Financial Accounting MCQ Quiz in తెలుగు - Objective Question with Answer for Financial Accounting - ముఫ్త్ [PDF] డౌన్లోడ్ కరెన్
Last updated on Mar 26, 2025
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Financial Accounting Question 1:
Comprehension:
Phoenix Co. is facing several legal and operational uncertainties as at 31 May 20X5.
Which of the following situations, as at 31 May 20X5, would require Phoenix Co. to recognise a provision in its financial statements in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets?
A. A customer filed a lawsuit on 1 May 20X5 for a defective product sold on 1 April 20X5. Legal counsel advises that it is probable (70% chance) Phoenix Co. will lose the case and be required to pay damages of $50,000.
B. Phoenix Co. is currently negotiating to acquire a new supplier; discussions began on 1 June 20X5, after the year-end.
C. On 10 June 20X5 (after the year-end), a fire destroyed an uninsured portion of Phoenix Co.'s raw material inventory, which is significant.
D. The company issued a public statement on 15 May 20X5 announcing a voluntary recall of a specific furniture line due to a minor aesthetic flaw. While not legally required, the company has a well-established history of conducting such recalls to maintain brand reputation. The estimated cost of the recall is $20,000, and it is probable that customers will respond.
Answer (Detailed Solution Below)
Financial Accounting Question 1 Detailed Solution
The correct option is option 2
Additional Information:
- A provision is recognised when all three of the following criteria are met:
- The entity has a present obligation (legal or constructive) as a result of a past event.
- It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
- A reliable estimate can be made of the amount of the obligation.
- Situation A: Meets all three criteria. The past event is the defective product sale. There is a present legal obligation due to the lawsuit. An outflow is probable (70% chance of losing). A reliable estimate of $50,000 can be made. Therefore, a provision is required.
- Situation D: Meets all three criteria. The past event is the public statement and established history (creating a constructive obligation). An outflow is probable (customers responding to the recall). A reliable estimate of $20,000 can be made. Therefore, a provision is required.
Explanation of Incorrect Answers:
- Situation B (Negotiating new supplier): This commenced after the year-end (1 June 20X5) and does not represent a present obligation from a past event existing at 31 May 20X5. No action is required in the 31 May 20X5 financial statements.
- Situation C (Fire after year-end): This is an event that occurred after the reporting period (10 June 20X5). It is a non-adjusting event because the condition (fire) did not exist at the year-end. While significant, it would typically be disclosed by note if material, not recognised as a provision in the 31 May 20X5 financial statements.
Financial Accounting Question 2:
Comprehension:
Phoenix Co. recently completed a new custom-designed table. The costs associated with this were:
- Initial design and feasibility study for the new table (before technical feasibility was established): $15,000
- Development costs incurred after technical feasibility was established, including material and labour costs directly attributable to creating the prototype: $40,000
- Testing costs to ensure the prototype met quality standards: $5,000
- Marketing campaign costs for the new table launch: $10,000
- Staff training on new manufacturing techniques required for the new table (ongoing training for existing staff): $8,000
- Purchase of a 5-year non-exclusive licence to use a specialised wood treatment process for the new table (effective 1 June 20X4): $25,000
- What is the total amount that should be capitalised as an intangible asset for the new table's development for the year ended 31 May 20X5?
Answer (Detailed Solution Below)
Financial Accounting Question 2 Detailed Solution
The correct option is option 2
Additional Information:
- Development costs incurred after technical feasibility was established ($40,000): These costs should be capitalised as an intangible asset because they meet the criteria specified in IAS 38, including technical feasibility and the intention to complete the asset.
- Testing costs to ensure the prototype met quality standards ($5,000): These are directly attributable costs necessary to bring the asset to its working condition for its intended use, and thus should be capitalised as part of the development cost.
- Purchase of a 5-year non-exclusive licence ($25,000): A licence is an identifiable non-monetary asset without physical substance, acquired for long-term use and expected to generate future economic benefits. Therefore, it is an intangible asset and should be capitalised at cost.
- Total capitalised intangible assets = $40,000 (Development costs) + $5,000 (Testing costs) + $25,000 (Licence) = $70,000.
Explanation of Incorrect Answers:
- Option 1. $45,000: This only includes the development and testing costs, omitting the capitalisable licence fee. Initial design and feasibility study costs are research and should be expensed, not capitalised.
- Option 3. $88,000: This incorrectly includes the staff training costs ($8,000). Staff training costs are generally expensed as they do not directly create or enhance an intangible asset, but rather relate to ongoing operational activities.
- Option 4. $98,000: This incorrectly includes both the marketing campaign costs ($10,000) and staff training costs ($8,000). Marketing costs are selling/administrative expenses and are not capitalisable as they do not directly contribute to the asset's creation.
Financial Accounting Question 3:
Comprehension:
Which of the following statements correctly classifies the qualitative characteristic demonstrated when Phoenix Co. ensures its financial statements are published within two weeks of the year-end to allow stakeholders timely decision-making, AND when it presents its financial statements in a consistent format year-on-year with comparative figures for the prior period?
Answer (Detailed Solution Below)
Financial Accounting Question 3 Detailed Solution
The correct option is option 2
Additional Information:
Timeliness: The rapid publication of financial statements to enable timely decision-making directly aligns with the definition of Timeliness as an enhancing qualitative characteristic under the Conceptual Framework.
Comparability: Presenting financial statements in a consistent format year-on-year and providing comparative figures is a direct application of Comparability, which is an enhancing qualitative characteristic. It allows users to identify and understand similarities and differences in information over time and between different entities. Consistency is a means to achieve comparability.
Explanation of Incorrect Answers:
Option 1. Timeliness (Fundamental); Comparability (Enhancing): While Comparability is correctly identified as an enhancing characteristic, Timeliness is not a fundamental qualitative characteristic. The two fundamental qualitative characteristics are Relevance and Faithful Representation.
option 3. Relevance (Fundamental); Consistency (Fundamental): Relevance is a fundamental characteristic, but consistency itself is not; it is a means to achieve comparability (an enhancing characteristic). Neither are fundamental.
Option 4. Understandability (Enhancing); Faithful Representation (Fundamental): While both are qualitative characteristics, Understandability is enhancing, and Faithful Representation is fundamental. However, the scenarios provided specifically illustrate timeliness and comparability, not necessarily understandability or faithful representation. Prudence is also mentioned, but it is not a characteristic under the latest framework
Financial Accounting Question 4:
Harry Co extracted the trial balance for the year ended 31 December 20X7. The total of the debits exceeded the credits by $300.
Which of the following could explain the imbalance?
Answer (Detailed Solution Below)
Financial Accounting Question 4 Detailed Solution
The correct option is option 3
Additional Information:
Discounts received are recorded as a credit balance and appear as other income in the statement of profit or loss: DEBIT payables, CREDIT discounts received.
Financial Accounting Question 5:
Cassy is a sole trader and had assets of $569,400 and liabilities of $412,840 on 1 January 20X8. During the year ended 31 December 20X8 she paid $65,000 capital into the business and she paid herself wages of $800 per month. At 31 December 20X8, Cassy had assets of $614,130 and liabilities of $369,770.
What is Cassy's profit for the year ended 31 December 20X8?
Answer (Detailed Solution Below)
Financial Accounting Question 5 Detailed Solution
The correct option is option 2
Additional Information:
Closing net assets = opening net assets + capital introduced + profit - drawings
| $ | |
| Opening assets | 569,400 |
| Opening liabilities | (412,840) |
| Capital introduced | 65,000 |
| Drawings (800 x 12) | (9,600) |
| Profit (bal fig) | 211,960 |
| Closing net assets (614,130 -369,770) | 32,400 |
| 244,360 |
Financial Accounting Question 6:
A company values its inventory using the FIFO method. At 1 May 20X5 the company had 700 engines in inventory, valued at $190 each. During the year ended 30 April 20X6 the following transactions took place:
| 20X5 | |
| 1 July | Purchased 500 engines at $220 each |
| 1 November | Sold 400 engines for $160,000 |
| 20X6 | |
| 1 February | Purchased 300 engines at $230 each |
| 15 April | Sold 250 engines for $125,000 |
What is the value of the company's closing inventory of engines at 30 April 20X6?
Answer (Detailed Solution Below)
Financial Accounting Question 6 Detailed Solution
The correct option is option 1
Additional Information:
Closing inventory:
| $ | |
| 50 × $190 | 9,500 |
| 500 × $220 | 110,000 |
| 300 × $230 $ | 69,000 |
| 188,500 |
Financial Accounting Question 7:
Which of the following material events, which occurred after the reporting date and before the financial statements are approved, are adjusting events?
- A valuation of property providing evidence of impairment in value at the reporting date
- Sale of inventory held at the reporting date for less than cost
- Discovery of fraud or error affecting the financial statements
- The insolvency of a customer with a debt owing at the reporting date which is still outstanding
Answer (Detailed Solution Below)
Financial Accounting Question 7 Detailed Solution
The correct option is option 4
Additional Information:
- All of the events are adjusting events.
Financial Accounting Question 8:
The following control account has been prepared by a trainee accountant:
RECEIVABLES LEDGER CONTROL ACCOUNT
| $ | $ | ||
| Opening balance | 308.600 | Cash | 148,600 |
| Credit sales | 154,200 | Interest charged on overdue accounts |
2,400 |
| Cash sales | 88,100 | Irrecoverable debts | 4,900 |
| Contras against credit balances in payables ledger |
4,600 | Allowance for receivables | 2,800 |
| Closing balance | 396,800 | ||
| 555,500 | 555,500 |
What should the closing balance be when all the errors made in preparing the receivables ledger control account have been corrected?
Answer (Detailed Solution Below)
Financial Accounting Question 8 Detailed Solution
The correct option is option 4
Additional Information:
RECEIVABLES LEDGER CONTROL ACCOUNT
| $ | $ | ||
| Opening balance | 308,600 | Cash | 148,600 |
| Credit sales | 154,200 | Contras | 4,600 |
| Interest charged on overdue accounts | 2,400 | Irrecoverable debts | 4,900 |
| Closing balance | 307,100 | ||
| 465,200 | 465,200 |
Financial Accounting Question 9:
The IASB's Conceptual Framework identifies characteristics which make financial information faithfully represent what it purports to represent.
Which of the following are examples of those qualitative characteristics?
- Accruals
- Completeness
- Going concern
- Neutrality
Answer (Detailed Solution Below)
Financial Accounting Question 9 Detailed Solution
The correct option is option 2
Additional Information:
- Completeness and neutrality are two characteristics given in the Conceptual Framework. Going concern is the underlying assumption and accruals is not a stated characteristic.
Financial Accounting Question 10:
The following bank reconciliation statement has been prepared by a trainee accountant:
| $ | |
| Overdraft per bank statement | 3,860 |
| Less: Unpresented cheques | 9,160 |
| Add: Outstanding lodgements | 5,300 |
| Cash at bank | 16,690 |
| 21,990 |
What should be the correct balance per the cash book?
Answer (Detailed Solution Below)
Financial Accounting Question 10 Detailed Solution
The correct option is option 2
Additional Information:
| $ | |
| Overdraft per bank statement | (3,860) |
| Less: Unpresented cheques | (9,160) |
| Add: Outstanding lodgements | 16,690 |
| Cash at bank | 3,670 |