FINANCIAL ACCOUNTING AND REPORTING

Question 1

What is Accounting?

Answer 1

Accounting is the process of recording financial transactions

Question 2

What is Matching Concept?

Answer 2

Matching concept is an accounting concept which states that revenues
and their related expenses should be recognized in the same accounting
period they occur in.

Question 3

What is Prudence Concept?

Answer 3

It is an accounting concept that states that an entity must not overstate
its assets, revenues and profits, and must not understate its liabilities,
expenses and losses.

Question 4

What is Going Concern?

Answer 4

The going concern concept of accounting implies that the business entity
will continue its operations in the future and will not liquidate or be forced
to discontinue operations due to any reason.

Question 5

What is an Asset?

Answer 5

An asset is:
- a resource controlled by the entity;
- as a result of past events; and
- from which future economic benefits are expected to flow to the
entity.

Question 6

What is Depreciation?

Answer 6

The systematic allocation of the depreciable amount of an asset over its
useful life.

Question 7

What is Impairment?

Answer 7

An asset is said to be impaired when its recoverable amount is lower
than its carrying value

Question 8

What is NRV?

Answer 8

Net realizable value is the value for which an asset can be sold, minus the
estimated costs of selling or discarding the asset.

Question 9

What is Capital Expenditure?

Answer 9

It is expenditure made to acquire or improve long term assets that are
used by the business for a number of years

Question 10

What is a Liability?

Answer 10

A liability is:
- a present obligation of an entity
- arising from past events
- the settlement of which is expected to result in an outflow of
resources that embody economic benefits.

Question 11

What is Equity?

Answer 11

Equity is the amount of capital invested in an entity. It represents the net
assets of the entity.

Question 12

What is Negative Goodwill?

Answer 12

When a company acquires another company or its assets for a
significantly lower price than its fair market value the balancing amount is
called negative goodwill. It is recorded as an income on date of
acquisition.

Question 13

What is a Lease?

Answer 13

A lease is an agreement to grant the right to use an asset for a specified
time against periodic rentals.

Question 14

What is an Operating Lease?

Answer 14

A lease that does not transfer substantially all the risks and rewards
incidental to ownership of an underlying asset.

Question 15

What is a Finance Lease?

Answer 15

A lease that transfers substantially all the risks and rewards incidental to
ownership of an underlying asset.

Question 16

What is a Bad Debt?

Answer 16

Bad debt refers to loans or outstanding balances owed that are no
longer deemed recoverable and must be written off.

Question 17

What are the Five Steps for Revenue
Recognition?

Answer 17

1. Identify contract(s) with customer.
2. Identify separate performance obligations in the contract(s).
3. Determine the transaction price.
4. Allocate the transaction price between the performance obligations.
5. Recognize revenue as and when the performance obligations are
   satisfied.

Question 18

What is Deferred Tax?

Answer 18

It is an accounting measure used to match the tax effects of transactions
with their accounting impact to produce less distorted results.

Question 19

What is a Temporary Difference?

Answer 19

t is the difference between the carrying amount of an asset/liability
within the Statement of Financial Position and its tax base.
Carrying Amount: As per IFRSs in Financial Statements
Tax Base: As per Tax Authoritie

Question 20

What is a Taxable Temporary
Difference?

Answer 20

A temporary difference that will yield amounts that are taxable in the
future when determining taxable profit or loss

Question 21

What is a Deferred Tax Liability?

Answer 21

The amounts of income taxes payable in future periods in respect of
taxable temporary differences

Question 22

What is a Deductible Temporary
Difference

Answer 22

A temporary difference that will yield amounts that are deductible in the
future when determining taxable profit or loss

Question 23

What is a Deferred Tax Asset

Answer 23

The amounts of income taxes recoverable in future periods in respect of
deductible temporary differences or unused tax losses and tax credits.