Corporate Accounting Exam Bank
Course Introduction
Corporate Accounting introduces students to the accounting principles and practices specific to corporations, including the preparation and interpretation of financial statements, management of share capital, debentures, and reserves, and the accounting for company amalgamations, absorptions, and reconstructions. The course emphasizes regulatory requirements, dividend distributions, and the preparation of consolidated financial statements, providing a comprehensive understanding of how corporations report, analyze, and use financial information for strategic decision-making. Through real-world examples and case studies, students develop the skills necessary to navigate complex financial scenarios commonly encountered in the corporate sector.
Recommended Textbook
Issues in Financial Accounting 15th Australia Edition by Scott Henderson
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29 Chapters
707 Verified Questions
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Page 2
Chapter 1: Institutional Arrangements for Setting Accounting Standards in Australia
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Sample Questions
Q1) Compliance with accounting standards by reporting entities in the public sector is required by:
A) ASIC
B) specific acts applying to the public sector
C) FRC
D) the Corporations Act
Answer: B
Q2) Interpretation Advisory Panels make recommendations on particular issues to:
A) AASB
B) UIG
C) ASIC
D) ASX
Answer: A
Q3) The AASB has responsibility for making accounting standards applicable to:
A) entities coming under the Corporations Act, entities in the public sector and the remainder of the non-corporate sector entities
B) entities coming under the Corporations Act
C) entities coming under the Corporations Act and entities in the public sector
D) none of the above
Answer: A
Page 3
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Chapter 2: A Conceptual Framework: Scope, reporting
Entity and the Objective of Financial Report
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Q1) SAC1 defines an entity which has users who are dependent on general purpose financial reports as a/an:
A) accounting entity
B) reporting entity
C) company entity
D) legal entity
Answer: B
Q2) The correct order for the seven levels of the accounting standard-setting part of the conceptual framework is:
A) standard-setting policy, display, border of discipline, subject, objective, fundamentals, operational
B) fundamentals, border of discipline, operational, subject, objective, display, standard-setting policy
C) border of discipline, subject, objective, fundamentals, operational, display, standard-setting policy
D) subject, objective, fundamentals, border of discipline, operational, display, standard-setting policy
Answer: C
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Page 4
Chapter 3: A Conceptual Framework: the Fundamentals of
General Purpose Financial Reporting
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Sample Questions
Q1) SAC3 arranges the qualitative characteristics in three levels:
A) fundamentals, presentation, display
B) fundamentals, enforcement, display
C) fundamentals, enhancing, constraints
D) assets, liabilities, owners' equity
Answer: C
Q2) Which statement is incorrect?
A) Net assets, net worth, shareholders' equity and proprietorship are all synonyms for equity
B) The settlement of a liability by the owner from his private funds results in an increase in equity
C) Under the Framework equity exists only because there are assets and liabilities
D) None of the statements is incorrect, i.e., all are correct
Answer: D
Q3) Explain and discuss three essential characteristics of an asset as defined by the Framework.
Answer: Not Answer
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Page 5
Chapter 4: A Conceptual Framework: Recognition and
Measurement of the Elements of Financial Statements
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Q1) It is a conventional accounting practice to recognise a doubtful debts expense when the probability of a decrease in economic benefits is:
A) more than 90% likely
B) less than 50% likely
C) more than 60% likely
D) beyond a reasonable doubt
Q2) Future economic benefits for assets come from:
A) value-in-utility
B) value-in-exchange
C) value-in-use
D) both B and C
Q3) Which of the following provides an example of measurement based on a nominal scale?
A) Postcode
B) Temperature using centigrade
C) Temperature using Fahrenheit
D) The outcome of an election process
Q4) Explain and discuss the assertion that current replacement cost provides a more relevant but less reliable measure of assets than historical cost.
Chapter 5: The Choice of Accounting Methods
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Q1) Which item does not normally require accountants to exercise a significant degree of professional judgement to determine its amount?
A) Doubtful debts
B) Depreciation
C) Cost of goods sold
D) Interest
Q2) Recent research on the manipulation of profit numbers by managers with a view to influencing share price has shown:
A) no evidence of manipulation
B) firms reporting continuous growth are priced at a discount to other firms
C) reporting of small losses is rare and reporting of small profits fairly common
D) none of the above
Q3) Research suggests that post-Enron,Chief Financial Officers:
A) are reluctant to use accounting policy choices to manipulate earnings
B) prefer not to smooth earnings
C) are more likely to use accounting policy choices to smooth earnings
D) use volatile earnings to signal low risk prospects
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Chapter 6: The Balance Sheet: an Overview
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Q1) 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
Q2) 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
Q3) 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.
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Page 8
Chapter 7: Accounting for Current Assets
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Q1) The method where production costs incurred are included in the cost of manufacturing inventory and finance and administration costs are treated as period costs is known as the:
A) full-cost approach
B) direct cost approach
C) absorption cost approach
D) joint cost approach
Q2) A reason for not allocating all the outgoings incurred in bringing the inventory to its present location and condition to the cost of inventory is:
A) allocation may not make a material difference to reported profit or to the carrying amount of the inventory
B) the allocation of some costs may be time-consuming
C) incidental costs of acquisition may be minor
D) all of the above are reasons
Q3) Explain the effects on the financial reports of the FIFO cost flow assumption in a period of rising prices and discuss the arguments that have been raised for and against the use of this assumption to value inventory.
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9
Chapter 8: Accounting for Property, plant and Equipment
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Q1) Which of these would be classed as a current asset?
A) Goodwill
B) Investment not expected to be realised within 12 months
C) Delivery vehicle
D) Cash at bank
Q2) Depreciable amount is defined in AASB 116 as:
A) the allocation of the cost of an asset, or other amount substituted for cost, over its useful life
B) the cost of an asset, or other amount substituted for cost, less accumulated depreciation
C) the cost of an asset, or other amount substituted for cost, less its residual value
D) none of the above
Q3) The accounting standard that specifically deals with property,plant and equipment is:
A) AASB 138
B) AASB 116
C) AASB 132
D) AASB 101
Q4) Explain and discuss how donated assets should be recorded in the accounts.
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Chapter 9: Accounting for Company Income Tax
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Q1) According to AASB 112,the prepayment of rent of $2000 that is claimed as a tax deduction immediately upon payment (assuming an income tax rate of 30%)will give rise to:
A) a Deferred Tax Liability of $600
B) a Deferred Tax Liability of $600 and a credit to Income Tax Payable of $600
C) a Deferred Tax Asset of $600
D) neither a Deferred Tax Liability nor a Deferred Tax Asset
Q2) A temporary difference arises due to:
A) the timing difference between the end of the financial year and when the income tax payable is paid
B) a difference between the amounts of the accounting expenses and the tax deductions of a company which will be reversed in future periods
C) a difference between the amounts of the accounting expenses and the tax deductions of a company which will never be reversed
D) a difference in the amount of the deferred tax assets and the deferred tax liabilities
Q3) Discuss the results of empirical research that examines whether tax-effect accounting should continue to be required.
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Chapter 10: Accounting for Investments
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Q1) The accounting standard that applies to financial assets that consist of 'small holdings' of shares held as non-current assets is:
A) AASB 116 'Property, Plant and Equipment'
B) AASB 136 'Impairment of Assets'
C) AASB 139 'Financial Instruments: Recognition and Measurement'
D) All of the standards apply
Q2) Under AASB 128,the quantitative test that normally raises a presumption of significant influence is:
A) holding 15% or more of the voting power in an investee
B) holding 25% or more of the voting power in an investee
C) owning 25% or more of the shares in an investee
D) holding 20% or more of the voting power in an investee
Q3) Which statement is correct regarding shares purchased by one company in another to make use of temporary idle cash balances?
A) They will normally be sold when the company needs cash
B) They must always be measured at cost
C) They can be classified as either current or non-current assets
D) All of the statements are correct
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Chapter 11: Accounting for Intangible Assets
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Q1) AASB 138 requires that entities classify their intangible assets into those with finite lives and those with indefinite lives.Which of these is a factor that tends to limit the useful life of intangible assets?
A) Technological obsolescence
B) Contractual and legal rights
C) Uncertainty
D) All are factors
Q2) The main reason why accounting for intangible assets is more difficult than accounting for other assets is:
A) intangible assets are inherently inert and their value can grow or dissipate quickly B) intangible assets may be developed internally
C) intangible assets do not have physical substance
D) all of the above are equally important reasons why accounting for intangible assets is more difficult than accounting for other assets
Q3) Compare the costs likely to be recorded for internally developed patents with those associated with a patent purchased in an arm's length transaction.
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13
Chapter 12: Accounting for Leases
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Q1) Discuss the implications of the proposal that operating/finance lease distinction be dropped.
Q2) If a lease is non-cancellable by either party,then:
A) it can be neither a finance lease nor an operating lease
B) it may be either a finance lease or an operating lease
C) it must be an operating lease
D) it must be a finance lease
Q3) How is a finance lease distinguished from an operating lease? Give an explanation of the meaning and significance of any technical terms used in your answer.
Q4) Paragraph 15A of AASB 117 requires that when accounting for leases of land and buildings the value of the land should be:
A) treated separately for the purpose of the lease
B) never be separated from the buildings erected on the land
C) recognised as an expense in the period in which the cost was incurred
D) recognised as having a finite economic life
Q5) Explain the main similarities and differences between an operating lease and a finance lease,and state how each is treated in the financial statements of a business.
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Page 14
Chapter 13: Accounting for Employee Benefits
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Sample Questions
Q1) While on a salary of $150 000,C.Cronk retired from Footballers R US after 35 years of service.He was entitled to 13 weeks accrued long service leave for every 15 years of service.How much long service leave pay was he entitled to on his retirement? He had not previously taken any long service leave.
A) $87 499
B) $75 000
C) $37 500
D) None of the above
Q2) The superannuation trust fund is a separate entity which manages the fund's assets and is responsible for the fund's obligations.The employer's only assets and liabilities are related to the accrual or deferral of the payments due to the superannuation plan. Discuss whether you agree or disagree with the above approach to accounting for superannuation costs by employers.
Q3) There are two types of risk associated with post-employment benefits,investment risk and actuarial risk.Explain these terms and describe the situations when these risks are borne by the employee and when they are borne by the employer (in accordance with AASB 119).
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Page 15
Chapter 14: Accounting for Financial Instruments
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Q1) A futures exchange clearing house is mainly concerned with:
A) calling in margins from traders as and when required
B) establishing and collecting deposits from brokers trading on the exchange
C) calculating the gains and losses made by futures traders
D) all of the above
Q2) A 'hedging' financial instrument can:
A) protect against losses from adverse movements in foreign exchange rates
B) eliminate any possible gain from changes in the Australian dollar/US dollar exchange rate
C) offset the risk of loss from adverse commodity price changes
D) do all of the above
Q3) Financial instruments include accounts receivable,accounts payable,futures contracts,equity securities and options.Which of the following statements is correct?
A) Accounts receivable, accounts payable and options are primary financial instruments
B) Equity securities and futures contracts are primary financial instruments
C) Accounts receivable and accounts payable are derivative (secondary) financial instruments
D) None of the above is correct
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Chapter 15: Equity
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Q1) Distinguish between compensatory and non-compensatory share option plans.How does AASB 2 suggest that each be accounted for?
Q2) The three broad components of equity for a company are:
A) public equity, contributed equity, government equity
B) ordinary shares, preference shares, options
C) share capital, retained earnings, reserves
D) ordinary shares, preference shares, reserves
Q3) Debt instruments that include an option to convert them to equity under specified conditions are known as:
A) preference shares
B) convertible notes
C) options
D) rights
Q4) A reason why a company might wish to buy back its own shares is:
A) to decrease its debt to equity ratio
B) to protect its creditors
C) to use funds to benefit shareholders where there are insufficient profitable investment opportunities
D) all of the above
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Chapter 16: The Income Statement
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Q1) The standard that requires the disclosure of auditor's remuneration and executives' remuneration in the published reports is:
A) AASB 1031
B) AASB 101
C) AASB 118
D) No accounting standard requires the disclosure of auditor's remuneration and executives' remuneration
Q2) Explain and discuss the advantages and disadvantages of the operating-profit and the comprehensive income approaches to profit measurement.Which approach do you think is the most useful for decision making?
Q3) The incorrect statement is:
A) the percentage of completion method is to be used to measure revenue arising from long-term construction contracts
B) interest revenue must be recognised using the effective interest method as set out in AASB 139
C) royalties must be recognised on a cash received basis
D) none of the above, i.e., all the statements are correct
Q4) Define income and explain how it differs from revenue.
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Chapter 17: The Cash Flow Statement
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Q1) Studies such as Bowen,Burgstahler and Daley (1986)and Cleng and Hollie (2008)in the USA and Percy and Stokes (1992),Cotter (1996)and Clinch Sidhu and Sin (2002)in Australia have found:
A) cash flow data appeared to be similar to profit data
B) cash flow data was significantly different from profit data
C) there was no relation between profit and cash flow data
D) none of the above
Q2) The approach to presenting cash flows from operating activities where reported net profit is adjusted for non-cash income statement items and changes in non-cash working capital accounts is known as:
A) the direct approach
B) the adjustment approach
C) the indirect approach
D) none of the above
Q3) All of these are classified as financing items under AASB 107 'Cash Flow Statements'-2 except:
A) in the cash flow statement of the lender cash repayments by borrowers
B) cash paid to buyback the company's shares
C) proceeds from the issue of debentures
D) none of the above, i.e., all are classified as financing items
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Chapter 18: Financial Reporting: Segment Reporting, value
Added Statements, highlights Statements and
Financial Information
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Q1) Reporting by segments of a business is believed to have a number of disadvantages.Which of the following is not likely to be such a disadvantage?
A) Segment information may not be sufficiently reliable
B) The costs to a business of providing segment information may exceed the benefits to investors
C) Providing segment information may assist a business's competitors
D) Investors invest in a whole company and not in its individual segments
Q2) Reporting by segments of a business is believed to have a number of advantages.Which of the following is not likely to be such an advantage?
A) Allowing better assessment of expected returns from and risks of investing
B) Preventing management from hiding failures in decision making
C) Increasing the net profit of a business
D) Improving investors' decision making
Q3) Discuss the benefits of the 'management approach' adopted by AASB 8.
Q4) What benefits is an investor likely to gain if a business presents financial information for its various separate major organisational divisions and/or geographical areas of operations? Are there any likely costs (direct or indirect)to the investor from the presentation of this information?
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Chapter 19: Further Financial Reporting Issues
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Q1) The treatment of items that clearly belong to past reporting period is a long standing problem.One way to handle this problem is to make adjustments to the retained earnings.The problem with this approach is that: A) it could lead to manipulation of profit for the period B) revenue and expenses are matched inappropriately C) revenue and expenses are matched appropriately D) none of the above
Q2) Concise financial reports:
A) must be drawn up in accordance with AASB's B) must achieve consistency with the changes in terminology contained in AASB 101 C) must include a statement of comprehensive income, a statement of financial position, a statement of cash flows and a statement of changes in equity D) all of the above
Q3) Discuss the concept of the reporting entity and the rationale for the revisions to the International Financial Reporting Standards for small and medium sized entities.
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Chapter 20: Accounting for the Extractive Industries
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Q1) Bigspill Gas & Oil Ltd began operations on 1 July 20X1.During the year ended 30 June 20X2,Bigspill explored five different areas of interest and spent $200 000 in each area.The exploration results indicated that three areas were likely to be productive and Bigspill acquired leases over the three areas at costs of $400 000,$720 000 and $480 000 respectively.Under the successful-efforts method of accounting for exploration and evaluation costs in the extractive industries,Bigspill would include which of the following amounts in its statement of financial position as at 30 June 20X2 for Exploration and Evaluation Costs?
A) $1 600 000
B) $2 600 000
C) $2 200 000
D) $ Nil
Q2) Australian Accounting Standard AASB 6 'Exploration for and Evaluation of Mineral Resources' requires the use of the area-of-interest method in accounting for pre-production costs of a mining operation.This method is a special form of the:
A) expense-and-reinstatement method
B) successful-efforts method
C) expense (costs written-off) method
D) full-cost method
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Chapter 21: Accounting for Real Estate Development and Construction Contracts
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Q1) Justhouses Ltd is a property development company.By the beginning of this year it had already spent $600 000 on a development project and then spent a further $2 million during this year.Justhouses' total borrowing costs for this year were $250 000 on borrowings outstanding during the year of $4 000 000 and the interest rate on its latest borrowings is 10%.Justhouses should include as part of the total costs of the project for the year,borrowing costs of:
A) $ Nil
B) $125 000
C) $100 000
D) $200 000
Q2) Under Australian Accounting Standard AASB 123 'Borrowing Costs',interest on borrowings should not be included as part of the cost:
A) of a building intended to be leased for use by others
B) of any asset
C) of land being held for future building purposes
D) of a building constructed for an entity's own use
Q3) 'To recognise assets and liabilities when a firm construction contract is signed would be inconsistent with the requirements of AASB 111'.Discuss this statement in reference to the framework.
Page 23
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Chapter 22: Accounting for Agricultural Activity
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Q1) Describe the sustained-yield method and the standard method of measuring forestry assets.
Q2) Agricultural activity under the heading of Biological assets such as animals is most appropriately measured for accounting purposes at:
A) standard value
B) net realisable value
C) discounted market value
D) historical cost
Q3) Which of the following statements about a growing crop expected to be sold within the next reporting cycle is not true?
A) It should never be classified as inventory
B) It should always be classified as a current asset
C) It should always be classified as inventory
D) It is in the process of production
Q4) List three significant items of information that Australian Accounting Standard AASB 141 'Agricultural Activity' requires to be shown in the annual report and financial statements specifically of a primary production business.Explain why disclosure of each of these items is considered to provide useful information to investors.
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24
Chapter 23: Accounting for Superannuation Plans
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Q1) Discuss the differences between the requirements of ED179 and AAS 25.
Q2) A change in the net market value of a superannuation plan's assets over a period is included in the income of:
A) all superannuation plans
B) defined contribution superannuation plans
C) self-managed superannuation plans
D) defined benefit superannuation plans
Q3) The trustees of a superannuation fund can transfer their responsibility for the general conduct of the fund:
A) if it is non-contributory
B) if it provides portable benefits
C) if the fund is externally managed
D) in none of the above cases
Q4) AAS 25 applies specifically to superannuation plans and:
A) overrides the Australian equivalent to IFR's
B) requires the preparation of information about the rights and benefits of individual members
C) applies only to private sector superannuation plans
D) all of the above
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Chapter 24: Accounting for Financial Institutions
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Q1) 'Underwriting' by an insurer involves:
A) assessment of risks
B) settling claims
C) collection of premiums on insurance policies
D) all of the above
Q2) A general insurer should usually record as liabilities at the end of each reporting period the estimated amounts of:
A) claims not yet lodged but arising from events occurring before the end of the reporting period
B) claims lodged but not yet paid
C) claims lodged but the amount of the liability is uncertain
D) all of the above
Q3) The main revenue item for a bank is usually:
A) net interest income
B) profit on foreign exchange dealing
C) fees charged for granting loans or altering the terms and conditions of loans
D) interest on loans and investments
Q4) Explain what is meant by reinsurance.In your answer,discuss inwards and outwards reinsurance.
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Chapter 25: Financial Reporting in the Public Sector
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Q1) The 'fund accounting' system previously used by government departments:
A) is very similar to conventional accrual accounting
B) is based wholly on cash receipts and expenditures
C) maintains a distinction between operating and capital expenditure
D) operates over a three to four year cycle, based on the normal period between elections
Q2) When a Government Trading Enterprise is restructured into a company and at least some shares are held by private investors it is said to be:
A) corporatised
B) privatised
C) publicised
D) globalised
Q3) All of these are essential features of most of the definitions of infrastructure assets,except:
A) they are usually very profitable
B) they are necessary to sustain living standards
C) they are generally immovable
D) none of the above, i.e., all are essential features of infrastructure assets
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Chapter 26: International Accounting Standards, harmonisation and Convergence
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Q1) Australia adopted international accounting standards:
A) on 30 June 2005
B) on 31 December 2005
C) on 1 January 2005
D) on 31 March 2005
Q2) The primary benefit of harmonising financial reporting practices around the world is:
A) enhancing the attractiveness of exporting goods and services for smaller businesses
B) reducing the likely risks and costs of making transactions in different countries
C) eliminating the need for firms operating locally and in other countries to file detailed financial reports with regulatory authorities in other countries
D) that investors in international capital markets can make more reliable comparisons of the reports of different entities
Q3) Describe and explain the strategies adopted by the AASB in order to achieve the objective of international harmonisation of accounting standards in Australia.
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28
Chapter 27: Foreign Currency Translation
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Q1) The 'spot' rate of exchange for foreign currencies is:
A) the rate at which currencies can be exchanged in a particular place (e.g., in Sydney or in New York)
B) the rate of exchange between the Australian dollar and the US dollar
C) the rate at which currencies can be exchanged on the New York foreign exchange market
D) the rate at which currencies can be exchanged immediately
Q2) Respectively,a company's domestic currency,functional currency and presentation currency are:
i.the currency in which the financial statements must be presented
ii.the currency in which an entity is required to measure its financial performance and position
iii.the currency of the country of incorporation
iv.the currency of the country in which the majority of shareholders are located
A) i, ii, iv
B) iii, iv, i
C) iii, ii, i
D) iv, iii, ii
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Chapter 28: Accounting for Corporate Social Responsibilities
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21 Verified Questions
21 Flashcards
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Sample Questions
Q1) 'A conflict of interest can be argued to exist between maximisation of shareholder's wealth and social responsibility'.Discuss this statement with respect to Australian corporations that have call centres in countries such as India or major Australian supermarkets that import goods from China when they are readily available in Australia.
Q2) The Australian government ratified the Kyoto Protocol on:
A) 3 December 2007
B) 1 January 2005
C) 11 December 1997
D) 16 February 2005
Q3) The major difficulty in implementing the full cost reporting approach to reporting a company's socially responsible activities is:
A) auditing the resulting cost-benefit report
B) calculating the cost of such activities
C) calculating the value of the benefits
D) all of the above
Q4) Discuss the basic characteristics of the Carbon Pricing Mechanism (CPM).In your answer,explain the cap and trade scheme.
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Chapter 29: Ethics in Accounting
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20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/71412
Sample Questions
Q1) 'Assessing the costs and benefits of ethical behaviour is subjective'.Discuss this statement by considering the costs and benefits of ethical and unethical behaviour of accountants.
Q2) Professional codes of ethics can generally be classified into two types:
A) disciplinary codes and aspirational codes
B) quantitative and qualitative codes
C) legally enforceable codes and voluntary codes
D) moral codes and ethical codes
Q3) Teleological theories of ethics:
A) determine whether behaviour is ethical or unethical by observing the consequences of that behaviour
B) suggest that people behave with varying degrees of self-interest
C) are based on religious principles
D) can be all of the above
Q4) The Code of Ethics for Professional Accountants is best described as:
A) deontological in nature
B) voluntary for all members of the ICAA, CPA Australia and the NIA
C) descriptive in nature
D) teleological in nature
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