Preparation and Presentation of Financial Statements MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Preparation and Presentation of Financial Statements, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Preparation and Presentation of Financial Statements MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Preparation and Presentation of Financial Statements mcq questions that explore various aspects of Preparation and Presentation of Financial Statements problems. Each MCQ is crafted to challenge your understanding of Preparation and Presentation of Financial Statements principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Preparation and Presentation of Financial Statements MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

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Preparation and Presentation of Financial Statements MCQs | Page 7 of 11

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Q61.
How should revenue from operations be disclosed for a finance company in the notes to the financial statements?

a.

Only as a total amount without any further classification.

b.

Separately as interest and other financial services.

c.

Only as interest.

d.

Separately as interest and dividend.

Discuss
Answer: (b).Separately as interest and other financial services. Explanation:For a finance company, revenue from operations should be disclosed separately in the notes as interest and other financial services.
Q62.
How should finance costs be disclosed in the statement of profit and loss?

a.

Only as interest expense.

b.

Only as other borrowing costs.

c.

Separately as interest expense, other borrowing costs, and applicable net gain/loss on foreign currency transaction and translation.

d.

Only as applicable net gain/loss on foreign currency transaction and translation.

Discuss
Answer: (c).Separately as interest expense, other borrowing costs, and applicable net gain/loss on foreign currency transaction and translation. Explanation:Finance costs should be disclosed in the statement of profit and loss separately as interest expense, other borrowing costs, and applicable net gain/loss on foreign currency transaction and translation.
Q63.
How is other income classified in the statement of profit and loss?

a.

Only as interest income.

b.

Separately as interest income, dividend income, net gain/loss on sale of investments, and other non-operating income (net of expenses directly attributable to such income).

c.

Only as interest income and dividend income.

d.

Separately as dividend income and net gain/loss on sale of investments.

Discuss
Answer: (b).Separately as interest income, dividend income, net gain/loss on sale of investments, and other non-operating income (net of expenses directly attributable to such income). Explanation:Other income is classified in the statement of profit and loss separately as interest income, dividend income, net gain/loss on sale of investments, and other non-operating income (net of expenses directly attributable to such income).
Q64.
How should net gain or loss on foreign currency transaction and translation be treated in the financial statements?

a.

As part of finance costs.

b.

As part of other income.

c.

As part of exceptional items.

d.

Excluded from consideration.

Discuss
Answer: (b).As part of other income. Explanation:Net gain or loss on foreign currency transaction and translation is treated as part of other income.
Q65.
What should be disclosed regarding payments to auditors in the financial statements?

a.

Only the total amount paid to auditors.

b.

Only the total amount paid for audit.

c.

The total amount paid for audit, taxation matters, company matters, management services, other services, and reimbursement of expenses should be disclosed separately.

d.

Only the total amount paid for audit and taxation matters.

Discuss
Answer: (c).The total amount paid for audit, taxation matters, company matters, management services, other services, and reimbursement of expenses should be disclosed separately. Explanation:Payments to auditors should be disclosed in the financial statements separately for audit, taxation matters, company matters, management services, other services, and reimbursement of expenses.
Q66.
How should details of items of exceptional and extraordinary nature be disclosed?

a.

Only as a total amount without any further classification.

b.

Separately for prior period items, raw materials, goods purchased, gross income from services, and work-in-progress under broad heads.

c.

Only for prior period items.

d.

Separately for raw materials, goods purchased, and work-in-progress under broad heads.

Discuss
Answer: (b).Separately for prior period items, raw materials, goods purchased, gross income from services, and work-in-progress under broad heads. Explanation:Details of items of exceptional and extraordinary nature should be disclosed separately for prior period items, raw materials, goods purchased, gross income from services, and work-in-progress under broad heads.
Q67.
How are amounts set aside or proposed to be set aside to reserves treated in the financial statements?

a.

Shown as part of gross income.

b.

Shown as part of other income.

c.

Shown as part of exceptional items.

d.

Shown separately, excluding provisions made to meet specific liabilities, contingencies, or commitments.

Discuss
Answer: (d).Shown separately, excluding provisions made to meet specific liabilities, contingencies, or commitments. Explanation:Amounts set aside or proposed to be set aside to reserves are shown separately in the financial statements, excluding provisions made to meet specific liabilities, contingencies, or commitments.
Q68.
How should expenditure incurred on each of the listed items be presented in the profit and loss account?

a.

As a single total amount without any further classification.

b.

Separately for each item, including consumption of stores and spare parts, power & fuel, rent, repairs to building, repairs to machinery, insurance, rates and taxes (excluding taxes on income), and miscellaneous expense.

c.

Only for major items, excluding minor expenses.

d.

Only as a total amount for all items combined.

Discuss
Answer: (b).Separately for each item, including consumption of stores and spare parts, power & fuel, rent, repairs to building, repairs to machinery, insurance, rates and taxes (excluding taxes on income), and miscellaneous expense. Explanation:Expenditure incurred on each of the listed items should be presented separately in the profit and loss account, including consumption of stores and spare parts, power & fuel, rent, repairs to building, repairs to machinery, insurance, rates and taxes (excluding taxes on income), and miscellaneous expense.
Q69.
How should dividends from subsidiary companies be treated in the profit and loss account?

a.

Disclosed as part of gross income.

b.

Disclosed as part of other income.

c.

Disclosed as part of miscellaneous expense.

d.

Disclosed as part of exceptional items.

Discuss
Answer: (b).Disclosed as part of other income. Explanation:Dividends from subsidiary companies should be disclosed as part of other income in the profit and loss account.
Q70.
What information should be provided in the profit and loss account by way of a note regarding expenditure in foreign currency?

a.

Only the total amount spent without any further details.

b.

Separately for royalty, know-how, professional and consultation fees, interest, and other matters.

c.

Only for major expenses, excluding minor ones.

d.

Only for interest and dividends.

Discuss
Answer: (b).Separately for royalty, know-how, professional and consultation fees, interest, and other matters. Explanation:In the profit and loss account, expenditure in foreign currency should be disclosed separately by way of a note for royalty, know-how, professional and consultation fees, interest, and other matters.
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