Question 1

According to the Conceptual Framework,an entity is not permitted to change its accounting policies.

Accepted Answer

According to the Conceptual Framework, an entity may change its accounting policies if it is required by a new accounting standard or if the new policy is expected to result in better information being provided to users of the financial statements. However, if an entity changes its accounting policies, it must disclose the nature of and reason for the change, and the effect of the change on the financial statements.

Question 2

The Reserves accounts of a company are disclosed in the statement of financial position as liabilities.

Accepted Answer

Reserves are not liabilities, but rather they are part of the equity section of the statement of financial position.

Question 3

The statement of changes in equity shows the movement between the beginning and ending balance for the period for each equity account.

Accepted Answer

The statement of changes in equity shows the movement between the beginning and ending balance for the period for each equity account, which includes common stock, retained earnings, and additional paid-in capital.

Question 4

There are no separate measurement methods for equity.

Accepted Answer

Equity is a residual claim on the assets of a company after all debts have been paid. As such, there is no separate measurement method for equity. Instead, equity is calculated by subtracting the total liabilities of a company from its total assets.

Question 5

The statement of profit or loss and other comprehensive income shows both the company's income (revenues and gains)less expenses for the year,to determine the company's profit,to which is added other items of comprehensive income.

Accepted Answer

The statement of profit or loss and other comprehensive income shows the company's income less expenses to determine profit, and also includes other items of comprehensive income.

Question 6

In the absence of an Australian accounting standard specifically applying to a transaction,accounting policies must be selected on the basis that they provide relevant and reliable information to users of the financial report.

Accepted Answer

According to AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, in the absence of an Australian accounting standard specifically applying to a transaction, accounting policies must be selected based on their relevance and reliability in providing information to users of the financial report.

Question 7

Nominal or face value is the most common method used for measuring liabilities.

Accepted Answer

Nominal or face value is the amount stated on the face of a liability instrument, such as a bond or note. It is the most common method used for measuring liabilities since it represents the amount of resources that must be paid or transferred to settle the obligation.

Question 8

According to the Corporations Act,dividends can only be paid out of the profits earned by a company.

Accepted Answer

The Corporations Act allows dividends to be paid out of the company's profits or other sources, as long as the company's assets exceed its liabilities before the dividend is paid and the payment does not materially prejudice the company’s ability to pay its creditors.

Question 9

The statement of financial position must be presented to show assets less liabilities equals equity.

Accepted Answer

The answer of The statement of financial position must be...

Quiz 3: Company Operations