4 MARKS QUESTIONS

Module 1

1. What are the components of financial statements?

2. What are the components of Other Comprehensive Income?
3. What is IFRS Board? Write any one objective of the Board.
4. What is the difference between Rights Issue and Bonus Issue?

Module 2

5. Define PPE under IFRS 16.

6. Define Depreciation as per IFRS 16.
7. Differentiate Warranty from Guarantee?
8. What is the meaning of EPS and Diluted EPS?

Module 3

9. Define a Government Grant?

10. Define Investment in Property as IAS 40.
11. Write on Cash Generating Unit.
12. Define a discontinued operation.
Module 4

13. Define Lease as per IFRS 16.

14. What is meant by sale and Lease back under IFRS 16.
15. What is the meaning of financial asset as per IAS 32?
16. What is the meaning of financial Liability as per IAS 32?
17. Define Deferred Tax Asset and Liability.
Module 5

18. Distinguish between goodwill and other intangible

19. Define an impairment loss with example.
20. What is meant by Bio Logical Asset?

10 MARKS QUESTIONS
Module 1
1. What are the fundamental qualitative characteristics of financial statements?
2. Write the Proforma of Statement of Financial Position (SOFP).
3. Write the Proforma of Statement of Changes in Equity.
4. Name the items which must be shown in the statement of profit or loss and other
comprehensive income.
5. On 1 April 20X8 the fair value of Xu's property was $100,000 with a remaining
life of 20 years. Xu’s policy is to revalue its property at each year end. At 31
March 20X9 the property was valued at $86,000. The balance on the revaluation
surplus at 1 April 20X8 was $20,000 which relates entirely to the property.
Xu does not make a transfer to realised profit in respect of excess depreciation.
Required:
1 Prepare extracts of Xu's financial statements for the year ended 31 March 20X9
reflecting the above information.
2 State how the accounting would be different if the opening revaluation surplus did
not exist.

Module 2

6. Explain the qualitative characteristics of financial statements.

7. Write a note on Government Grants both revenue and capital. An entity revalued its
land and buildings at the start of the year to $10 million ($4 million for the land).
The property cost $5 million ($1 million for the land) ten years prior to the
revaluation. The total expected useful life of 50 years is unchanged. The entity's
policy is to make an annual transfer of realised amounts to retained earnings.
Show the effects of the above on the financial statements for the year.

Module 3

8. Give the accounting treatment for Borrowing Cost and Investment in Property.
9. Write short notes on reversal of Impairment loss.
10. An entity opens a new factory and receives a government grant of $15,000 in
respect of capital equipment costing $100,000. It depreciates all plant and
machinery at 20% pa straight-line.
Show the statement of profit or loss and statement of financial position extracts in
respect of the grant in the first year under both methods.

Module 4

11. What are the five steps in process of recognition of Revenue? Explain them.
12. Define and account for non-current assets held for sale and discontinued operations?
Module 5
13. Explain in detail the terms gearing and Overtrading.
 14. Riyad enters into an agreement to lease an asset. The terms of the lease are as
follows.
1 Primary period is for four years from 1 January 20X2 with a rental of $2,000 pa
payable on 31 December each year.
2 The present value of the lease payments is $5,710
3 The interest rate implicit in the lease is 15%.
What figures will be shown in the financial statements for the year ended 31
December 20X2?
15 MARKS QUESTIONS
Module 1

1. Explain in detail the following (a) Accrual basis of Accounting (b) consistency of
presentation (c) Materiality (d) Comparative information (e) Offsetting.
2. Explain in detail various measurement bases used in preparation of financial
statements.
Module 2
3. Explain and list the line item requirements for the Statement of Profit and Loss and
Other Comprehensive Income (SOPL & OCI).
4. Explain in detail the treatment of Intangible assets including Goodwill and R & D
Expenditure.
5. 11. Cost of investment
The statements of financial position of P and S as at 30 June 20X8 are given below:
P S
$ $
Property, plant & equipment 15,000 9,500
Investments 5,000
Current assets 7,500 5,000
–––––– ––––––
27,500 14,500
–––––– ––––––
Share capital $1 6,000 5,000
Share premium 4,000
Retained earnings 12,500 7,200
–––––– ––––––
22,500 12,200
Non-current liabilities 1,000 500
Current liabilities 4,000 1,800
–––––– ––––––
27,500 14,500
–––––– ––––––
P acquired 60% of S on 1 July 20X7 when the retained earnings of S were $5,800. P
paid $5,000 in cash. P also issued 2 $1 shares for every 5 acquired in S and agreed to
pay a further $2,000 in 3 years' time. The market value of P’s shares at 1 July 20X7
was $1.80. P has only
recorded the cash paid in respect of the investment in S. Current interest rates are 6%.
 The P group uses the fair value method to value the non-controlling interest. At the
date of acquisition the fair value of the non-controlling interest was $5,750.
Required:Prepare the consolidated statement of financial position of P group as at 30
June 20X8.

Module 3
6. Discuss in detail the Impairment of Assets and its reversal.

7. Explain in detail the treatment of Foreign Currency transactions in Initial Treatment,

Settled Transactions and Unsettled Transactions.
Module 4
8. Explain any five Profitability and Liquidity and working capital ratios.

9. Compare and differentiate the Cash flow statement from a profit and loss statement.

10. Write a report on the following ratios for two years of a company.

20X4 20X5
Revenue 1,159,850 1,391,820 +20%
Gross profit 406,400 340,995 – 16.1%
Operating profit 235,450 179,545 – 23.7%
Operating profit 235,450/1,159,850 =20.3% 179,545/1,391,820=12.9%
ROCE 235,450/490,520=48.0% 179,545/607,765=29.5%
Asset turnover 1,159,850/490,520=2.36 1,391,820/607,765=2.29
Inventory days 88,760 × 365/753,480=43 days 109,400 × 365/1,050,825=38
days
Receivables days 206,550 × 365/1,159,850=65 days 419,455 × 365/1,391,820=110
days
Payables days 179,590 × 365/753,450=87 days 295,480 × 365/1,050,825=102
days
Current ratio 390,710/241,590=1.62 528,855/430,680=1.23
Gearing 83,100/490,520=16.9% 61,600/607,765=10.1%

Module 5
11. Explain the various workings for Consolidated Statement of Financial Position
(SOFP).
12. The statements of profit or loss for Paddle and Skip for the year ended 31 August 20X4
are shown below. Paddle acquired 75% of the ordinary share capital of Skip several years
ago.
Paddle Skip
$000 $000
Revenue 2,400 800
Cost of sales and expenses (2,160) (720)
–––––– ––––––
Trading profit 240 80
Investment income:
Dividend received from Skip 3
 –––––– ––––––
Profit before tax 243 80
Income tax expense (115) (40)
–––––– ––––––
Profit for the year 128 40
–––––– ––––––
Prepare Paddle’s consolidated statement of profit or loss for the year ended 31 August
20X4.

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