MGT401-Financial Accounting-II

IAS / Description
IAS 1 / Presentation of Financial Statements
IAS 2 / Inventories
IAS 7 / Cashflow Statement
IAS 8 / Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 / Events after Balance Sheet Date
IAS 11 / Construction Contracts
IAS 12 / Income Taxes
IAS 16 / Property, Plant and Equipment
IAS 17 / Leases
IAS 18 / Revenues
IAS 19 / Employee Benefits
IAS 20 / Accounting for Government Grants and Disclosure of Government Assistance
IAS 21 / The Effects of Changes in Foreign Exchange Rates
IAS 23 / Borrowing Costs
IAS 24 / Related Parties
IAS 27 / Consolidated and Separate Financial Statements
IAS 28 / Investments in Associates
IAS 31 / Interests in Joint Ventures
IAS 32 / Financial Instruments Disclosure and Presentation
IAS 33 / Earnings per Share
IAS 36 / Impairment of Assets
IAS 37 / Provisions, Contingent Assets, and Contingent Liabilities
IAS 38 / Intangible Assets
IAS 39 / Financial Instruments Recognition and Measurement
IAS 40 / Investment Property
IAS 41 / Agriculture

Q.Difference between Administrative and Selling Cost?

A.Administrative costs are the costs incurred on administration and management of business

  1. Salaries of administration staff, management etc.
  2. Depreciation
  3. Spending on office administration and maintenance

Selling or distribution costs are the costs that can be directly attributed to the sale of the product or service e.g.

  1. Salaries of sales and marketing people
  2. Sales and Distribution costs
  3. Advertisement costs

Q.Pass entries of Repurchase of shares (both Premium and Discount)

A.Repurchase on Premium (example: A Rs. 10 share repurchased for Rs. 12.)

Dr. / Paid up Capital / 10
Dr. / Share Premium Account / 2
Cr. / Cash / 12
Dr. / Accumulated P&L Account / 10
Cr. / Capital Repurchase Reserve Account / 10

Repurchase on Discount (example: A Rs. 10 share repurchased for Rs. 8.)

Dr. / Paid up Capital / 10
Cr. / Capital Repurchase Reserve Account / 2
Cr. / Cash / 8
Dr. / Accumulated P&L Account / 8
Cr. / Capital Repurchase Reserve Account / 8

Q.Define Revenue

A.Revenue is defined as the gross inflow of resources embodying economic benefits in the normal course of business operations of the entity during a period when those inflows result in the increase in equity, other than contributions from the equity participants.

Q.Recognition of Finance Lease?

A.Finance lease is recognized in the books of Lessee because in substance, the asset is owned by the Lessee. The finance lease is recognized as asset and liability in books of Lessee at the inception of the lease. The recognition amount is lower of the Present value of minimum lease payments, and fair value.

Q.Adjusting event vs Non-adjusting event.

A.Both of these events are types of events that occur after the balance sheet date but before the issuance of the balance sheet.

An adjusting event is the one that is indicative of the conditions that existed on the date of balance sheet. Balance sheet must be corrected to include effects of such an event.

A non-adjusting event indicates conditions only that existed after the balance sheet date. For these events, balance sheet is not modified, but may be identified in nots to the accounts if material.

Q.Format of Statement of Changes in Equity

A.

Share Capital / Share Premium / General Reserve / Unappropriated Profit / Total
Balance as of previous year,
Changes this year
Balance at the end of this year

Q.According to IAS, which items shall be disclosed on the face of the income statement as allocations to profit or loss for the period?

A.

  • Profit and loss attributable to minority interest
  • Profit and loss attributable to equity holders of the parent

Q.What are the major classifications of expenses in which expenses have been distributed for presentation in Income statement?

A.Following are the classes,

  • Costs of Goods sold
  • Distribution expenses
  • Administrative expenses
  • Operating expenses
  • Finance costs

Q.List down the items that should be included in the cashflow from financing activities?

A.Following items are included

  • Cash received from owners
  • Cash payment to owners
  • Cash payment for long term borrowings
  • Cash receipts for such borrowings / loans

Q.What is meant by cashflow from investing activities? Give examples.

A.Cashflows arising from fixed and long term assets of the company.

  • Sale of a fixed asset
  • Purchase of a new fixed asset
  • Cash receipts and payments from acquisition / disposal of long term assets.