FA Full Course

Which of the following statements is true?

• The directors of a company are liable for any losses of the company

• A sole trader business is owned by shareholders and operated by the proprietor

• Partners are liable for losses in a partnership in proportion to their profit share ratio

• A company is run by directors on of its members

Which of the following statements does NOT explain the distinction between financial

statements and management accounts?

• Financial statements are primarily for external users and management accounts are

  primarily for internal users.

• Financial statements are normally produced annually and management accounts are

  normally produced monthly.

• Financial statements are normally produced annually and management accounts are

  normally produced monthly.

• Financial statements are audited by an external auditor and management accounts do

  not normally have an external audit,

Which of the following items could be used to encourage executive directors to operate in

the best interests of the company?

• They could be awarded a high salary

• They could receive bonuses based on both individual and company performance

• The could be entitled to large payment on resignation

• The could be asked to attend Annual General Meetings of the company

Details of B Co’s insurance policy are as follows: Premium for year ended 31 March 20X6 paid April 20X5 $10,800 Premium for year ending 31 March 20X7 paid April 20X6 $12,000 What figures should be included in the B Co’s financial statements for the year ended 30 June 20X6?

• 11,100 SOPL 9,000 prepayment

• 11,700 SOPL 9,000 prepayment

• 11,100 SOPL 9,000 accrual

• 11,700 SOPL 9,000 accrual

A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The

rent was increased from $90,000 per year to $120,000 per year as from 1 October 20X2.

What rent expense and accrual should be included in the company’s financial statements for the year

ended 31 January 20X3?

• Rent expense 100,000 Accrual 20,000

• Rent expense 100,000 Accrual 10,000

• Rent expense 97,500 Accrual 10,000

• Rent expense 97,500 Accrual 10,000

Diesel fuel in inventory at 1 November 20X7 was $12,500, and there were invoices awaited for

$1,700. During the year to 31 October 20X8, diesel fuel bills of $85,400 were paid, and a delivery

worth $1,300 had yet to be invoiced. At 31 October 20X8, the inventory of diesel fuel was valued at

$9,800. What is the value of diesel fuel to be charged to the statement of profit or loss and other

comprehensive income for the year to 31 October 20X8?

• $87,700

• $89,400

• $88,500

• $91,100

Which one of the following statements best defines an expense?

answer choices

• An expense is any outflow of economic benefits in an accounting period.

• An expense is an outflow of economic benefits resulting from the purchase of resources in an accounting period

• An expense is an outflow of economic benefits resulting from a claim by a third party.

• An expense is an outflow of economic benefits in an accounting period as a result of the using up of resources or a fall in the value of an asset.

Which of the following are differences between sole traders and limited liability companies?

(1) A sole trader’s financial statements are private and never made available to third parties; a company’s financial statements are sent to shareholders and may be publicly filed.

(2) Only companies have share capital.

(3) A sole trader is fully and personally liable for any losses that the business might make.

(4) Drawings would only appear in the financial statements of a sole trader.

• (1) and (4) only

• (2), (3) and (4)

• (2) and (3) only

• (1), (3) and (4)

The closing inventory at cost of a company at 31 January 20X3 amounted to $284,700.

The following items were included at cost in the total:

1. 400 coats, which had cost $80 each and normally sold for $150 each. Owing to a defect in manufacture, they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of the proceeds.

2. 800 skirts, which had cost $20 each. These too were found to be defective. Remedial work in February 20X3 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each.

What should the inventory value be according to IAS 2 Inventories after considering the above items?

answer choices

• $281,200

• $282,800

• $329,200

• None of these

In preparing its financial statements for the current year, a company’s closing inventory was understated by $300,000.

What will be the effect of this error if it remains uncorrected?

answer choices

• The current year's profit will be overstated and next year's profit will be understated.

• The current year's profit will be understated but there will be no effect on next year's profit.

• The current year's profit will be understated and next year's profit will be overstated.

• The current year's profit will be overstated but there will be no effect on next year's profit