meeting the identifiability criteria for recognition as an identifiable intangible asset that may be acquired in a business combination?
A) customer service capability
B) newspaper mastheads
C) favourable government relations
D) presence in geographic locations.
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Chapter 16: Impairment of Assets
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Q1) During 2013 Sacco Limited, estimated that the carrying amount of goodwill was impaired and wrote it down by $50 000. In 2014, the company reassessed goodwill was decided that the old acquired goodwill still existed. The appropriate accounting treatment in 2014 is:
A) reverse the previous goodwill impairment loss
B) recognise the revalued amount of goodwill by an adjustment against the asset revaluation surplus account
C) ignore the reversal as it is prohibited by AASB 136 Impairment of Assets
D) increase goodwill by an adjustment to retained earnings.
Q2) Hayfield Limited recognised an impairment loss of $200 against a cash-generating unit containing the following assets: Buildings $500; Roads $300; Equipment $600. The net carrying amount of the Roads after allocation of the impairment loss is:
A) $100
B) $235
C) $257.
D) $300
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18
Chapter 17: Accounting for Mineral Resources
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Q1) Which of the following methods is inconsistent with historical cost accounting?
A) the area of interest method
B) the successful efforts method
C) the appropriation method
D) the full cost method
Q2) Which of the following methods tends to be restricted to small mining companies in South Africa?
A) the area of interest method
B) the successful efforts method
C) the appropriation method
D) the full cost method
Q3) AASB 6 requires disclosure of which of the following?
A) accounting policies relating to pre-exploration costs
B) financing cash flows relating to E&E activities
C) impairment write-downs made on E&E assets
D) accounting policies relating to E&E assets
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Chapter 18: Agriculture
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Q1) Which of the following is NOT a reason as to why the IASC felt that agriculture was an industry that needed its own industry specific standard?
A) the specific exclusion of assets related to agricultural activity from other standards
B) agriculture was considered to be an emerging industry at that time
C) accounting guidelines for agricultural activity previously developed by national standard setters had been piecemeal
D) the nature of agricultural activity had created uncertainty or conflicts when applying traditional accounting models
Q2) Which of the following meets the definition of agricultural produce?
A) Dairy cattle
B) Milk
C) Cheese
D) Yoghurt
Q3) Which of the following is NOT a cost to sell?
A) commissions to brokers
B) transfer taxes and duties
C) levies by regulatory agencies
D) transport costs to get assets to a market
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Chapter 19: Financial Statement Presentation
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Q1) Which of the following events occurring after the reporting date but before the financial report is authorised for issue is NOT an example of an adjusting event?
A) a decline in the market value of a listed security
B) the notification of the insolvency of a debtor
C) an event that indicates that the going concern basis of accounting may not be appropriate.
D) the sale of inventories after the reporting date for an amount below cost
Q2) Included in a statement of changes in equity are the following items:
I Opening and closing balances.
II Profit or loss for the period.
III Gains or losses not recognised in the statement of profit or loss and other comprehensive income.
IV New share issues.
V Dividends paid.
A) I, II & III only
B) II, III and IV only
C) I, IV and V only.
D) I, II, IV and V only.
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21
Chapter 20: Statement of Cash Flows
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Q1) Which of the following descriptions best describes cash flows from investing activities? Those activities that relate to:
A) changing the size or financial structure of an entity
B) altering the composition of the debt of an organisation
C) the acquisition or disposal of non-current assets
D) restructuring the working capital components of a business.
Q2) During the financial year Sugianto Limited had sales of $42 000. The opening balance of accounts receivable was $9000, and the closing balance was $12 700. Bad debts amounting to $700 were written off during the period. The cash receipts from sales during the year amounted to:
A) $37 600
B) $39 000
C) $38 300
D) $45 700.
Q3) What is the net cash inflow (outflow) from financing activities?
A) $38 000 net cash inflow
B) $40,000 net cash inflow
C) $42,000 net cash inflow
D) $(2000) net cash outflow.
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Page 22
Chapter 21: Earnings Per Share
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Q1) EPS refers to:
A) equity per share
B) earnings per shareholder
C) earnings per share
D) earnings per subsidiary
Q2) ABC Ltd has 21 000 ordinary shares on issue at 1 January 2015 which is the beginning of its reporting period. On 30 June 2015, it issued a further 2000 ordinary shares for cash. On 1 November 2015, ABC Ltd repurchased 600 shares at fair value in a market transaction.
The weighted average number of shares for use in the earnings per share calculation is:
A) 21 000 shares
B) 21 700 shares
C) 21 900 shares
D) 22 400 shares
Q3) Earnings per share is calculated by comparing an entity's:
A) revenue with the number of ordinary shares it has on issue
B) profit with the number of shareholders
C) profit with the number of ordinary shares it has on issue
D) revenue with the number of shareholders
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Page 23
Chapter 22: Operating Segments
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Q1) A key objective of providing financial reporting information by segment is:
A) to allow detailed analysis to be undertaken by users such as segment profit margin analysis;
B) to allow the user to better understand the entity's future performance; C) to highlight poorly performing areas of an entity's business to users; D) to allow users to better assess the entity's risks and returns.
Q2) Segments that do not satisfy the requirements of a reportable segment must: A) not be disclosed at all in the financial report; B) be reported in the notes to the financial statements; C) be combined and disclosed as 'all other segements'; D) be combined with the smallest reportable segment.
Q3) What is the reasonable maximum number of an entity's reportable segments according to the additional guidance provided in AASB 8?
A) 8;
B) 10;
C) 12;
D) There is no maximum number provided in the guidance.
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Chapter 23: Operating Segments
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Q1) VicEd is a government agency that controls Science Limited. Science Limited has two subsidiaries: Bio Limited and Chem Limited. To which entities can Bio Limited apply the disclosure exemption in paragraph 25 of AASB 124?
A) VicEd Limited only;
B) Science Limited only;
C) Science Limited and Chem Limited only;
D) VicEd Limited, Science Limited, and Chem Limited.
Q2) An entity is related to a reporting entity if any of the following conditions apply, except:
A) the reporting entity has significant economic dependence on the entity;
B) both entities are joint venture of the same third party;
C) the entity is the subsidiary of the reporting entity;
D) the entity is a post-employment benefit plan for the reporting entity's employees.
Q3) Examples of related party transactions that must be disclosed include:
A) settlement of liabilities;
B) disposal of assets;
C) purchase or sales of goods;
D) all of the above.
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Chapter 24: Business Combinations
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Q1) Goodwill is measured as the difference between the:
A) cost of the assets given up, and the cost of the net assets acquired
B) cost of the net assets acquired, and the net present value of the consideration given up
C) present value of the consideration transferred, and the present value of the net assets acquired
D) consideration transferred, and the fair value of the assets and liabilities acquired
Q2) In a business combination, the acquirer is the party that:
A) obtains control of the other entities
B) concedes control over the acquired entities
C) sells the acquired entity
D) receives the acquisition consideration.
Q3) Where the acquirer purchases assets and assumes liabilities of another entity it does NOT need to consider measurement of:
A) consideration transferred
B) fair values of identifiable net assets
C) carrying amounts of identifiable net assets
D) goodwill
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Chapter 25: Consolidation: Principles and Accounting Requirements
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Q1) If the tax rate is 30%, what would be the amount of Business Combination Value Reserve that must be recognised at the acquisition date?
A) $42 000
B) $45 000
C) $52 500
D) $60 000
Q2) When preparing consolidated financial statements, adjustments for pre-acquisition equity and inter-entity transactions are recorded:
A) in the accounting records of the parent entity
B) in the accounting records of the subsidiary
C) on a consolidation worksheet
D) in the accounting records of the reporting entity.
Q3) Which of the following events can cause a change in the pre-acquisition elimination entry
Subsequent to acquisition date?
A) Transfers from post-acquisition retained earnings
B) Dividends paid from pre-acquisition reserves
C) Transfers from pre-acquisition retained earnings
D) Impairment of goodwill
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Chapter 26: Consolidation: Intragroup Transactions
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Q1) A subsidiary entity sold inventory to its parent entity at a profit of $8000. The goods had originally cost the subsidiary $20 000. At the end of the year all the inventory was still on hand. The adjustment entry to deal with this transaction on consolidation would include the following line item:
A) CR Cost of sales $28 000
B) CR Cost of sales $20 000
C) CR Cost of sales $12 000
D) CR Cost of sales $8 000.
Q2) Janus Limited, a subsidiary entity, sold a non-current asset at a profit to its parent entity. The adjustment necessary on consolidation to reflect the tax effect of this transaction will result in an:
A) increase in deferred tax assets.
B) decrease in deferred tax liabilities.
C) increase in retained earnings.
D) decrease in retained earnings.
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Chapter 27: Consolidation: Non Controlling Interest
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Q1) Company A Limited owns 90% of the share capital of Company B Limited. Company B Limited paid a dividend of $20 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:
A) DR Dividend revenue $18 000
B) DR Dividend revenue $20 000
C) DR Dividend payable $18 000
D) DR Dividend receivable $20 000.
Q2) Under the full goodwill method:
I made a change to the original question, as the original question is very similar to Q3 of the SPQ.
A) the NCI does not get a share of any equity relating to goodwill.
B) only goodwill acquired by parent entity will be recognised.
C) the NCI is measured at the NCI's proportionate share of the acquiree's identifiable assets and liabilities.
D) acquired goodwill consists of both goodwill of the subsidiary and the premium paid by the parent to acquire control over the subsidiary.
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Chapter 29: Joint Arrangements
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Q1) Wiseye Limited and Goodbody Limited agreed to form a joint operation to offer health services. To start the operation the joint operators agreed to contribute cash of $30 000 each. The joint operation will record which of the following entries to recognise this event?
A) DR\(\quad\) Joint operator contributions \(\quad\)$600,000
CR \(\quad\)Cash\(\quad\)\(\quad\)$600,000
B) DR\(\quad\) Cash\(\quad\)\(\quad\)$600,000
CR \(\quad\)Joint operator contributions\(\quad\)$600,000
C) D\(\begin{array}{lccc}
\text { DR } & \text { Venturer's equity - Wiseye Limited } & \$ 300,000 & \\
\text { DR } & \text { Venturer's equity - Goodbody Limited } & \$ 300,000 & \\
\text { CR } & \text { Cash } & & \$ 600,000 ; \end{array}\)
D) \(\begin{array}{lll}
\text { DR } & \text { Cash } &\$ 600,000 \\
\text { CR } & \text { Joint operation contribution - Wiseye } & \$ 300,000 \\
C R &\text { Joint operation contribution - Goodbody } & \$ 300,000 \\ \end{array}\)
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Chapter 30: Associates and Joint Ventures
Available Study Resources on Quizplus for this Chatper
26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/70198
Sample Questions
Q1) Where an investor has discontinued the use of the equity method because the associate has incurred losses it must disclose the:
A) unrecognised share of current period and cumulative losses of the associate;
B) reason why it has discontinued the method;
C) accounting policy it has adopted in place of the equity method;
D) effect on the statement of changes in equity if it had continued to use the method.
Q2) For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has significant influence over the other entity where the investor holds:
A) between 1% and 5% of the voting power of the investee;
B) between 5% and 10% of the voting power of the investee.
C) 20% or more of the voting power of the investee;
D) 50% or more of the voting power of the investee;
Q3) At 30 June 20X8 the equity accounted balance of the investment in Leo was:
A) NIL
B) $1500
C) $5000
D) $20 000
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