Question 1

The definition and recognition criteria for income and expenses are specified in the _________________ _________________ For a transaction to be recognised in the income statement the elements must satisfy both the definition and recognition criteria of an income or expense.

Accepted Answer

The answer of The definition and recognition criteria for income...

Question 2

The statement of comprehensive income reports the profit or loss and other
Comprehensive income.Which of the following is an example of other comprehensive income?

Accepted Answer

Other comprehensive income includes items that are not part of the company's normal business operations, such as unrealized gains or losses on investments or non-current asset revaluations taken directly to a revaluation surplus. Dividends, royalties, and sales are all part of the company's normal business operations and would be reported as part of the profit or loss in the statement of comprehensive income.

Question 3

If equity at the beginning of the accounting period was $120 000 and at the end of the period was $175 000,and drawings by the owner during the period were $30 000,how much profit was earned during the period?

Accepted Answer

The profit can be calculated by adding the drawings to the increase in equity: ($175,000 - $120,000) + $30,000 = $85,000.

Question 4

The accounting standard that prescribes disclosure of specific income and expense items requires the disclosure to be on the face of the income statement or in the _________ attached to the report.

Accepted Answer

The answer of The accounting standard that prescribes disclosure of...

Question 5

Income accrued is income recognised _________ the cash has been received.

Accepted Answer

The answer of Income accrued is income recognised _________ the...

Question 6

___________________ management refers to managers’ use of accounting discretion allowable under accounting policy choices and estimates to portray a desired level of profit in a particular reporting period.

Accepted Answer

The answer of ___________________ management refers to managers’ use of...

Question 7

Which of the following statements about gross profit is not true?

Accepted Answer

Gross profit is not equal to total income minus total expenses. Total income minus total expenses would give the entity's net profit or net loss. Gross profit only considers the revenue generated from sales and the direct costs associated with producing or acquiring that revenue.

Question 8

Which of the following could be found in a statement of changes in equity?

Accepted Answer

A statement of changes in equity includes all changes in equity, including contributions, dividends, share purchases, and non-owner changes like profits.

Question 9

If an item meets the definition of an expense,to be reported in the income statement,it must also meet the recognition criteria of being probable that the decrease in economic benefits has arisen and that the amount is able to be reliably _______________.

Accepted Answer

The answer of If an item meets the definition of...

Question 10

The order in which the income statement and balance sheet are normally completed is:

Accepted Answer

The income statement is prepared first to determine the net income or loss, which is then used in the equity section of the balance sheet.

Question 11

Post-tax profit is more important to a shareholder than pre-tax profit as:

Accepted Answer

Post-tax profit is important to shareholders because tax has to be paid before profits can be distributed as dividends. This means that post-tax profits are the actual profits available to shareholders for distribution.

Question 12

Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity,other than those relating to contributions from equity participants,is the Framework's definition of ____________________.

Accepted Answer

The answer of Increases in economic benefits during the accounting...

Question 13

If sales revenue is $300 000 and cost of sales is $250 000,the gross profit margin is:

Accepted Answer

The answer of If sales revenue is $300 000 and...

Question 14

Which of the following is not disclosed in the statement of comprehensive income?

Accepted Answer

Transactions with owners as owners are not disclosed in the statement of comprehensive income; they are typically disclosed in the statement of changes in equity.

Question 15

If owners' equity at the beginning of the accounting period was $60 000 and at the end of the period was $75 000,and drawings by the owner during the period were $20 000,how much profit was earned during the period?

Accepted Answer

The increase in owners' equity is $15,000 ($75,000 - $60,000). Since the owner also withdrew $20,000, the profit must have been $35,000 to account for both the increase in equity and the drawings.

Question 16

______________ _____________ _____________ _____________ (GAAP)are acceptable accounting practices which have become documented in the accounting standards.

Accepted Answer

The answer of ______________ _____________ _____________ _____________ (GAAP)are acceptable accounting...

Question 17

When the value of an asset is lower than its carrying amount,the asset is considered to be impaired and must be written down to its ______________ amount with the write-down being recognised as an impairment expense in the reporting period in which it occurs.

Accepted Answer

The answer of When the value of an asset is...

Question 18

An item is considered to be __________________ based on the size and/or nature of the item,and whether its non-disclosure could influence users' decision making.

Accepted Answer

The answer of An item is considered to be __________________...

Question 19

If sales = $45 000,purchases = $25 000,beginning inventory = $10 000 and ending inventory = $8000 gross profit is:

Accepted Answer

Gross profit = Sales - Purchases - Beginning inventory + Ending inventory= $45,000 - $25,000 - $10,000 + $8,000= $18,000

Question 20

The ___________ statement is prepared to calculate an entity's profit.

Accepted Answer

The answer of The ___________ statement is prepared to calculate...

Quiz 6: Income Statement and Statement of Changes in Equity

The definition and recognition criteria for income and expenses are specified in the _ _ For a transaction to be recognised in the income statement the elements must satisfy both the definition and recognition criteria of an income or expense.

The statement of comprehensive income reports the profit or loss and other Comprehensive income.Which of the following is an example of other comprehensive income?