MFRS 108, MFRS 110, MFRS 137 Quiz

Legal obligation derives from all of the following except?

• Contract

• Legislation

• Volunteer

• Other operation of law

In an event where a reliable estimate cannot be made, an entity shall disclose the probable obligation as __________.

• provision

• virtually certain

• contingent asset

• contingent liability

In March 2022, an accounting clerk discovered that payment to suppliers amounting to RM50,000 in March 2021 was recorded as salaries paid to employees. The company closed its account on 31 December. To correct the error, the accounting clerk needs to:

• Debit Account Payable; Credit Salaries Expenses

• Debit Account Payable; Credit Retained Earnings

• Debit Salaries Expenses; Credit Account Payable

• Debit Retained Earnings; Credit Account Payable

Which of the following is provision under MFRS137?

• Provision for warranty repairs

• Provision for depreciation

• Provision for doubtful debts

• Provision for retain profit

Discuss the treatment if dividends are declared after the reporting period but before the financial statements are authorised for issue.

• The dividends are recognised as a liability at the end of the reporting period and such dividends are disclosed in the notes to account.

• The entity does not merely disclose a dividend because it does not provide additional evidence.

• An entity is required to adjust the dividend amounts recognised in its financial statements.

• The dividends are not recognised as a liability at the end of the reporting period and such dividends are disclosed in the notes to account.

Tok Ayah Bhd has a published environmental policy. It explains that they always replant trees to counter-balance the environmental damage caused by their operations. The country has no legal regulations forcing the company to replant the trees. Up to the year ended 31 December 2023, it is still uncertain to estimate the cost to replant the area that has been damaged. Identify the appropriate accounting treatment for Awesome Bhd in accordance with MFRS137.

• The company should recognise the cost for replanting the trees as provision because it has constructive obligation to do so.

• The company should ignore the event because there is no legal regulations forcing the company to replant the trees.

• No provision should be made but the company should disclose the event as contingent liability.

• The company should recognise damages expense in SOPL due to environmental damage caused by their operations.

Provisions are recognized when the following conditions are met except?

• There is a present obligation as a result of past event.

• A reliable estimated amount of the obligation can be made.

• There is a probable inflow of resources will be received.

• There is a probable outflow of resources will be required to settle the obligation.

The following statement explains the difference between provision and contingent liabilities.

• Provision cannot be measured whereas contingent liabilities can be accurately measured.

• Recognition of provision in the financial statements increases liabilities whereas contingent liabilities increase expenses.

• Recognition of provision reduces net profit whereas contingent liabilities increase liabilities.

• Provision is a present liability of uncertain amount whereas contingent liabilities is a possible obligation which arises from past events.

Hassanal Bhd started its business two months ago and currently appoint an accountant to take part in preparing its financial account. The accountant rises an issue regarding the method of valuing its inventories. Since the method LIFO method is no longer relevant, the accountant suggest that the company should use FIFO method. This situation is referring to:

• Changes in accounting policy

• Changes in accounting estimate

• Prior year error

• None of the above

The following are examples of non-adjusting events after the reporting period, except?

• Announcing a plan to discontinue an operation

• Major business combination after the reporting period

• Sale of inventories at a price lower than cost after the reporting period

• Destruction of a major production plant by a fire after the reporting period