Question 1

'Comprehensive income' refers to:

Accepted Answer

The answer of 'Comprehensive income' refers to:
...

Question 2

Under AASB 101 additional line items,headings and subtotals:

Accepted Answer

Under AASB 101, additional line items, headings, and subtotals shall be presented on the face of the statement when such presentation is relevant to an understanding of the entity's financial performance. This means that when certain items or information are important for users to understand the financial performance, they should be included in the statement. However, unnecessary information that may confuse the user should be avoided.

Question 3

Traditional financial accounting calculations of profit ignore the cost of externalities.One reason for this is:

Accepted Answer

Traditional financial accounting only considers the impacts on assets that are controlled by the entity. Externalities such as negative impacts on environmental resources (e.g. air and oceans) are not considered as impacts on the assets of the entity because they are not under the entity's direct control or ownership.

Question 4

Profit is:

Accepted Answer

Profit can be directly affected by the accounting policy choices implemented by management, such as choosing different methods of depreciation or inventory valuation. This can impact the reported profit of the firm and make it difficult to compare profits across different companies. Therefore, profit is not a completely reliable or comparable measure of a firm's financial performance.

Question 5

The notes to the accounts that relate to income and expense should include:

Accepted Answer

The notes to the accounts that relate to income and expense should include a variety of information that incorporates the disclosures required in all standards related to income and expenses. This includes information on the nature and amount of significant items of income and expense, the circumstances that give rise to gains and losses, and any restrictions on the distribution of income or the repayment of capital. It is not limited to only commentary on issues covered by AASB 101 or items that are material enough to affect the profit or loss figure on the face of the statement.

Question 6

Government departments are now required to report in accordance with AAS 29 'Financial reporting by government departments'.Opponents of this requirement suggest that:

Accepted Answer

Opponents of the requirement argue that focusing on financial reporting can distract managers from their primary goals of providing social services. This suggests that they believe that the reporting requirement may take away from time and resources that could be devoted to providing those services.

Question 7

AASB 118 'Revenue' requires a number of disclosures,including information about:

Accepted Answer

AASB 118 requires all of the given disclosures, including information on rents, interest, royalties, and dividends, accounting policies for recognizing revenue, and methods for determining the stage of completion of service contracts.

Question 8

Examples of classification of expenses by their nature are:

Accepted Answer

Classifying expenses by their nature means grouping them based on what they are used for or what they represent. Employee expenses are related to labor costs, while depreciation expenses are related to the decline in value of a company's assets over time. Therefore, option D is the most appropriate classification of expenses by their nature. Option A is more related to the function of expenses, option B is mostly related to the different types of expenses, option C is related to the source of financing and distribution costs, and none of the given options is also incorrect.

Question 9

Estimations are frequently made in the income statement in relation to items such as bad debts,inventory obsolescence,an asset's useful life,and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the income statement is to:

Accepted Answer

The answer of Estimations are frequently made in the income...

Question 10

An entity is required in AASB 101 to produce:

Accepted Answer

AASB 101 requires entities to produce all of the listed financial statements: a statement of changes in equity, a balance sheet, an income statement, and a statement of comprehensive income.

Question 11

The statement of changes in equity is required.

Accepted Answer

The statement of changes in equity provides a reconciliation of opening and closing equity, details the various equity accounts impacted by the period's total comprehensive income, and also shows any items of income and expense for the period that are recognised directly in equity as required by other AASB standards. Therefore, option E is the best choice. The other options (A, B, and C) are not accurate explanations for why the statement of changes in equity is required.

Question 12

Where a change in accounting estimates occurs,the following should be disclosed.

Accepted Answer

When a change in accounting estimates occurs, it is required to disclose if the effect on future periods cannot be estimated due to impracticability.

Question 13

Different measurement models affect the determination of income and expenses.The different measurement models include:

Accepted Answer

Historical cost is the original cost of the asset or liability, while market value is the value that the asset or liability would fetch on the market. Present value is the discounted cash flows that the asset or liability is expected to generate. Choosing these measurement models would give a comprehensive view of income and expenses.

Question 14

The choice of classification between nature and function of expenses from ordinary activities depends on:

Accepted Answer

The choice of classification between nature and function of expenses from ordinary activities should depend on the nature of the entity and historical and industry factors. This will help to ensure that the expenses are accurately categorized based on the unique characteristics and circumstances of the entity.

Question 15

Government departments are now required to report in accordance with AAS 29 'Financial reporting by government departments'.The broad effect of the requirements of this standard is to:

Accepted Answer

AAS 29 requires government departments to use accrual accounting instead of cash accounting, and to report on an accrual basis. This includes reporting on the full economic impact of transactions, rather than just the cash flow impact. There is also an emphasis on reporting on comprehensive income, which includes both operating revenue and expenses as well as non-operating items such as net gains or losses on non-financial assets. However, there is no requirement for profit to be emphasised, as government departments do not operate for profit.

Question 16

If it is found that an error had been made in a prior period.

Accepted Answer

AASB 108 requires that material errors are corrected via an adjustment to opening retained earnings. This means that the correction of the error is reflected in the opening balance of the earliest financial statement presented, rather than in the current period's income statement. This is because the error occurred in a prior period and should not affect the current period's financial statements. Non-material errors can be corrected in the current period's income statement.

Question 17

Extraordinary items will be included in the income statement:

Accepted Answer

Extraordinary items are no longer separately reported in the income statement under current accounting standards (e.g., IFRS and US GAAP). They are included in the ordinary income.

Question 18

A statement displaying components of profit or loss is referred to in AASB 101 as a(n):

Accepted Answer

AASB 101 uses the term "income statement" to refer to the statement displaying components of profit or loss.

Question 19

Profit is not defined in the AASB Framework:

Accepted Answer

The answer of Profit is not defined in the AASB...

Question 20

The effect of a revision of an accounting estimate must be recognised in profit and loss in which reporting periods?

Accepted Answer

Revisions of accounting estimates are recognized in the period of the change and future periods if the change affects both. Prior periods are not adjusted.

Quiz 17: The Statement of Comprehensive Income and Statement of Changes in E