Balance Sheet and Income Statement

Question 1

Function of expense method

Answer 1

Revenue
- Rev related costs
= Net income / loss

Question 2

Nature of expense method

Answer 2

Revenue
+/- Change Inventory
- Expenses
= Net income / loss

Question 3

P&L Annual Report (function of expense method)

Answer 3

Rev
- Cost of Sales
= gross profit
-R&D
- SG&A
+/- other op inc/exp
+/- interest
=income from continuing operation
-tax
= income/loss from continuing operation
+/- discontinuied ops
=net income/loss

Question 4

Functional costs

Answer 4

Class 7, Cost Centers are are for transfer from class 6 to 7

Question 5

Functional cost - basic principles (4)

Answer 5

1) Operation expense by type are assigned to categories according to org structure
2) Each CC must be clearly assigned to one functional cost category
3) Expenses on order-by-orde basis are reported as CoS
4) Reserves assigned to function are expected to be actually incurred

Question 6

Research activity

Answer 6

Original and planned investigation, objective to gain new scientific or technical knowledge

Question 7

Development activity

Answer 7

Application of research findings, new technical ideas to a specific plan

Question 8

R&D Decision Tree - CoS or not

Answer 8

1) Does a customer specific order exist?
2) Are the results of development transferred to customer?
3) Is it probable that results will be used for other projects (if “No” - CoS)

Question 9

Capitalization of R&D - recognition criteria

Answer 9

1) Technical feasibility of completing the intangible asset so that it can be used or sold
2) Intention to complete inten asset
3) Ability to use or sell
4) probable future benefits