Module 1 lecture 1

Question 1

Companies are organizations established under the ….

Answer 1

Corporations Act (2001)

Question 2

what type of company is this

• Larger, with widespread ownership.
• Can issue shares to the public and be listed on the stock exchange.

Answer 2

Public Company

Question 3

Yes or No:

Is this company classified as large

• Revenue > $50m
• Assets > $25m
• Employees > 100

Answer 3

Yes

Question 4

Sources of Corporate Reporting Requirements:

The primary legislation governing companies in Australia Is…

Answer 4

Corporations Act (2001)

Question 5

Sources of Corporate Reporting Requirements:

Establishes standards for financial reporting

Answer 5

Australian Accounting Standards Board (AASB)

Question 6

Sources of Corporate Reporting Requirements:

Requires listed companies to adhere to specific rules, including continuous disclosure obligations.

Answer 6

Australian Securities Exchange (ASX)

Question 7

Required Financial Statements (AASB 101)

Shows assets, liabilities, and equity…

Answer 7

Statement of Financial Position (Balance Sheet)

Question 8

Required Financial Statements (AASB 101)

Can be a single statement or split into profit/loss and other comprehensive income.

Answer 8

Statement of Comprehensive Income

Question 9

Required Financial Statements (AASB 101)

Reports the cash generated and used during the period.

Answer 9

Cash Flow Statement

Question 10

Enforcement of Accounting Standards

Ensures compliance with the Corporations Act and AASB standards…

Answer 10

Australian Securities and Investments Commission (ASIC)

Question 11

Listing Rules: Ensure efficient and timely dissemination of information.

Continuous Disclosure: Companies must immediately inform the ASX of any material information that could affect the value of their securities.

Specifically, these requirements are for the…

Answer 11

Australian Securities Exchange (ASX)

Question 12

Journal Entry for Share Issue

When shares are issued for cash:

Answer 12

Dr. Cash
Cr. Share Capital

Question 13

Cash Dividends

Declaration of dividend

Answer 13

Dr. Dividends Declared
Cr. Dividends Payable

Question 14

Cash Dividends

Payment date

Answer 14

Dr. Dividends Payable
Cr. Cash
Dr. Dividends Paid
Cr. Dividends Declared

Question 15

Share Dividends / Bonus Issues:

Answer 15

Dr. Retained Earnings/General Reserve
Cr. Share Capital

Issuing shares to existing shareholders from retained earnings or reserves without any cash payment.

Question 16

Accounting for Transfers to and from Reserves

Transfers from Retained Earnings;

Answer 16

Dr. Transfer to General Reserve
Cr. General Reserve

This entry can be reversed if necessary.

Question 17

These steps are for:

1) Transfer profit/loss to retained earnings.

2) Deduct dividends declared/paid from retained earnings.

3) Reset the balances of revenues, expenses, dividends, and transfer to reserve accounts to zero.

Answer 17

Closing Entries, at the end of each financial year.

Question 18

Accounting for Retained Earnings

• Formula:

Answer 18

Opening Retained Earnings

+ Net Profit

• Dividends Paid/Declared

− Transfer to Other Reserves

= Closing Retained Earnings (reflected in the equity section of the statement of financial position).

Question 19

true or false

PPE should be recorded at cost, which includes purchase price and costs to bring the asset to its current location and condition

Answer 19

True

(including taxes)

Question 20

Cost - residual value is the…

Answer 20

depreciable amount

is allocated over the asset’s useful life.

Question 21

Depreciation expense

Answer 21

Dr. Depreciation Expense
Cr. Accumulated Depreciation

Question 22

contra asset accounts have a natural balance of…

Answer 22

CR. Credit

Asset accounts have a natural balance of

DR. debit…

Question 23

Measurement After Acquisition:

what model is this called?

Assets are carried at cost less accumulated depreciation and less impairment losses.

Answer 23

Cost Model
(AASB 116)

Question 24

AASB 136 requires at each reporting date that assets are to be asses for….

Answer 24

Impairment

Question 25

impairment loss is recognised when…

Answer 25

If the recoverable amount is less than the carrying amount, an impairment loss is recognized.

Question 26

Revaluation Model:

Answer 26

Assets are carried at fair value.

Revaluation must be applied to the entire class of assets.

Question 27

The carrying amount of a plant is increased from $70,000 to $95,000 on revaluation.

Answer 27

Dr. Accumulated Depreciation $30,000

Cr. Plant $30,000

This entry resets the accumulated depreciation to zero before revaluing the asset.

Question 28

The carrying amount of a plant is increased from $70,000 to $95,000 on revaluation.

Answer 28

Write-back Accumulated Depreciation (if any)

Dr. Accumulated Depreciation $30,000
Cr. Plant** $30,000

This entry resets the accumulated depreciation to zero before revaluing the asset.

Record the Revaluation Increment

Dr. Plant $25,000 (the difference between the new fair value of $95,000 and the carrying amount of $70,000)

Cr. Revaluation Gain (Other Comprehensive Income) $25,000

Transfer the Revaluation Gain to Revaluation Surplus** (Equity)

Dr. Revaluation Gain (OCI) $25,000

Cr. Revaluation Surplus** $25,000

Question 29

Disposal of a Revalued Asset

Journal Entry

Answer 29

Dr. Cash at Bank
Dr. Accumulated Depreciation

Cr. Asset (Revalued
Amount)

Dr. Loss on Sale or
Cr. Gain on Sale (based on the difference)