Misc

Question 1

The rental income account has been mislaid, where do the following transactions go on the RTA?

1) Cash received from tenants
2) Reversal of b/fwd deferred income
3) Posting deferred income
4) Transfer to the profit and loss T account

Answer 1

CREDIT Cash received from tenants

CREDIT Reversal of b/fwd deferred income

DEBIT Posting closing deferred income

DEBIT Transfer to profit and loss T account

Question 2

True or false, for service organisations, revenue can only be recognised when the contract is completed?

Answer 2

FALSE

Question 3

True or false, for service organisations, revenue should be recognised only to the extent that expenses are recoverable from a client where the outcome cannot be reliably estimated?

Answer 3

TRUE

Question 4

In law, are the following entities treated as separate legal entities?

Limited company, sole traders and partnerships

Answer 4

Limited companies - separate legal person

Sole traders - not a separate legal person

Partnerships - natural person

Question 5

True or false, when fixed assets are sold at a loss, the loss will require an adjustment under the heading of ‘cash flows from investing activities’?

Answer 5

FALSE

Question 6

True or false, the repayment of debentures and loans will require a cash outflow to be presented under the heading of ‘cash flows from financing activities’?

Answer 6

True

Question 7

In respect of deferred tax, true or false: in a year when capital expenditure is abnormally high, the tax charge will be higher than the reported profit would suggest

Answer 7

FALSE

Question 8

Should a contingent liability be included in the disclosure note if it is not recognised?

Answer 8

Yes, where a contingent liability is not recognised it should be included in the disclosure note

Question 9

Should contingent liabilities net off against any contingent assets that have been recognised in the same accounting period?

Answer 9

No

Question 10

How should a grant be recognised where there are no performance conditions?

Answer 10

As it is received under the performance model

Question 11

How should a capital grant initially be recognised?

Answer 11

As deferred income under the accrual model

Question 12

How is a contingent liability treated?

Answer 12

A contingent liability is only ever disclosed in a company’s financial statements, never recognised

It is not disclosed, only if there is a remote chance it will lead to economic benefit