Global Accounting Practices
Test Bank
Course Introduction
Global Accounting Practices provides an in-depth exploration of accounting principles, standards, and procedures as they are applied and interpreted in various countries around the world. The course examines the challenges and opportunities of managing financial information in a global context, with a particular focus on the harmonization and differences between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Through case studies and real-world examples, students gain practical skills in analyzing multinational financial statements, understanding currency translation issues, and recognizing the impact of cultural, economic, and legal factors on global accounting practices. This course equips learners with the knowledge necessary to navigate and manage the complexities of financial reporting in today's interconnected global economy.
Recommended Textbook
Financial Accounting and Reporting A Global Perspective 5th Edition by Herv Stolowy
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18 Chapters
423 Verified Questions
423 Flashcards
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Page 2
Chapter 1: Accounting: the Language of Business
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27 Verified Questions
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Sample Questions
Q1) The language of accounting needs to be sufficiently general:
A) To be easily understandable
B) To be applicable to a variety of situations and business models
C) To be flexible
D) To be reliable
Answer: B
Q2) Shareholders want to know periodically.
A) If the firm they have invested in is able to reimburse the money it has borrowed and how much residual wealth was created in the transformation process that they can claim as theirs.
B) What the firm they have invested in owns and how much of the residual wealth created in the transformation process they can claim as theirs.
C) What the firm they have invested in owns and how much managers are paid.
D) If the firm they have invested in is able to reimburse the money it has borrowed and how much managers are paid.
Answer: B
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3
Chapter 2: Introduction to Financial Statements
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Sample Questions
Q1) A liability is a past obligation of the entity arising from present events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
A)True
B)False
Answer: False
Q2) Retained earnings represent that part of the firm's value created that:
A) Shareholders have chosen not to take out of the firm.
B) Lenders have chosen not to take out of the firm.
C) Shareholders have chosen to take out of the firm.
D) Lenders have chosen to take out of the firm.
Answer: A
Q3) What is the result of recording a borrowing transaction?
A) An increase in both cash and shareholders' equity.
B) An increase in cash and a decrease in liabilities.
C) An increase in both cash and liabilities.
D) A decrease in cash and an increase in liabilities.
Answer: C
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4
Chapter 3: Financial Statements: Interrelations and Construction
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Sample Questions
Q1) Which of the following statements is true?
A) The statement of financial position/balance sheet,the income statement and the statement of cash flows are totally linked.
B) There are links only between the statement of financial position/balance sheet and statement of cash flows.
C) There is no link between the statement of financial position/balance sheet,the income statement and the statement of cash flows.
D) There are links only between the income statement and the statement of cash flows.
Answer: A
Q2) Which of the following accounts is expected to present a credit balance?
A) Accounts receivable
B) Provision for doubtful debts
C) Doubtful debt accounts
D) Selling expenses
Answer: B
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Page 5
Chapter 4: Accounting Principles and End-Of-Period Adjustments
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Sample Questions
Q1) Which measurement basis should be used to prepare the financial statements when a business is liquidated?
A) Historical cost
B) Realizable value
C) Replacement cost
D) Present value
Q2) The going concern principle is a key reason for valuing assets and resources or liabilities at their historical costs rather than at their ____ value.
A) Replacement
B) Present
C) Liquidation
D) Discounted
Q3) Which of the following fixed assets is not subject to downward value adjustments?
A) Building
B) Equipment
C) Land
D) Office furniture
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Page 6
Chapter 5: Regulation of Accounting and Financial Reporting
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19 Verified Questions
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Sample Questions
Q1) The profit and loss account in the UK is generally called the ____ in the USA.
A) Revenue and expense account
B) Result account
C) Income generation account
D) None of these.
Q2) Which of the following is not 'off balance sheet' information?
A) Litigation in which the firm is involved
B) Bank borrowings
C) Hypotheses used in valuing specific assets such as rate of recovery of accounts receivable
D) Hypotheses used in valuing specific liabilities such as provisions for pensions
Q3) The different formats that exist for the presentation of the statement of financial position/balance sheet do not affect its generic content.
A)True
B)False
Q4) The IASB has no authority to require compliance with its accounting standards. A)True
B)False
Page 7
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Chapter 6: Revenue Recognition Issues
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Sample Questions
Q1) According to IAS 18,revenue is 'the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity,other than increases relating to contributions from equity participants'.(IAS 18)
A)True
B)False
Q2) Which accounting principle is designed to prevent abuses of flexibility in revenue recognition?
A) Consistency principle
B) Accrual principle
C) Going concern principle
D) Matching principle
Q3) What is the preferred accounting treatment of government grants relating to assets?
A) Grants are recorded directly as an increase in shareholders' equity
B) Grants are 'amortized' over a period to be matched with related costs
C) Grants are recognized in totality in the first year
D) None of these
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8
Chapter 7: Tangible Fixed Assets
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Sample Questions
Q1) If an airplane jet engine which is kept in inventory to be used during maintenance operations or for a replacement,is treated as a tangible asset,which of the following statements is true?
A) It is never subject to depreciation.
B) It is subject to an annual depreciation expense even before being brought into operational use.
C) It is subject to an annual depreciation expense only when it is brought into operational use.
D) None of these
Q2) The cost of a tangible asset is allocated over time.What is systematic allocation designed to reflect?
A) The recognition of some form of unpredictable event that modifies the value of the asset
B) An ongoing process of consumption.
C) An unusual loss in value.
D) None of these
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9
Chapter 8: Intangible Assets
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Sample Questions
Q1) Intangible assets are usually considered to have no physical substance and to be linked to legal rights.
A)True
B)False
Q2) The IASB accounting standard currently regulating goodwill accounting is:
A) IAS 22
B) SFAS 142
C) IFRS 3
D) None of these
Q3) What is a trademark?
A) It is a document granted by a government or an official authority bestowing on the inventor of a product or manufacturing process the exclusive right to use or sell the invention or rights to it.
B) It is a contractual agreement that allows the holder to sell certain products or services.
C) It is the exclusive right to the publication,production and sale of the rights for an intellectual creation.
D) It is a distinctive identification of a manufactured product or of a service.
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Chapter 9: Inventories
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Sample Questions
Q1) Work in progress measures the value of the resources attached to items that are still left in the process of production on the closing date.
A)True
B)False
Q2) Which of the following equations is correct?
A) Beginning inventory - Purchases - Cost of goods sold = Ending inventory
B) Beginning inventory - Purchases + Cost of goods sold = Ending inventory
C) Beginning inventory + Purchases + Cost of goods sold = Ending inventory
D) Beginning inventory + Purchases - Cost of goods sold = Ending inventory
Q3) Any cost that does not flow to the income statement by way of a cascade of inventory accounts is recognized in the period incurred and is thus called a 'product cost'.
A)True
B)False
Q4) Which of the following types of inventories is not common in a manufacturing activity?
A) Raw materials
B) Merchandise
C) Semi finished goods
D) Work in progress
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Chapter 10: Financial Instruments in the Statement of
Financial Position and Fair Value Accounting
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Sample Questions
Q1) Which of the following statements is not correct?
A) Under the direct write-off method,no provision is created when the risk of uncollectibility appears.
B) All countries allow the direct write-off method.
C) The direct write-off method shows receivables at their nominal value when in fact,there is a known risk of uncollectibility.
D) The only situation where the direct write-off method might not create a misrepresentation of the financial situation of the firm is when the sales revenue and the percentage of uncollectible receivables is essentially constant or stable.
Q2) How is the figure for 'average days of sales' calculated?
A) (Average net accounts receivable/Net sales)× 365 days
B) (Average net accounts receivable × Net sales)/365 days
C) (Average net accounts receivable/Net sales)/180 days
D) (Average net accounts receivable/Net sales)× 180 days
Q3) The valuation of the uncollectibility risk constitutes one of the tools managers use to manage their earnings.
A)True B)False
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Chapter 11: Shareholders Equity
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Sample Questions
Q1) Which of the following statements about partnerships is not correct?
A) In many countries,a partnership is not incorporated.
B) Each of the partners is fully responsible for all the consequences of the actions of the business.
C) A partnership is a business with one or more owners
D) Partnership is best suited for a limited number of partners.
Q2) Which of the following statements is false?
A) There is no need for the accounting and the reporting systems to separate economic transactions that concern the business exclusively,from those that concern its individual or corporate capital providers.
B) A business represents a legal or economic entity that is separate from the individual or corporate capital providers.
C) Any business must report on its economic activity by issuing periodic financial statements,even if only for tax purposes.
D) If incorporated as a legal entity,a business can go to court,or be taken to court.
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13
Chapter 12: Liabilities and Provisions
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Sample Questions
Q1) Accrued liabilities are the results of both the accrual process and the time lag between an event and its complete resolution in the course of the cycle of operations.
A)True
B)False
Q2) A major difference between IFRS 16 and IAS 17 is that the new standard introduces a single lessee accounting model,abandoning the distinction between operating lease and finance lease.
A)True
B)False
Q3) Which of the following examples does not constitute a situation in which a provision for restructuring is created?
A) Sale or termination of a line of business.
B) Changes in management structure,for example,eliminating a layer of management.
C) Litigation with one of the major customers.
D) Fundamental reorganizations that have a material effect on the nature and focus of the entity's operations.
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Chapter 13: Business Combinations
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Sample Questions
Q1) Given the above data: What is the rate of exchange of shares?
A) 2
B) 1/2
C) 4
D) 1/4
Q2) According to IAS 28,the existence of significant influence by an investor is usually evidenced by:
A) Representation on the board of directors or equivalent governing body of the investee.
B) Participation in the policy-making process.
C) Interchange of managerial personnel.
D) All of these
Q3) In IFRS 10,non-controlling [minority] interests are defined as the equity in a subsidiary not attributable,directly or indirectly,to a parent.
A)True
B)False
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15
Chapter 14: Income Statement Analysis
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Sample Questions
Q1) How should a Rent A Car company and the local phone utility report the sales revenue from auctioning their used vehicles after these have fulfilled their strategically defined useful life?
A) Both the rental car company and the utility company report the revenue as 'exceptional revenue'.
B) Both the rental car company and the utility company report the revenue as 'revenue from operations'.
C) The rental car company reports this revenue as 'operating revenue' while the utility company reports the equivalent sale as 'exceptional revenue'.
D) The rental car company reports this revenue as 'exceptional revenue' while the utility company reports the equivalent sale as 'operational revenue'.
Q2) How is the business profitability of a firm often measured,to allow inter-enterprise comparisons?
A) EBITDA/Net income
B) EBITDA/Commercial margin
C) EBITDA/Value added
D) EBITDA/Sales
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16
Chapter 15: Balance Sheet Analysis
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Sample Questions
Q1) If a firm faces short-term financing difficulties (as happened in the liquidity crisis of 2008-2009)and forecasts a reduction of its sales revenue due to global recession,which of the four possible course of action described below would it be best advised to implement:
A) Liquidate as much of its inventory as possible and sell its receivables so as to pay as much as possible of its short-term debt.
B) Use its cash on hand to first settle its short-term debt,negotiate longer credit terms with suppliers,and analyze receivables to stop selling to slow-paying customers.
C) Issue long-term bonds and invest in more capacity,more R&D,more product launches and higher levels of inventory to better serve customers.
D) Reduce simultaneously and within market constraints its inventory level,credit terms to customers,and cash in a reasoned way (leading to reduced activity and thus reduced payables)and weed receivables from slow payers.
Q2) A positive working capital need is typical of a firm operating in the distribution sector.
A)True B)False
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Page 17
Chapter 16: Statement of Cash Flows Construction
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Sample Questions
Q1) Past cash flows aid users of the financial statements in:
A) Predicting future cash flows.
B) Evaluating the way management generates and uses cash.
C) Determining a company's ability to pay interest and dividends and to pay debts when they are due.
D) All of these.
Q2) Which of the following equations is correct?
A) Purchases + Change in inventory (ending - beginning)= Cost of merchandise sold
B) Purchases = Change in inventory (ending - beginning)+ Cost of merchandise sold
C) Purchases = Change in inventory (ending - beginning)- Cost of merchandise sold
D) Purchases = Change in inventory (ending - beginning)/Cost of merchandise sold
Q3) Which of the following equations is correct?
A) Purchases + Change in accounts payable = Cash paid out for purchases
B) Purchases = Change in accounts payable + Cash paid out for purchases
C) Purchases + Cash paid out for purchases = Change in accounts payable
D) Purchases + Cost of merchandise sold + Change in inventory = 0
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18
Chapter 17: Statement of Cash Flows Analysis and Earnings
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Sample Questions
Q1) IFRS GAAP requirement that a statement of cash flows be reported (in one of two standard formats)by all business entities is logical because
A) Accrual accounting is no longer valid in today's fast paced economy.
B) Accrual accounting and cash accounting provide different information.
C) Cash accounting is useless in a world where most transactions involve credit.
D) The value of a business entity is best described by its cash position after liquidation.
Q2) How is the available cash flow calculated?
A) Available cash flow = Cash flow from operating activities (assumed to be positive)+ Cash flow from investing activities (assumed to be negative)
B) Available cash flow = Cash flow from operating activities + Cash flow from financing activities
C) Available cash flow = Cash flow from investing activities + Cash flow from financing activities
D) Available cash flow = Cash flow from operating activities - Dividends paid
Q3) Generally,the operating cash flow is expected to be positive.
A)True
B)False
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Page 19
Chapter 18: Ratio Analysis, financial Analysis and Beyond
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Sample Questions
Q1) Segment reporting consists in:
A) Breaking down the earnings of the firm into the various functional components of its generation process.
B) Breaking down the earnings of a firm into the elements traceable to identifiable components of the business entity defined around markets,technologies or regions.
C) Reporting the three consolidated financial statements of a group plus,separately,those of each of its key subsidiaries.
D) Reporting the accrual-based earnings and the cash flows by structuring them by term.
Q2) The asset turnover ratio (ATR)for Jovial Inc.has evolved as follows over the past three years:
ATR(Y-3)= 200% ATR(Y-2)= 190% ATR(Y-1)= 180%
A) New assets are acquired for the same amount as the annual depreciation expense.
B) Sales revenue grew at a rate that is more rapid than the rate of growth of net assets.
C) Assets are being used more efficiently over time.
D) Assets are being used less efficiently over time.
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