Professional Accountancy Preparation
Final Exam Questions
Course Introduction
Professional Accountancy Preparation is designed to equip students with a comprehensive understanding of accounting concepts, standards, and practices necessary for success in professional accountancy examinations and real-world financial environments. The course covers core topics such as financial reporting, management accounting, audit and assurance, taxation, and business law, with an emphasis on application through practical scenarios and case studies. Students will also develop critical skills in ethics, communication, problem-solving, and analytical reasoning, preparing them for a dynamic career in accountancy and for membership in recognized professional bodies.
Recommended Textbook
Intermediate Accounting 2nd Edition Volume I by Kin Lo George Fisher
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10 Chapters
1107 Verified Questions
1107 Flashcards
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Page 2
Chapter 1: Fundamentals of Financial Accounting Theory
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Which statement best explains the relationship between the efficient securities market hypothesis and accounting?
A)Security prices adjust slowly when accounting reports are publicly released.
B)The timeliness of accounting information is irrelevant to securities markets.
C)Accounting information competes with other sources of information.
D)Security prices are unaffected when accounting reports are publicly released.
Answer: C
Q2) Management motivation to increase the likelihood that the company will receive a $50,000 government rebate best illustrates which of the following?
A)Earnings management.
B)Positive accounting theory.
C)Information asymmetry.
D)Efficient securities market.
Answer: A
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Chapter 2: Conceptual Frameworks for Financial Reporting
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Provide three reasons for the importance of the conceptual framework for financial reporting.
Answer: A conceptual framework is like a strategic business plan that identifies demands of users and how to supply a product that meets those demands. The framework provides overall plans to guide implementation: the evaluation of more specific accounting standards and the application of accounting standards to specific circumstances.
As business plans, they differ in response to variations in the environments for which they are developed, and they change from time to time to respond to changes in market conditions.
It provides the foundational principles, assumptions and principles upon which accounting standards are built.
This foundation ensures accounting standards are consistent with each other (e.g. the definition of an "asset" ensures that the accounting for fixed assets and intangible assets are based on consistent recognition criteria).
The foundational concepts help accountants determine the appropriate accounting in circumstances for which specific standards may not exist.
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4
Chapter 3: Accrual Accounting
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) Explain how financial information prepared using accrual accounting provides better information to predict future cash flows than financial information prepared using the cash basis of accounting.
Answer: Accrual accounting numbers can be a better predictor of future cash flows because they smooth out and reallocate cash flows to periods that better reflect the long-term average cash flow of the enterprise. For example, an equipment purchase results in a large cash outflow but benefits the company over many years, so allocating the purchase cost over those years makes each year more representative of the cash flow expected in a typical year.
Q2) Explain what is meant by "quality of earnings."
Answer: Quality of earnings conceptually refers to how close the reported earnings are to an unbiased amount. Since we cannot observe unbiased earnings, quality of earnings is difficult to measure in practice.
Q3) Explain how changes in accounting policies, changes in accounting estimates and errors are accounted for under the accrual basis of accounting.
Answer: Correction of errors and changes in accounting policies require retrospective adjustment of financial statements. Changes in estimates due to new information require prospective treatment.
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Page 5
Chapter 4: Revenue Recognition
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Compare and contrast the revenue recognition criteria for a transaction involving the sale of goods with a transaction involving the provision of services.
Q2) Which statement is correct about multiple deliverable sales arrangements?
A)The revenue recognition criteria no longer apply to these transactions.
B)The revenue must be allocated to the components of the sale evenly over the life of the contract.
C)The revenue must be recognized evenly over the life of the contract.
D)Identifying the different sources of revenue increases the representational faithfulness.
Q3) What are some exceptions to the use of the percentage of completion method for construction contracts?
Q4) Which statement is correct about unintentional errors on construction contracts?
A)Unintentional underestimates or overestimates may not be errors.
B)Errors are misstatements that should not have been made based on the information available at the time.
C)Both statements are correct.
D)Neither statement is correct.
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Chapter 5: Cash and Receivables
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Sabrina Inc. reported credit sales of $700,000 and cash sales of $100,000. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. What was the bad debt expense for the year?
A)$7,000
B)$8,000
C)$15,000
D)$47,000
Q2) Fitness Machines reported credit sales of $880,000 and bad debt expense of $250,000 for last year. Accounts receivable had a balance of $1,400,000 at the beginning of the year and $1,350,000 at the end of the year. Assuming there are no write-offs made during the year, how much cash was collected from customers during the year?
A)$630,000
B)$680,000
C)$930,000
D)$1,180,000
Q3) Explain how a company can use its credit policy for customers and allowance for bad debts policies to manipulate earnings.
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Chapter 6: Inventories
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156 Flashcards
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Sample Questions
Q1) Which statement best explains the weighted average cost flow assumption?
A)A method that uses the most recent costs in the calculation of cost of sales.
B)A method that uses the cost of goods available for sale divided by the number of units available for sale.
C)A method that assigns costs to inventories and cost of sales based on actual costs of each item.
D)A method that uses the oldest costs in the calculation of cost of sales.
Q2) Which statement is correct for about inventory systems?
A)The periodic inventory system provides more information to allow an enterprise to better manage its inventories.
B)Cost of goods sold is a not a calculated number under the periodic inventory system.
C)The final amounts reported in statements are the same under both the periodic and perpetual systems.
D)The periodic inventory system continuously updates information about the amount of inventory on hand.
Q3) Explain what problems are created for the auditor by the use of the absorption costing method under GAAP.
Q4) Explain why the absorption costing method is appropriate under GAAP.
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Page 8
Chapter 7: Financial Assets
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) On January 1, 2013, Ella Ltd. purchased 25% of the common shares of JB Inc. for $2,200,000. In 2013, JB reported net income of $280,000 and paid dividends of $100,000. Required:
a. Which of the following conditions must be met for Ella to use the equity method to report its investment in JB?
i. Ella owns at least 20% of the voting shares of JB.
ii. Ella has control over JB.
iii. Ella has a significant interest in JB.
iv. Ella is able to exercise significant influence over JB.
b. How much income would be reported by Ella in 2013 related to its investment in JB under the equity method?
Q2) How should derivatives be classified?
A)Held for trading.
B)Held to maturity.
C)Available for sale.
D)Proportionate consolidation.
Q3) Discuss three factors that are important in classifying an investment as a "loan or receivable."
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Chapter 8: Property, Plant, and Equipment
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) What is the meaning of "exit value"?
A)The cost required to replace the productive capacity of an asset.
B)The value of an asset in an input market or output market on the date of measurement.
C)The value expected from the sale of an asset, net of any costs of disposal.
D)The actual cost of an asset at the time it was purchased.
Q2) Ceila Manufacturing purchased equipment on January 1, 2012 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the company uses the double-declining-balance depreciation method, what is the depreciation expense for 2012?
A)$50,000
B)$55,000
C)$100,000
D)$110,000
Q3) Explain derecognition of property, plant or equipment.
Q4) Explain the accounting purpose of "depreciation." Does depreciation represent the decline in value of an asset?
Q5) Explain how non-monetary transactions are accounted for.
Page 10
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Chapter 9: Intangible Assets, Goodwill, Mineral Resources, and
Government Grants
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81 Flashcards
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Sample Questions
Q1) Which criteria under IAS 38 would be met if the "project has a dedicated group of qualified staff"?
A)Technical feasibility.
B)Marketability of usefulness.
C)Resource adequacy.
D)Ability to use or sell.
Q2) Explain the difference in recognition of externally acquired intangibles versus internally developed intangibles.
Q3) Which statement is correct about indefinite lived intangible assets?
A)This is an infinite lived asset.
B)The asset is expected to continue providing economic benefits for the foreseeable future.
C)Management does not know how long the asset is expected to provide economic benefits.
D)The asset has fixed and determinable cash flows.
Q4) Explain the difference between indefinite lived and finite lived intangible assets.
Q5) Why is it important to understand the difference between research costs and development costs?
11
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Chapter 10: Applications of Fair Value to Non-Current Assets
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120 Flashcards
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Sample Questions
Q1) Which of the following is correct with respect to "investment properties"?
A)These are land or buildings used for production or administrative purposes of the business.
B)These are land, buildings or machinery used for production or administrative purposes of the business.
C)These are land or buildings used for rental income purposes of the business.
D)These are land, buildings or machinery used for rental income purposes of the business.
Q2) Explain the accounting for assets related to the agricultural industry.
Q3) Which of the following is correct with respect to the "fair value model"?
A)A model that recognizes changes in value of the asset in the statement of changes in equity.
B)A model that recognizes changes in value of the asset in the revaluation surplus account.
C)A model that recognizes changes in value of the asset in other comprehensive income.
D)A model that recognizes changes in value of the asset in profit or loss.
Q4) Explain why non-current assets held for sale are valued at fair value less costs to sell rather than at their value in use.
Page 12
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