Intermediate Accounting Trivia Exam Quiz!

The value added statement is not a component of financial statements in line with IAS 1. IAS 1 specifies that the components of financial statements include the statement of financial position, statement of comprehensive income, and statement of cash flows. The value added statement is not a required component under IAS 1 and is not commonly included in financial statements prepared in accordance with IAS 1.

Precision is not a financial assertion to which financial controls must be linked. Financial controls are measures put in place to ensure the accuracy, reliability, and integrity of financial information. The assertions to which financial controls must be linked include valuation (ensuring assets and liabilities are accurately valued), existence (ensuring assets and liabilities actually exist), and completeness (ensuring all relevant financial information is included). Precision, on the other hand, refers to the level of detail or accuracy in financial reporting, but it is not a specific assertion that financial controls are directly linked to.

The chart of accounts is used to set up the general ledger. It is a list of all the accounts that a company uses to record its financial transactions. The chart of accounts organizes these accounts in a systematic manner, making it easier to track and analyze financial information. It typically includes categories such as assets, liabilities, expenses, and equities. However, in this case, the correct answer is specifically the chart of accounts, as it is the tool used to establish the structure and organization of the general ledger.

Precision is not a financial assertion to which financial controls must be linked. Financial controls are designed to ensure the accuracy and reliability of financial information, and they are typically linked to assertions such as valuation, existence, and completeness. Precision, on the other hand, refers to the level of detail or accuracy in reporting financial information, and while it is important, it is not considered a separate financial assertion that requires specific controls.

Property, plant and equipment are not examples of current assets. Current assets are assets that are expected to be converted into cash or used up within one year or the normal operating cycle of a business. Property, plant, and equipment are long-term assets that are held for use in the production or supply of goods and services, rather than for sale or conversion into cash.

Depreciation expense feeds into the Statement of Comprehensive Income because it represents the portion of an asset's cost that is allocated as an expense over its useful life. This expense is recognized in the income statement and reduces the net income of the company. It is important to include depreciation expense in the Statement of Comprehensive Income to accurately reflect the company's financial performance and to provide a comprehensive view of its income and expenses.

The parameters for the tax deductibility test for CIT purposes include the requirements that the expenses be incurred wholly and exclusively for the purpose of the trade or business. Additionally, the expenses must be reasonable. However, there is no requirement that the expenses be incurred fairly. Therefore, the correct answer is "Fairly."

The correct answer is "General Ledger." The General Ledger is a collection of all individual ledger accounts in a company's accounting system. It serves as the central repository for recording and summarizing all financial transactions. By grouping all the individual ledger accounts together, the General Ledger provides a comprehensive overview of the company's financial position and performance.

Sales & marketing department is not classified by nature because it is a functional department within an organization, rather than a specific type of expense or financial transaction. Employee expenses, depreciation expense, and impairment expense are all examples of specific types of expenses that can be classified according to their nature.

Freehold land has an infinite useful life because it is a type of property ownership that grants the owner complete and indefinite ownership rights over the land. Unlike other assets such as motor vehicles, oil wells, buildings, and leasehold land, freehold land does not depreciate or wear out over time. It can be used for various purposes and can be passed down through generations, making it a long-lasting and valuable asset.

Depreciation expense is the correct answer because it represents the portion of an asset's cost that is allocated as an expense over its useful life. This expense is included in the Statement of Comprehensive Income to reflect the decrease in the value of the fixed asset over time. Fixed assets, asset under construction, and accumulated depreciation are all related to the fixed asset, but they do not directly contribute to the Statement of Comprehensive Income.

The given statement is not true because even if the trial balance balances, it does not guarantee that the accounts are correct. The trial balance only checks for the arithmetical accuracy of the postings, ensuring that the total debits and credits are equal. However, it does not verify the accuracy of individual transactions or account balances. Errors such as incorrect entries, omissions, or compensating errors can still exist even if the trial balance balances. Therefore, the statement that "When the trial balance balances, the accounts must be correct" is incorrect.

Errors of omission are errors where transactions or amounts are completely left out or not recorded in the books of accounts. These errors cannot be detected by the trial balance because they do not affect the equality of debits and credits. The trial balance only checks for mathematical accuracy and balance between the total debits and total credits. Therefore, errors of omission will not be identified by the trial balance and may lead to inaccurate financial statements.

The income of a non-resident company will be taxable in Nigeria based on factors such as permanent establishment/fixed base, agency relationship, and turnkey projects. However, the location of the head office of the non-resident entity is not a determining factor for taxation.

NNPC (NAPIMS) is saddled with this responsibility

The statement is false because the staff who prepares an expense report should record the expenses in the general ledger, not the purchase ledger. The purchase ledger is specifically used to record purchases from suppliers, while the general ledger is used to record all financial transactions, including expenses. Therefore, recording the expenses in the purchase ledger would not be consistent with standard accounting practices.

Error of principle refers to the situation where an item is mistakenly recorded in the wrong class of account, such as recording a capital transaction as a revenue transaction. This type of error violates the fundamental principles and rules of accounting, which require accurate classification and presentation of financial transactions. By entering an item in the wrong class of account, the financial statements will be misstated and may lead to incorrect analysis and decision-making.

Using pre-numbered acquisition forms can help mitigate the risk of unapproved purchase of assets by providing a systematic and controlled process for acquiring assets. These forms ensure that each acquisition is documented and accounted for, making it easier to track and verify the approval and authorization of purchases. By using pre-numbered forms, any unauthorized or unapproved purchases can be easily identified and investigated, allowing for timely corrective actions to be taken. This control measure adds an extra layer of security and accountability to the asset acquisition process.

The given options are all types of licenses related to mineral rights in the context of oil. Therefore, none of the options is not a type of Mineral rights License.

An impairment loss is recognized on trade receivable balances when the carrying amount (the amount recorded on the company's books) is more than the recoverable amount (the amount expected to be collected from the customer). This means that the company does not expect to fully collect the amount owed by the customer, and therefore, an impairment loss is recognized to reflect the decrease in the value of the receivable.

Oil Mining lease is type of License not an acquisition arrangement

A deferred tax asset arises when there are deductible temporary differences at the end of the current year. Deductible temporary differences occur when the tax base of an asset or liability is different from its carrying amount for accounting purposes. This creates a future tax benefit that can be used to offset future taxable income, resulting in a lower tax liability. Therefore, a deferred tax asset represents a potential tax saving in the future.

A value added statement is a statement that shows how the wealth created is distributed among various interest groups. It provides a breakdown of the value added by a company and how it is distributed to employees, shareholders, and other stakeholders. This statement helps in understanding the economic impact of a company and how it benefits different groups involved in its operations.

The Department of Petroleum Resources (DPR) is the correct answer because it is the authority responsible for regulating the oil service sector in Nigeria. The DPR is a department under the Nigerian Ministry of Petroleum Resources and its main functions include ensuring compliance with petroleum laws and regulations, monitoring and enforcing health, safety and environmental standards, and promoting investment in the oil and gas industry. The Nigerian National Petroleum Corporation (NNPC) is the state oil corporation responsible for exploration, production, and marketing of petroleum and petroleum products. The Federal Ministry of Environment (FMEnv) is responsible for environmental protection and the Petroleum Products Pricing Regulatory Agency (PPPRA) is responsible for regulating the prices of petroleum products.

A deferred tax liability arises when there are taxable temporary differences at the current year-end. Taxable temporary differences occur when the tax base of an asset or liability exceeds its carrying amount for tax purposes. This creates a future tax obligation that will be settled in a future period. The deferred tax liability reflects the amount of taxes that will be payable in the future when these temporary differences reverse and result in taxable income.

Pay-As-You-Earn tax should be remitted on or before the 10th day of the following month. This means that the tax payment should be made within the first 10 days of the month that follows the month in which the income was earned. This ensures timely payment and compliance with tax regulations.

It depends on the accounting policy chosen by the Company. It is expensed and capitalized under the successful effort method and Full cost method respectively.

Incomes of hospitals that are officially registered are exempt from CIT. This means that they do not need to pay corporate income tax on their earnings. On the other hand, incomes of companies formed for the promotion of sports, cooperative societies, and pioneer companies in the 3rd year of operations are all exempt from CIT. Therefore, the correct answer is "A hospital officially registered".

Temporary differences may arise from goodwill with no deductible tax amortization. This means that the company has recognized goodwill on its financial statements, but for tax purposes, there is no deduction allowed for the amortization of this goodwill. As a result, the taxable profit will be higher than the accounting profit, leading to a temporary difference.

Under the Value Added Tax (VAT) Act, non-oil exports are considered zero-rated goods. This means that these exports are not subject to VAT and do not incur any additional tax burden. The government aims to promote non-oil exports by exempting them from VAT, which helps to make these goods more competitive in the international market. By providing this tax incentive, the government encourages businesses to engage in non-oil exports, contributing to the growth of the economy and increasing foreign exchange earnings.

The question asks for an exception among the given categories of information processing objectives. The categories mentioned are validity, completeness, presentation and disclosure, and restricted access. The correct answer is "Presentation and Disclosure" because it does not fall under the category of information processing objectives. Validity refers to the accuracy and reliability of the information, completeness refers to the inclusion of all necessary data, and restricted access refers to controlling who can access the information. However, presentation and disclosure are not objectives of information processing but rather methods or actions taken to communicate the information effectively.

The correct answer is the relevant State Board. Withholding tax is a tax deducted at source from payments made to individuals and partnerships. It is the responsibility of the relevant State Board to collect and administer this tax. They ensure that the correct amount of tax is withheld and remitted to the appropriate authorities.

A newspaper subscription will create a future deductible amount because it is a prepaid expense that will be consumed over time. The cost of the subscription is paid in advance but the benefit is received over a period of time. Therefore, a portion of the prepaid expense can be deducted as an expense in future accounting periods.

Prepaid rent, prepaid insurance, and straight line depreciation of an asset will create a future taxable amount. Prepaid rent and prepaid insurance are considered as deferred expenses, meaning they are paid in advance but their benefits are realized in the future. When these expenses are deducted for tax purposes in the year they are paid, they create a future taxable amount when the benefits are actually realized. Similarly, straight line depreciation of an asset is deducted over its useful life, creating a future taxable amount as the deduction is spread out over multiple years.

The applicable standard is IFRS 6 on ‘Exploration for and Evaluation of Mineral resources.