Fin statements mistakes

A company may present negative amounts under liabilities if it reflects an overpayment.

• True

• False

Answer explanation

• Negative values are not allowed under liabilities in financial statements.

• 
  Liabilities can not be negative. The same is about receivables.

• Financial statements submitted to authorities must match those approved by the company’s management and shareholders.

• True

• False

• A company can record an increase in share capital before the official registration of amended articles of association.

• True

• False

Answer explanation

Changes in share capital must be reflected only after legal registration.

• If a company owns vehicles, they must be presented as property, plant, and equipment.

• True

• False

Answer explanation

Owned tangible assets must be included in the balance sheet.

• If a company owns vehicles, they must be presented as property, plant, and equipment at ...

• ... acquisition cost.

• ... residual value.

• ... carrying value.

• ... revalued value.

Answer explanation

... at the carrying value

If this value is small, it means very old (depreciated) assets.

• If a company has no retained earnings, it cannot form statutory reserves.

• True

• False

• Negative amounts are allowed in all equity accounts if justified.

• True

• False

Answer explanation

• Equity can show losses, but line items themselves must not be negative unless it’s a retained loss.

• All material items must be disclosed separately, regardless of their legal form.

• True

• False

• The amount of retained earnings shows how many dividends can be paid on any given day.

• True

• False

Answer explanation

• Retained earnings show the accumulated profit. If the company has no money, dividends can not be paid.

• Operating expenses may remain unchanged even after opening multiple new branches.

• True

• False

Answer explanation

• New branches normally increase operating costs; such stability is questionable.