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Accounting

Dr. Filemon C. Aguilar Memorial College of Las piass

BSA 101

CHAPTER 18

ACCOUNTING POLICY

1)Define an accounting policy.

2. What is a change in accounting policy?

QUESTION 3.

When is a change in accounting policy allowed?

 

QUESTION 4

What is the treatment of a change in accounting policy?

 

 

QUESTION 5

Explain retrospective application of a change in accounting policy.

 

QUESTION 6

Explain prospective application of a change in accounting policy.

 

QUESTION 7

What is a change in reporting entity?

 

 

QUESTION 8

How is the change in reporting entity reported?

QUESTION 9

Explain the selection and application of an accounting policy where there is an absence of an accounting standard.

QUESTION 10

What is the meaning of prior period errors?

QUESTION 11

What is the treatment of prior period errors?

Multiple choice (IFRS)

  1. Which is the first step within the hierarchy of guidance when selecting accounting policies?
    1. Apply a standard from IFRS if it specifically relates to the transaction.
    2. Apply the requirements in IFRS dealing with similar and related issue.
    3. Consider the applicability of the definitions, recognition criteria and measurement concepts in the Conceptual Framework.
    4. Consider the most recent pronouncements of other standard setting bodies.
  2. In the absence of an accounting standard that applies specifically to a transaction, what is the most authoritative source in developing and applying an accounting policy?
    1. The requirement and guidance in the standard or interpretation dealing with similar and related issue.
    2. The definition, recognition criteria and measurement of asset, liability, income and expense in the Conceptual Framework.
    3. Most recent pronouncement of other standard-setting body.
    4. Accounting literature and accepted industry practice.
  3. A change in accounting policy shall be made when
  1. Required by law.
  2. Required by an accounting standard or an interpretation of the standard.
  3. The change will result in more relevant or reliable information about the financial position, financial performance and cash flows of the entity.
    1. I and III only
    2. II and III only
    3. I and II only
    4. I, II and III
  1. Why is an entity permitted to change an accounting policy?
    1. The change would allow the entity to present a more favorable profit picture.
    2. The change would result in the financial statements providing more reliable and relevant information about financial position, financial performance and cash flows.
    3. The change is made by the internal auditor.
    4. The change is made by the CPA.
  2. A change in accounting policy requires what kind of adjustment to the financial statements?
    1. Current period adjustment
    2. Prospective adjustment
    3. Retrospective adjustment
    4. Current and prospective adjustment

 

  1. A change in accounting policy requires that the cumulative effect of the change for prior periods should be reported as an adjustment to
    1. Beginning retained earnings for the earliest period presented.
    2. Net income for the period in which the change occurred.
    3. Comprehensive income for the earliest period presented.
    4. Shareholders' equity for the period in which the change occurre
  2. Which of the following is accounted for as a change in accounting policy?
    1. A change in the estimated useful life of property, plant and equipment
    2. A change from cash basis to accrual basis of accounting
    3. A change from expensing immaterial expenditures to deferring and amortizing them when material
    4. A change in inventory valuation from FIFO to average method
  3. A change in accounting policy includes all of the following, except
    1. The initial adoption of an accounting policy to carry asset at revalued amount.
    2. The change from cost model to revaluation model in measuring property, plant and equipment.
    3. A change in the measurement basis.
    4. A change from one method of depreciation to a different method of depreciation.
  4. Which of the following should be treated as change in accounting policy?
    1. A change is made in the method of calculating the provision for doubtful accounts
    2. A change from cost model to fair value model in measuring investment property
    3. An entity engaging in construction contract for the first time needs on accounting policy to deal with this
    4. All of these qualify as change in accounting policy
  5. When it is difficult to distinguish between a change in accounting estimate and a change in accounting policy, the change is treated as
    1. Change in accounting estimate with appropriate disclosure
    2. Change in accounting policy
    3. Correction of an error
    4. Change in accounting estimate with no appropriate disclosure
  6. An entity that changed an accounting policy voluntarily should
    1. Inform shareholders prior to taking the decision.
    2. Account for the change retrospectively.
    3. Treat the effect of the change as a component of other comprehensive income.
    4. Treat the change prospectively and adjust the effect of the change in the current period and future periods
  7. Which statement best describes prospective application?
    1. Recognizing a change in accounting policy in the current and future periods affected by the change.
    2. Correcting the financial statements as if a prior period error had never occurred.
    3. Applying a new accounting policy to transactions occurring after the date at which the policy is changed.
    4. Applying a new accounting policy to transactions as if that policy had always been applie
  8. Which term best describes applying a new accounting policy to transactions as if that policy had always been applied?
    1. Retrospective application
    2. Retrospective restatement
    3. Prospective application
    4. Prospective restatement

 

  1. This means correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.
    1. Retrospective application
    2. Retrospective restatement
    3. Prospective application
    4. Prospective restatement
  2. All of the following should be treated as a change in accounting policy, except
    1. A new accounting policy of capitalizing development cost as a project has become eligible for capitalization for the first time.
    2. A new policy resulting from the requirement of a new IFRS.
    3. To provide more relevant information, items of property plant and equipment are now being measured at fair value, whereas they had previously been measured at cost.
    4. All of these qualify as change in accounting policy.

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