Professional and Regulatory Aspects of Accounting Test Preparation
Course Introduction
This course explores the professional and regulatory environment surrounding the practice of accounting, emphasizing the ethical, legal, and institutional frameworks that govern the profession. Students will examine the roles and responsibilities of professional accountants, study relevant accounting standards and bodies including International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) and analyze the impact of regulation on financial reporting, audit practices, and corporate governance. The course also addresses issues such as professional ethics, public interest, compliance, and the consequences of regulatory breaches, preparing students to navigate the dynamic landscape of modern accounting practice responsibly.
Recommended Textbook
Understanding Australian Accounting Standards 1st Edition by Janice Loftus
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29 Chapters
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) The Corporations Act requires the following entities to prepare a financial report, except for:
A) public companies.
B) small proprietary companies.
C) large proprietary companies.
D) registered schemes.
Answer: B
Q2) YinYang Ltd. is a company listed on the ASX, with a total number of 250 non-employee shareholders owning the company's shares and 60 employees working at the company. Which of the following statements about Yinyang Ltd. is incorrect?
A) Yinyang Ltd. is proprietary company.
B) Yinyang Ltd. is a disclosing entity.
C) Yinyang Ltd is a public company.
D) Yinyang Ltd. is required to prepare a financial report.
Answer: A
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Chapter 2: Application of Accounting Theory
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Sample Questions
Q1) Which of the following statements is not derived from the agency theory?
A) Entities employ managers to conduct business on their behalf and to negotiate contracts with other parties.
B) An entity is the centre of contractual relationships, with different parties having rights and responsibilities under the contracts.
C) Managers will not always act in the best interest of shareholders.
D) There are costs incurred in order to control agent's behaviour.
Answer: B
Q2) Which of the following processes describe how positive theories are developed?
A) Principles \(\to\) Assumptions \(\to\) Objectives \(\to\) Definitions/Actions
B) Objectives \(\to\) Definitions/Actions \(\to\) Assumptions \(\to\) Principles
C) Definitions/Actions \(\to\) Principles \(\to\) Assumptions \(\to\) Objectives
D) Objectives \(\to\) Assumptions \(\to\) Principles \(\to\) Definitions/Actions Answer: C
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4
Chapter 3: Shareholders Equity: Share Capital and Reserves
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Accounting for share buy-backs is prescribed by
A) an IFRS accounting standard
B) an IFRIC interpretation
C) an IAS accounting standard
D) generally accepted accounting practices
Answer: D
Q2) Laws in relation to share buy-backs are primarily designed to protect the interests of the company's:
A) shareholders
B) creditors
C) directors
D) option holders
Answer: B
Q3) Which of the following journal entries demonstrates the appropriate accounting treatment for share issue costs?
A) Dr Deferred asset: Cr Cash;
B) Dr Cash: Cr Deferred asset;
C) Dr Share capital: Cr: Cash;
D) Dr Cash: Cr Share capital.
Answer: C
Page 5
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Chapter 4: Fair Value Measurement
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Sample Questions
Q1) Which of the following is not an example of a level 2 input?
A) a financial forecast of cash flow or earnings
B) quoted prices for identical or similar assets or liabilities in markets that are not active
C) inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves, volatilities, prepayment speeds, and credit risks
D) inputs that are derived from or corroborated by observable market data by correlation or other means.
Q2) Where a market has both a bid and an ask process, the price used in measuring fair value is:
A) the bid price
B) the ask price
C) the bid-ask spread
D) the most representative price for the transaction.
Q3) When measuring the fair value of a liability, which of the following is assumed?
A) the liability is settled by the holder
B) the liability will be settled by the market participant
C) the liability will not be settled
D) the liability is settled with the counterparty on measurement date
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6
Chapter 5: Revenue
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Sample Questions
Q1) Under AASB 118 interest revenue is recognised as follows:
A) On a straight line method
B) On an effective interest method
C) On either an effective interest method, or a straight line method, depending on which method the entity feels provides the most relevant and reliable information.
D) At the time of receipt of the interest.
Q2) Which of the following are excluded from the scope of AASB 118?
I the initial recognition of agricultural produce
II insurance contracts within the scope of AASB 4
III the extraction of mineral ores
IV lease agreements
A) I, II only
B) II, III and IV only
C) I, III and IV only
D) I, II, III and IV
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Chapter 6: Provisions, Contingent Liabilities and Contingent Assets
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Sample Questions
Q1) In respect to a contingent liability, AASB 137 Provisions, Contingent Liabilities and Contingent Assets, requires disclosure of
A) any increase in the contingent liability during the period;
B) an estimate of its financial effect;
C) the carrying amount at the beginning and end of the period;
D) an indication of the uncertainties about the amount or timing of expected outflows.
Q2) The costs under an onerous contract are measured using which valuation method?
A) the lower of cost or net market value;
B) the lower of the cost of fulfilling the contract and the penalties arising from failure to fulfil the contract;
C) the present value method using a risk-free discount rate;
D) the unavoidable costs of meeting the obligations discounted by reference to market yields at reporting date.
Q3) Which of the following statements is correct?
A) a provision is a class of liabilities
B) a contingent liability is a class of liabilities
C) a provision is a class of contingent liabilities
D) contingent liabilities and provisions are classes of liabilities
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Chapter 7: Income Taxes
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Sample Questions
Q1) In jurisdictions where the impairment of goodwill is not tax deductible, AASB 112 Income Taxes:
A) does not permit the application of deferred tax accounting to goodwill
B) allows the recognition of a deferred tax item in relation to goodwill
C) requires that any deferred tax items in relation to goodwill be recognised directly in equity
D) requires that any deferred tax items for goodwill be capitalised in the carrying amount of goodwill.
Q2) Generally, when considering the differences between the accounting treatment and the income tax treatment of a particular item the accounting treatment is based on:
A) cash flows
B) cash flows adjusted for depreciation charges
C) accrual accounting and is subject to the requirements of accounting standards
D) the income tax legislation.
Q3) The deferred tax liability is:
A) $1500
B) $4500
C) $15 000
D) $34 500.
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Page 9
Chapter 8: Financial Instruments
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Sample Questions
Q1) The classification of a financial instrument on the Statement of Financial Position of an entity is governed by the principle of:
A) legal form;
B) net present value;
C) substance over form;
D) forfeiture.
Q2) Which of the following events provide objective evidence that a financial asset has been impaired:
I A default in interest payments.
II The borrower enters into bankruptcy.
III Significant financial difficulty of the issuer.
IV The downgrade of an entity's credit rating.
A) I, II and III only;
B) II, III and IV only;
C) I, III and IV only;
D) II and IV only.
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Chapter 9: Share-Based Payments
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Sample Questions
Q1) In relation to equity instruments granted by an entity where the entity makes modifications to the terms and conditions attaching to the grant:
A) the incremental fair value is measured as the difference between the fair value of the modified instrument, estimated at the date of modification and that of the original equity instrument, estimated at the date of original granting.
B) if the modification occurs during the vesting period the incremental fair value is recognised immediately.
C) terms or conditions may not be modified in a manner that is not beneficial to the employee.
D) where the exercise price of options is modified, the fair value of the options changes.
Q2) Reload features are accounted for as follows:
A) included in the fair value of the initial options granted at measurement date
B) separately from the initial options granted
C) as a market condition
D) as a modification to the initial terms and conditions of the initial options granted
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Chapter 10: Translation of the Financial Statements of Foreign Entities
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Sample Questions
Q1) When translating foreign currency denominated financial statements into the functional currency, the exchange differences are recognised:
A) as an item of gain or loss in the statement of profit or loss and other comprehensive income;
B) directly in the retained earnings account;
C) as a deferred asset or liability;
D) as a separate component of equity.
Q2) Under AASB 121 The Effects of Changes in Foreign Exchange Rates, an entity must disclose which of the following items in particular?
I. The amount of exchange differences included in profit or loss of the period.
II. The amount of the exchange difference included directly in share capital during the period.
III. Whether a change in the functional currency has occurred.
IV. The reason for using a presentation currency that is different from the functional currency.
A) I, II, III and IV;
B) II and III only;
C) I, III and IV only;
D) I and IV only.
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Chapter 11: Employee Benefits
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Sample
Questions
Q1) Carpenter Ltd has 6 employees, who are each paid $750 per week for a 5 day working week. Each employee is entitled to 8 days accumulating non-vesting sick leave per year.
At 1 July 2013 the accumulated untaken leave was 14 days in total. During the year ended 30 June 2014 a total of 50 days sick leave was taken, of which 12 days were unpaid leave. Of the accumulated untaken leave at 30 June 2014 it is estimated that 75% of it will be taken during the following year.
The balance of the provision for sick leave at 30 June 2014 is:
A) $1350
B) $3600
C) $2700
D) NIL, as the leave is non-vesting
Q2) Which of the following types of employee benefits are required to be measured at their nominal value?
A) long service leave
B) defined benefit post-employment benefits
C) accumulating non-vesting sick leave
D) defined contribution employment benefits
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Chapter 12: Inventories
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Sample Questions
Q1) When an entity's operating cycle is not clearly identifiable it is assumed to be:
A) three months;
B) six months;
C) nine months;
D) 12 months.
Q2) The weighted average inventory costing method is particularly suitable to inventory where:
A) dissimilar products are stored in separate locations;
B) the entity carries stocks of raw materials, work-in-progress and finished goods;
C) goods have distinct use-by dates and the goods produced first must be sold earliest; D) homogeneous products are mixed together.
Q3) Taxes may be included in the costs of inventory unless they are:
A) levied on the entity by a foreign government;
B) in respect to the raw materials component of manufactured inventory; C) recoverable by the entity from the taxing authority;
D) in the nature of import duties.
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14
Chapter 13: Property, Plant and Equipment
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Sample Questions
Q1) Depreciation is a process that is designed to:
A) reduce the carrying amount of an asset to reflect the diminishing fair value of the asset;
B) spread the cost of an asset across a period no greater than 5 years; C) reflect the change in value of an asset as a result of obsolescence;
D) allocate the cost of an asset across its useful life to an entity.
Q2) After an item of Property, plant and equipment has been initially recognised at cost it may be measured using the following measurement method:
A) liquidation value
B) accrual
C) revaluation
D) realisable value.
Q3) 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.
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Chapter 14: Leases
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Sample
Questions
Q1) Nelson Ltd manufactures specialised machinery for both sale and lease. On 1 July 2013, Nelson leased a machine to Poggi Ltd. The machine cost Nelson Ltd
$195 000 to manufacture, and its fair value at the inception of the lease was $212 515. The interest rate implicit in the lease is 10%, which is in line with current market rates. Under the terms of the lease, Poggi Ltd has guaranteed $25 000 of the asset's expected residual value of $37 000 at the end of the 5-year lease term. The debit to the sales revenue account in Nelson's books is:
A) $187 548
B) $195 000
C) $205 063
D) $212 515
Q2) Which of the following is an appropriate journal entry for the initial recognition by a lessee of a finance lease arrangement?
A) DR Leased asset: CR Bank loan
B) DR Cash: CR Leased asset
C) DR Lease liability: CR Leased asset
D) DR Leased asset: CR Lease liability
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Page 16
Chapter 15: Understanding Australian Accounting Standards
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Sample Questions
Q1) The recognition criteria that an asset must meet before it may be recognised and presented in the financial statements include:
A) that the recognition of the asset is relevant to user decision making;
B) probability that future economic benefits will flow to the entity;
C) that the information about the asset is neutral;
D) a likelihood that the cost of the asset is verifiable.
Q2) AASB 138 Intangibles, requires that an intangible asset with a finite life:
A) be amortised across its useful life
B) be amortised across a period of no greater than 20 years
C) not be amortised in periods when it is been properly maintained
D) not be subject to amortisation charges.
Q3) Under AASB 138 Intangibles, an intangible asset with an indefinite useful life is:
A) not able to be recognised by an entity as an asset
B) not subject to annual amortisation charges
C) amortised using the straight-line method over a period of no more than 20 years
D) amortised using the reducing balance method over a period not exceeding 5 years.
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Page 17
Chapter 16: Impairment of Assets
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Sample Questions
Q1) Which of the following assets need to be tested for impairment every year?
I intangible assets with indefinite useful lives
II intangible assets not yet available for use
III intangible assets accounted for under the revaluation method
IV goodwill acquired in a business combination
A) I, II and III only
B) II, III and IV only
C) I, II and IV only
D) I, III and IV only
Q2) 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.
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Page 18
Chapter 17: Accounting for Mineral Resources
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Sample Questions
Q1) Which of the following are included in AASB 6 as factors indicating the E&E assets may be impaired?
I whether the exploration rights for the specific area have expired or are expected to expire in the near future and there is no expectation of renewal II where there is no budget or plan for the incurrence of further substantial E&E expenditure in the specific area III where the entity had decided to discontinue E&E activities in the specific area on the basis that such activities have not led to the discovery of commercially viable quantities of mineral resources
IV where the entity has established that the cost of the E&E asset is unlikely to be recovered in full from the successful development or sale of the specific area
A) I, II and III
B) I, II and IV
C) I, III and IV
D) II, III and IV
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Chapter 18: Agriculture
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Sample
Questions
Q1) When determining the fair value of biological assets and there is no market price for that asset in its present condition AASB 141 requires that:
A) the entity uses the present value of expected net cash flows from the asset discounted at a current market-determined pre-tax rate.
B) the entity measure the asset at cost.
C) the entity uses the contract prices for recent sales of similar assets adjusted for the effects of biological transformation.
D) the entity uses sector benchmarks.
Q2) Which of the following is NOT one of the recognition criteria contained within AASB 141 in relation to recognition of a biological asset or agricultural produce as an asset?
A) the asset has physical form
B) the entity controls the asset as a result of past events
C) it is probable that future economic benefits associated with the asset will flow to the entity
D) the fair value or cost can be reliably measured
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20
Chapter 19: Financial Statement Presentation
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Sample Questions
Q1) Which of the following items, if it exists, must be presented as a line item in the statement of financial position?
A) Trade and other receivables
B) Revenue
C) Cost of sales
D) Share of profit of associates.
Q2) Which of the following statements in relation to errors is correct?
A) Errors must be accounted for on a retrospective basis.
B) Under the "all inclusive" concept of profit, accounting errors must be recognised in profit and loss for the period.
C) All errors, regardless of their size must be corrected as soon as they are discovered.
D) Where the error is considered to be fundamental, the prior year financial statements must be recalled and reissued.
Q3) Where an accounting estimate has been revised materially the item is:
A) to be accounted for retrospectively;
B) not required to be recognised in the current period;
C) to be accounted prospectively;
D) to be adjusted in the comparative numbers of previous periods.
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Chapter 20: Statement of Cash Flows
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Sample Questions
Q1) The following cash flow activities are regarded as investing cash flows:
A) income taxes paid
B) interest paid
C) acquisition of subsidiary net of cash acquired
D) proceeds from issue of debentures.
Q2) Items classified as financing activities on an entity's Statement of Cash Flows are usually associated with:
A) movements in non-current liabilities and equity
B) sales of goods and services by the entity
C) disposal of non-current assets
D) purchase on shares by the entity.
Q3) Which of the following items would be presented in a Statement of Cash Flows?
A) Payment of dividends through a share investment scheme
B) Acquisition of an investment in a subsidiary for consideration consisting of an exchange of non-current assets and liabilities
C) Proceeds from the issue of debentures
D) Refinancing of long-term debt
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22
Chapter 21: Earnings Per Share
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Sample Questions
Q1) If the entity has a discontinued operation, then it must also calculate and disclose the:
A) the basic and diluted earnings per share ratios for the discontinued operation in the statement of profit or loss and other comprehensive income.
B) the basic earnings per share ratio only for the discontinued operation in the statement of profit or loss and other comprehensive income.
C) the diluted earnings per share ratio only for the discontinued operation in the statement of profit or loss and other comprehensive income.
D) the basic and diluted earnings per share ratios for the discontinued operation in the statement of profit or loss and other comprehensive income only if the discontinued operation contributed a profit in the current reporting period
Q2) The basic earnings per share at 30 June 2014 is:
A) $0.80
B) $0.96
C) $3.50
D) $4.00
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23
Chapter 22: Operating Segments
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Sample Questions
Q1) 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.
Q2) Which of the following statements is correct?
A) AASB 8 requires additional disclosures about any reliance on major customers.
B) AASB 8 requires an entity to identify primary and secondary segments.
C) AASB 8 requires that the majority of a segment's revenue be from external sources in order for it to be identified as a reportable segment.
D) AASB 8 requires that the amount of each segment item reported be the measure determined in accordance with the entity's IFRS accounting policies.
Q3) If an operating segment does not meet all of the thresholds of significance, it:
A) may not be designated as a reportable segment;
B) may still be designated as a reportable segment;
C) must be combined with the largest of the other segments and reported in aggregate; D) is insignificant and cannot be reported separately.
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Chapter 23: Operating Segments
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Sample Questions
Q1) Metro Limited is a subsidiary of Matrix Limited. Which of the followings is not a related party to Metro Limited?
A) A pension scheme that offers benefits to employees of Metro Limited.
B) The Managing Director of Matrix Limited.
C) An associate of Metro Limited.
D) A distributor of Metro Limited's products.
Q2) The minimum disclosures for related party transactions include the followings, except:
A) provision of doubtful debts related to outstanding balances;
B) the amount of transactions;
C) the amount of the outstanding balances and commitments;
D) the key management personnel of the related party.
Q3) 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.
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Page 25
Chapter 24: Business Combinations
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Q1) Under AASB 3 Business Combinations, a gain on bargain purchase arises when the acquirer's interest in the fair value of the acquiree's identifiable assets and liabilities is:
A) less than the carrying amount of the net assets acquired
B) less than the consideration transferred
C) greater than the consideration transferred
D) more than the book values of the identifiable assets acquired.
Q2) Net employee benefit liabilities acquired in a business combination are measured by using the:
A) present value method
B) estimated total of future cash outflows, undiscounted
C) face value of the liabilities
D) cash method.
Q3) In a business combination, the acquiree is the party that:
A) finances the business combination
B) gives up control over the net assets acquired
C) obtains control of the net assets the other entity
D) pays the acquisition consideration.
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Chapter 25: Consolidation: Principles and Accounting Requirements
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Sample Questions
Q1) For entities wanting to use the cost model of accounting, the revaluation of a subsidiary's assets would be undertaken in the:
A) subsidiary's records
B) parent entity's records
C) consolidation worksheet
D) notes to the consolidated financial statements.
Q2) When a dividend is paid by a wholly-owned subsidiary out of pre-acquisition equity, the parent entity recognises:
This is explained more in Chapter 26.
A) a reduction in the investment in the subsidiary
B) a decrease in share capital
C) an increase in dividend income
D) a decrease in dividend revenue.
Q3) The key characteristic that determines which entities financial statements should be combined into a set of consolidated financial statements is:
A) the existence of transactions between the entities
B) control
C) substance over form
D) access to the financial statements of each entity that is to be combined.
Page 27
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Chapter 26: Consolidation: Intragroup Transactions
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Sample Questions
Q1) JoJo Ltd provided an advance of $500 000 to its subsidiary BoBo Ltd. Interest of $50 000 was charged during the year ended 30 June 20X8. On consolidation, the following adjustment is needed at 30 June 20X8 in relation to the interest charged:
A) no adjustment needed
B) \(\begin{array}{lrrr}
\text { DR } & & \text { Interest revenue } & \$ 50,000 \\ & \mathrm{CR} & \text { Interest expense } & \$ 50,000 \end{array}\)
C) \(\text { DR } \quad \text { Interest expense } \quad \$ 50,000\)
\(\text { CR } \quad \text { Interest revenue } \quad \$ 50,000\)
D)\(\text { DR } \quad \text { Retained earnings } \quad \$ 50,000\)
\(\text { CR } \quad \text { Cash } \quad \$ 50,000\)
Q2) If a dividend is paid out of profits that are earned after the acquisition date, it is known as:
A) a final dividend
B) a post-acquisition dividend
C) a temporary dividend
D) a pre-acquisition dividend.
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Chapter 27: Consolidation: Non Controlling Interest
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Sample Questions
Q1) Petros Limited is a subsidiary of Butros Limited. When Butros acquired its 60% interest, the retained earnings of Petros Limited were $20 000. At the beginning of the current period Petros Limited's retained earnings had increased to $50 000. Petros earned profit of $10 000 during the current period. The share of the non-controlling interest in the equity of Petros Limited at reporting date is:
A) $24 000
B) $32 000
C) $36 000
D) $48 000.
Q2) A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:
A) less 100% of any post-acquisition dividends paid
B) less the parent's share of any post-acquisition dividends paid or declared
C) plus a share of the changes in equity since the business combination
D) less the non-controlling proportionate share of changes since the combination.
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Chapter 29: Joint Arrangements
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25 Verified Questions
25 Flashcards
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Sample Questions
Q1) Three joint operators agree to an arrangement in which they have an equal share in an agricultural joint operation. The work undertaken in setting up the joint operation cost $300 000 and each operator contributed in cash. Each operator will need to recognise the following accounting entry:
A)\(\text { DR \quad Cost of joint operation product } \quad \$ 300,000\)
\(\text { CR \quad Cash } \quad\quad\quad\quad\$ 300,000 \text {; }\)
B) \(\begin{array} { l c c }
\text { DR } & \text { Inventory in JO } & \$ 100,000 \\
\text { CR } & \text { Cash } & \$ 100,000 ; \end{array}\)
C) \(\begin{array} { l r c }
\text { DR } & \text { Cash in JO } & \$ 300,000 \\
\text { CR } & \text { Cash } & \$ 300,000 ; \end{array}\)
D) \(\begin{array} { l r r r }
\text { DR } & \text { Cash in JO } & \$ 100,000 & \\
\text { CR } & \text { Cash } & & \$ 100,000 . \end{array}\)
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Chapter 30: Associates and Joint Ventures
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26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/70198
Sample Questions
Q1) 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;
Q2) Gunawan Limited acquired a 20% share in Juliano Limited for $18 000. Gunawan Limited has no other investments. At the date on which it became an associate, Juliano Limited had the following equity:
Share capital $50 000
Retained earnings $40 000
At the end of the financial year following the investment, Juliano Limited generated a profit of $6000. After applying the equity method of accounting, Gunawan Limited will have the following carrying amount for the investment:
A) $9200;
B) $16 800;
C) $18 000;
D) $19 200.
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