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Myanmar DA Part I Module II study materials
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Myanmar DA Part I Module II practice questions

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Question 1Financial Accounting

A business purchases office equipment for MMK 4,000,000 on credit. What is the immediate effect on the accounting equation?

  1. Assets decrease by MMK 4,000,000 and liabilities decrease by MMK 4,000,000.
  2. Assets increase by MMK 4,000,000 and liabilities decrease by MMK 4,000,000.
  3. Assets increase by MMK 4,000,000 and liabilities increase by MMK 4,000,000. Correct answer.
  4. Assets increase by MMK 4,000,000 and equity increases by MMK 4,000,000.

Explanation

Buying equipment on credit increases the asset office equipment and creates a liability, accounts payable, for the same amount. Equity is unaffected at the date of purchase because no income or expense has arisen. The accounting equation therefore remains in balance with equal increases on both sides.

Question 2Financial Accounting

Which statement is prepared to test the arithmetical accuracy of the double-entry records before the financial statements are drafted?

  1. Bank reconciliation statement
  2. Trial balance Correct answer.
  3. Statement of financial position
  4. Statement of cash flows

Explanation

A trial balance lists ledger balances and tests whether total debits equal total credits. It is extracted before the statement of financial position and statement of profit or loss are completed, so it helps detect arithmetical and posting errors.

Question 3Financial Accounting

A firm has a 6% MMK 20,000,000 loan outstanding for the full year, but interest for the last two months has not been paid or recorded. What adjusting entry is required at year-end?

  1. Dr Interest expense MMK 1,200,000; Cr Cash MMK 1,200,000
  2. Dr Interest expense MMK 200,000; Cr Interest payable MMK 200,000 Correct answer.
  3. Dr Interest payable MMK 200,000; Cr Interest expense MMK 200,000
  4. Dr Interest expense MMK 100,000; Cr Interest payable MMK 100,000

Explanation

Interest for two months is MMK 20,000,000 × 6% × 2/12 = MMK 200,000. The accrual principle requires the unpaid expense to be recorded in the current period with a corresponding liability. The entry is debit interest expense and credit interest payable.

Question 4Financial Accounting

A machine costing MMK 12,000,000 has an estimated residual value of MMK 2,000,000 and a useful life of 5 years. Under straight-line depreciation, what is the annual depreciation charge?

  1. MMK 2,000,000 Correct answer.
  2. MMK 2,400,000
  3. MMK 3,000,000
  4. MMK 1,600,000

Explanation

Straight-line depreciation is (cost − residual value) ÷ useful life. Here (MMK 12,000,000 − MMK 2,000,000) ÷ 5 = MMK 2,000,000 per year. Residual value is deducted because it is the estimated amount recoverable at the end of the asset's life.

Question 5Financial Accounting

Under IAS 2, inventory is measured at the lower of cost and net realisable value. An item costing MMK 500,000 has a selling price of MMK 620,000 and costs to sell of MMK 150,000. At what amount should it be carried?

  1. MMK 500,000
  2. MMK 620,000
  3. MMK 150,000
  4. MMK 470,000 Correct answer.

Explanation

Net realisable value is estimated selling price less costs to sell: MMK 620,000 − MMK 150,000 = MMK 470,000. IAS 2 requires inventory to be carried at the lower of cost (MMK 500,000) and NRV (MMK 470,000), so the write-down is MMK 30,000.

Question 6Financial Accounting

The bank statement shows a closing balance of MMK 8,500,000. Outstanding cheques total MMK 1,200,000 and deposits not yet credited total MMK 700,000. What is the adjusted bank balance?

  1. MMK 9,000,000
  2. MMK 8,000,000 Correct answer.
  3. MMK 8,400,000
  4. MMK 7,600,000

Explanation

The adjusted bank balance is the bank statement balance plus deposits not yet credited minus outstanding cheques: MMK 8,500,000 + MMK 700,000 − MMK 1,200,000 = MMK 8,000,000. This reconciles the bank's records to the business's cash book position.

Question 7Financial Accounting

A contractor agrees a fixed-price contract of MMK 100,000,000. Costs incurred to date are MMK 30,000,000, estimated costs to complete are MMK 45,000,000, and progress is measured by costs. Under IFRS 15, what revenue is recognised to date?

  1. MMK 40,000,000 Correct answer.
  2. MMK 30,000,000
  3. MMK 45,000,000
  4. MMK 75,000,000

Explanation

Progress is measured by costs incurred to date divided by total expected costs: MMK 30,000,000 ÷ (MMK 30,000,000 + MMK 45,000,000) = 40%. Revenue recognised to date is 40% × MMK 100,000,000 = MMK 40,000,000. Under IFRS 15, revenue for a performance obligation satisfied over time is recognised according to progress.

Question 8Financial Accounting

A company faces a legal claim. Legal counsel concludes that an outflow is probable and the best estimate is MMK 5,000,000, but the range of possible outcomes is MMK 3,000,000 to MMK 9,000,000. Under IAS 37, how should this be treated?

  1. Recognise MMK 9,000,000, the highest outcome.
  2. Recognise MMK 3,000,000, the lowest outcome.
  3. Disclose a contingent liability only.
  4. Recognise MMK 5,000,000, the best estimate. Correct answer.

Explanation

IAS 37 requires a provision when an outflow is probable and can be estimated reliably. The amount recognised is the best estimate of the expenditure required to settle the obligation, which is MMK 5,000,000, not the lowest or highest point of the range.

Question 9Financial Accounting

Which principle requires that expenses be recognised in the same accounting period as the revenues they helped to generate?

  1. Business entity concept
  2. Consistency concept
  3. Matching principle Correct answer.
  4. Going concern assumption

Explanation

The matching principle requires expenses to be recognised in the same period as the revenues they helped generate. This supports accruals, prepayments and adjustments so that profit is not distorted between periods.

Question 10Financial Accounting

A purchase of MMK 900,000 was entered in the purchases account but not in the supplier's account. What is the effect on the trial balance?

  1. Credit balance of MMK 900,000 on suspense account.
  2. Debit balance of MMK 1,800,000 on suspense account.
  3. Debit balance of MMK 900,000 on suspense account. Correct answer.
  4. No suspense balance, because the error is one-sided.

Explanation

The purchase was debited in the purchases account but no credit was made to the supplier's account. Debits therefore exceed credits by MMK 900,000, and the suspense account carries a debit balance until the omission is corrected.

Question 11Financial Accounting

Under IAS 1, which of the following items is classified as a non-current asset in the statement of financial position?

  1. Raw materials awaiting use in production
  2. Plant used in manufacturing Correct answer.
  3. Prepaid insurance for the next quarter
  4. Trade receivables collectable within one year

Explanation

IAS 1 treats an asset as non-current when the entity expects to realise, sell or consume it beyond twelve months or beyond the normal operating cycle. Plant used in manufacturing is held for continuing use in production rather than for sale or short-term conversion into cash. Trade receivables, raw materials and short-term prepayments are all expected to be realised or consumed within the operating cycle, so they are current assets.

Question 12Financial Accounting

Under IFRS 15, revenue from a contract with a customer is recognised when which event occurs?

  1. A binding contract is signed by both parties
  2. An invoice is issued to the customer
  3. Cash is received from the customer
  4. Control of the goods passes to the customer Correct answer.

Explanation

IFRS 15 requires revenue to be recognised when the entity satisfies a performance obligation by transferring promised goods or services to the customer. Transfer occurs when the customer obtains control of the asset, which may happen before or after cash is received or an invoice is issued. Signing a contract creates enforceable rights but does not itself satisfy a performance obligation.

Question 13Financial Accounting

Under IAS 7, which of the following is reported as a financing activity in the statement of cash flows?

  1. Payment of wages to employees
  2. Proceeds from issuing ordinary shares Correct answer.
  3. Interest received on bank deposits
  4. Purchase of property, plant and equipment

Explanation

IAS 7 classifies cash flows as operating, investing or financing according to the nature of the activity. Issuing ordinary shares raises capital from the owners and changes the size and composition of equity, so it is a financing activity. Purchasing property, plant and equipment is investing, interest received is investing or operating under the permitted policy, and paying wages is operating.

Question 14Financial Accounting

A machine costs MMK 10,000,000 and is depreciated at 20% per year on the reducing balance basis. What is the depreciation charge for the second year of use?

  1. MMK 2,000,000
  2. MMK 1,600,000 Correct answer.
  3. MMK 1,800,000
  4. MMK 1,280,000

Explanation

Under the reducing balance method a fixed percentage is applied to the carrying amount at the start of each period, so the charge falls over time. In year one the charge is MMK 10,000,000 x 20% = MMK 2,000,000, leaving a carrying amount of MMK 8,000,000. Year two applies 20% to that reduced balance: MMK 8,000,000 x 20% = MMK 1,600,000.

Question 15Financial Accounting

A customer owing MMK 3,000,000 at the year end is declared bankrupt two months after the reporting date but before the financial statements are authorised for issue. How should this be treated in the year-end financial statements?

  1. Disclose only in the notes to the financial statements
  2. Ignore it until the next reporting period
  3. Reclassify the receivable as a non-current asset
  4. Adjust the receivables and loss for the year ended Correct answer.

Explanation

IAS 10 requires adjusting treatment when an event after the reporting date provides evidence of conditions that existed at that date. The customer's financial difficulty was already present at the year end, and the bankruptcy confirms the receivable was impaired then, so the receivable is written down and the loss recognised in the year-end statements. This produces statements that reflect the position as it actually stood at the reporting date.

Question 16Financial Accounting

A cash-generating unit has a carrying amount of MMK 50,000,000 and a recoverable amount of MMK 42,000,000. Under IAS 36, what impairment loss is recognised?

  1. MMK 42,000,000
  2. Nil
  3. MMK 50,000,000
  4. MMK 8,000,000 Correct answer.

Explanation

IAS 36 requires an impairment loss whenever the carrying amount of an asset or cash-generating unit exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and value in use, and here it is given as MMK 42,000,000. The loss is MMK 50,000,000 minus MMK 42,000,000 = MMK 8,000,000, recognised immediately in profit or loss unless the revaluation model applies.

Question 17Financial Accounting

A lessee enters a lease of equipment with a term of ten months and no purchase option. Under IFRS 16, how should the lessee account for this lease?

  1. Classify the lease as a finance lease and recognise interest
  2. Recognise a right-of-use asset and a lease liability
  3. Recognise a lease liability only, with no right-of-use asset
  4. Expense the payments on a straight-line basis Correct answer.

Explanation

IFRS 16 offers a recognition exemption for short-term leases, defined as leases with a term of twelve months or less at commencement and without a purchase option. For such a lease the lessee may elect not to recognise a right-of-use asset and lease liability. Instead the lease payments are recognised as an expense on a straight-line basis over the lease term.

Question 18Financial Accounting

Trade receivables are MMK 20,000,000 and an allowance of 5% is required. The allowance account already carries a credit balance of MMK 600,000. What amount is charged to profit or loss for the year?

  1. MMK 1,000,000
  2. MMK 500,000
  3. MMK 400,000 Correct answer.
  4. MMK 600,000

Explanation

The closing allowance required is 5% of MMK 20,000,000, which equals MMK 1,000,000. Because the allowance account already contains a credit balance of MMK 600,000, only the increase is charged as an expense. The charge is MMK 1,000,000 minus MMK 600,000 = MMK 400,000.

Question 19Financial Accounting

Which of the following situations gives rise to a deferred tax liability under IAS 12?

  1. An accrued expense deductible for tax when paid
  2. A warranty provision deductible only when the claim is settled
  3. Capitalised development costs already tax-deductible Correct answer.
  4. Interest receivable recognised on an accrual basis and taxed on the same basis

Explanation

A deferred tax liability arises from a taxable temporary difference, which occurs when the carrying amount of an asset exceeds its tax base. Capitalised development costs that have already been deducted for tax have a tax base of nil, so their carrying amount exceeds the tax base and a deferred tax liability is recognised. The difference will reverse in future periods as the asset is amortised for accounting purposes.

Question 20Financial Accounting

A company has a trade payable denominated in US dollars at the reporting date. Under IAS 21, how should this monetary item be translated for the year-end financial statements?

  1. Closing rate, with the difference in profit or loss Correct answer.
  2. At the closing rate, with the difference in other comprehensive income
  3. At the historical rate, with no exchange difference
  4. At the average rate, adjusting the cost of the payable

Explanation

IAS 21 requires foreign currency monetary items to be translated using the closing rate at each reporting date. Any exchange difference arising on retranslation of a monetary item is recognised in profit or loss in the period in which it arises. Trade payables are monetary items because they represent an obligation to deliver a fixed number of currency units.

Question 21Financial Accounting

Under the IASB Conceptual Framework, which of the following is an enhancing qualitative characteristic of useful financial information?

  1. Comparability Correct answer.
  2. Relevance
  3. Faithful representation
  4. Materiality

Explanation

Comparability, verifiability, timeliness and understandability are enhancing characteristics because they increase the usefulness of information that is already relevant and faithfully represented. Relevance and faithful representation are fundamental characteristics, while materiality is an entity-specific aspect of relevance.

Question 22Financial Accounting

Under the cost model in IAS 16, an item of property, plant and equipment is carried in the statement of financial position at:

  1. Its recoverable amount determined under IAS 36
  2. Its fair value at each reporting date
  3. Cost less accumulated depreciation and accumulated impairment losses Correct answer.
  4. Its revalued amount less accumulated depreciation

Explanation

Under the cost model, property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses. The revaluation model uses fair value at the date of revaluation less subsequent depreciation and impairment, so a revalued amount or fair value is not a cost-model measure.

Question 23Financial Accounting

Under IAS 37, a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity is called:

  1. A provision
  2. A financial liability
  3. A contingent liability
  4. A contingent asset Correct answer.

Explanation

IAS 37 defines a contingent asset as a possible asset arising from past events whose existence will be confirmed only by uncertain future events not wholly within the entity's control. Contingent assets are not recognised, but are disclosed when an inflow of economic benefits is probable.

Question 24Financial Accounting

An entity revalues a building under the IAS 16 revaluation model. The carrying amount is MMK 30,000,000 and the fair value is MMK 36,000,000. The revaluation increase reverses a previous revaluation decrease of MMK 2,000,000 that was recognised in profit or loss, and no revaluation surplus exists for this asset. Under IAS 16, how should the MMK 6,000,000 increase be treated?

  1. Recognise MMK 2,000,000 in profit or loss and MMK 4,000,000 in other comprehensive income Correct answer.
  2. Recognise MMK 6,000,000 in other comprehensive income
  3. Recognise MMK 4,000,000 in profit or loss and MMK 2,000,000 in other comprehensive income
  4. Recognise MMK 6,000,000 in profit or loss

Explanation

A revaluation increase is recognised in other comprehensive income, except that it is recognised in profit or loss to the extent it reverses a previous revaluation decrease on the same asset that was expensed. The first MMK 2,000,000 therefore reverses the prior loss in profit or loss, and the remaining MMK 4,000,000 is recognised in other comprehensive income.

Question 25Financial Accounting

Under IAS 38, which of the following costs of an internally generated intangible asset is capitalised?

  1. Development expenditure that meets all the IAS 38 recognition criteria Correct answer.
  2. Research expenditure incurred before technical feasibility is established
  3. Staff training costs for the new production process
  4. Advertising costs to launch the product

Explanation

IAS 38 requires all research expenditure to be expensed. Development expenditure is capitalised only after the entity can demonstrate technical feasibility, intention and ability to complete and use or sell the asset, probable future economic benefits, and reliable measurement of costs. Training and advertising costs are expensed.

Question 26Financial Accounting

A warehouse with a carrying amount of MMK 12,000,000 is destroyed by fire on 15 January 2025. The entity's reporting date is 31 December 2024 and its financial statements were authorised for issue on 20 March 2025. Under IAS 10, how should the fire be treated in the 2024 financial statements?

  1. Adjust the carrying amount of property, plant and equipment at 31 December 2024
  2. Recognise a provision for reconstruction in the 2024 financial statements
  3. Disclose the event if material, without adjusting the 2024 year-end amounts Correct answer.
  4. Ignore the event because it occurred after the reporting date

Explanation

The fire is a non-adjusting event because the condition that gave rise to the loss did not exist at the reporting date. IAS 10 requires disclosure of the nature and estimated financial effect of a material non-adjusting event after the reporting period, but the year-end asset carrying amount is not adjusted.

Question 27Financial Accounting

At 31 December 2023 an entity had 10,000,000 ordinary shares in issue. On 1 January 2024 it made a 1-for-4 bonus issue, and there were no other changes in ordinary shares during 2024. Profit attributable to ordinary shareholders for 2024 is MMK 60,000,000. What is basic earnings per share for 2024 under IAS 33?

  1. MMK 6.00
  2. MMK 5.00
  3. MMK 4.80 Correct answer.
  4. MMK 4.00

Explanation

A bonus issue issues shares without raising new resources, so the number of shares is adjusted as if the bonus issue had occurred at the beginning of the earliest period presented. Weighted average shares are 10,000,000 × 1.25 = 12,500,000, and basic EPS is MMK 60,000,000 ÷ 12,500,000 = MMK 4.80.

Question 28Financial Accounting

An entity owns three properties at 31 December: a building used as its head office, a building leased to a third party under an operating lease, and a building held for sale in the ordinary course of business. Under IAS 40, which property is classified as investment property?

  1. Both the head office building and the building held for sale
  2. The head office building
  3. The building leased to a third party under an operating lease Correct answer.
  4. The building held for sale in the ordinary course of business

Explanation

Investment property is property held to earn rentals or for capital appreciation, including a building leased to a third party under an operating lease. Owner-occupied property is covered by IAS 16, and property held for sale in the ordinary course of business is inventory under IAS 2.

Question 29Financial Accounting

In 2024 an entity discovered that depreciation of MMK 8,000,000 on equipment used in administration had been omitted from its 2023 financial statements, which had already been authorised for issue. The income tax rate is 25%. Under IAS 8, what is the effect on the opening balance of retained earnings at 1 January 2024?

  1. No effect, because the error is corrected prospectively in 2024
  2. Decrease of MMK 8,000,000
  3. Increase of MMK 6,000,000
  4. Decrease of MMK 6,000,000 Correct answer.

Explanation

A material prior period error discovered after the financial statements were authorised for issue is corrected retrospectively under IAS 8. The omitted depreciation reduces 2023 profit by MMK 8,000,000 before tax, or MMK 6,000,000 after the 25% tax effect, so opening retained earnings are reduced by MMK 6,000,000 and comparatives are restated.

Question 30Financial Accounting

An entity has general borrowings outstanding throughout 2024: a MMK 20,000,000 loan at 10% and a MMK 30,000,000 loan at 8%. It is constructing a qualifying asset and incurred expenditure of MMK 15,000,000 on 1 January 2024, which remained outstanding for the whole year. No specific borrowing was obtained. Under IAS 23, what amount of borrowing cost should be capitalised for 2024?

  1. MMK 1,500,000
  2. MMK 1,200,000
  3. MMK 1,320,000 Correct answer.
  4. MMK 2,000,000

Explanation

When a qualifying asset is funded from general borrowings, IAS 23 applies a capitalisation rate equal to the weighted average borrowing cost. The rate is (MMK 2,000,000 + MMK 2,400,000) ÷ MMK 50,000,000 = 8.8%, so capitalised borrowing cost is MMK 15,000,000 × 8.8% = MMK 1,320,000.

Question 31Financial Accounting

Under IAS 2, which cost formula is required for inventories of items that are not ordinarily interchangeable and whose individual costs can be identified?

  1. Last-in, first-out (LIFO)
  2. Specific identification Correct answer.
  3. First-in, first-out (FIFO)
  4. Weighted average cost

Explanation

IAS 2 requires specific identification for inventories of items that are not ordinarily interchangeable. FIFO and weighted average are acceptable for interchangeable items, but LIFO is not permitted under IAS 2.

Question 32Financial Accounting

An entity's reporting date is 31 December 2024. On 10 February 2025, before the financial statements are authorised for issue, the entity declares a dividend on its ordinary shares. Under IAS 10, how should this dividend be treated?

  1. Recognised as an adjusting event in the 2024 financial statements
  2. Recognised as a liability at the reporting date
  3. Recognised as a prior period adjustment in 2024
  4. Disclosed as a non-adjusting event only Correct answer.

Explanation

A dividend declared after the reporting date does not create a liability at that date because no obligation existed then. IAS 10 treats it as a non-adjusting event, so it is disclosed if material but not recognised.

Question 33Financial Accounting

Under IAS 7, which of the following cash flows is classified as an investing activity?

  1. Cash paid to acquire equipment for use in production Correct answer.
  2. Cash paid to suppliers for inventory purchases
  3. Cash received from issuing ordinary shares
  4. Cash proceeds from a bank loan

Explanation

IAS 7 classifies the acquisition of property, plant and equipment as an investing activity because it relates to long-term operating assets. Share issues and bank loans are financing activities, while supplier payments are operating activities.

Question 34Financial Accounting

An entity arranges hotel bookings for customers but does not control the hotel service before it is provided, cannot set the price freely, and earns a 10% commission. Under IFRS 15, how should the entity recognise revenue?

  1. The gross booking amount less hotel costs
  2. The commission only, as agent Correct answer.
  3. The gross booking amount as principal
  4. No revenue until the customer checks out

Explanation

An entity is an agent when it does not control the specified good or service before transfer; it recognises revenue equal to the commission or fee it earns. The gross amount billed to the customer is not the entity's revenue in an agency relationship.

Question 35Financial Accounting

An asset has a carrying amount of MMK 25,000,000, fair value less costs of disposal of MMK 18,000,000 and value in use of MMK 20,000,000. What is the impairment loss under IAS 36?

  1. Nil
  2. MMK 5,000,000 Correct answer.
  3. MMK 2,000,000
  4. MMK 7,000,000

Explanation

Recoverable amount is the higher of fair value less costs of disposal and value in use, so it is MMK 20,000,000. The impairment loss is the carrying amount of MMK 25,000,000 less recoverable amount of MMK 20,000,000, giving MMK 5,000,000.

Question 36Financial Accounting

An entity holds a portfolio of debt instruments solely to collect contractual cash flows, and those cash flows are solely payments of principal and interest. Under IFRS 9, how is the portfolio measured?

  1. At fair value through profit or loss
  2. At cost less impairment
  3. At fair value through other comprehensive income
  4. At amortised cost Correct answer.

Explanation

A debt instrument is measured at amortised cost when the business model is to hold assets to collect contractual cash flows and the cash flows are solely payments of principal and interest. Fair value through other comprehensive income requires a business model that also involves selling financial assets.

Question 37Financial Accounting

Under IAS 19, how are remeasurements of a defined benefit obligation, such as actuarial gains and losses, recognised?

  1. Directly in retained earnings
  2. In profit or loss as an actuarial gain or loss
  3. In other comprehensive income, without recycling to profit or loss Correct answer.
  4. In other comprehensive income and recycled to profit or loss

Explanation

IAS 19 requires remeasurements of the net defined benefit liability or asset to be recognised in other comprehensive income. These remeasurements are not recycled to profit or loss in later periods.

Question 38Financial Accounting

Under IFRS 5, how is a non-current asset classified as held for sale measured?

  1. The lower of carrying amount and fair value less costs to sell Correct answer.
  2. Its existing carrying amount, with depreciation continued until sale
  3. Fair value, with gains recognised in profit or loss
  4. The lower of cost and net realisable value

Explanation

IFRS 5 requires a non-current asset classified as held for sale to be measured at the lower of its carrying amount and fair value less costs to sell. Depreciation ceases once the asset is classified as held for sale.

Question 39Financial Accounting

At 31 December 2024 an entity has a deductible temporary difference of MMK 12,000,000. The tax rate is 25%, and it is probable that sufficient taxable profit will be available. Under IAS 12, what is recognised?

  1. No deferred tax, because the difference is deductible
  2. A deferred tax asset of MMK 12,000,000
  3. A deferred tax asset of MMK 3,000,000 Correct answer.
  4. A deferred tax liability of MMK 3,000,000

Explanation

A deductible temporary difference gives rise to a deferred tax asset when it is probable that taxable profit will be available against which the deductible difference can be used. The asset is measured at 25% of MMK 12,000,000, which is MMK 3,000,000.

Question 40Financial Accounting

An entity issues a convertible bond for MMK 100,000,000. The present value of the contractual cash flows of the liability component, using a market rate for a similar non-convertible bond, is MMK 92,000,000. Under IAS 32, how are the proceeds allocated?

  1. Equity MMK 100,000,000 and liability nil
  2. Liability MMK 8,000,000 and equity MMK 92,000,000 as a residual
  3. Liability MMK 100,000,000 and equity nil
  4. Liability MMK 92,000,000 and equity MMK 8,000,000 Correct answer.

Explanation

IAS 32 requires the issuer of a compound instrument to separate the liability and equity components. The liability is measured first at the present value of contractual cash flows, and the equity component is the residual proceeds, here MMK 8,000,000.

Question 41Financial Accounting

Under IAS 1, on which basis are general purpose financial statements normally prepared unless the entity intends to liquidate or cease trading?

  1. A liquidation basis of accounting
  2. A going concern basis Correct answer.
  3. A cash basis of accounting
  4. A tax basis of accounting

Explanation

IAS 1 requires management to assess the entity's ability to continue as a going concern. General purpose financial statements are prepared on a going concern basis unless management intends to liquidate or cease trading, in which case a different basis may be appropriate.

Question 42Financial Accounting

Under IAS 7, which of the following is classified as a financing cash flow?

  1. Cash received from customers for goods sold
  2. Purchase of property, plant and equipment for cash
  3. Interest received on a fixed deposit
  4. Repayment of a bank loan Correct answer.

Explanation

IAS 7 classifies repayment of borrowings as a financing cash flow because it changes the size and composition of the entity's contributed capital and debt. Purchases of PPE are investing, while interest received and customer receipts are operating or investing depending on the policy chosen.

Question 43Financial Accounting

Under IAS 2, at what amount are inventories normally measured in the statement of financial position?

  1. Historical cost only
  2. Revalued amount
  3. Lower of cost and NRV Correct answer.
  4. Fair value at reporting date

Explanation

IAS 2 requires inventories to be measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price less estimated costs of completion and costs to sell, so inventory is not carried above the amount expected to be recovered.

Question 44Financial Accounting

An entity changes the depreciation method for its machinery from straight-line to reducing balance because the pattern of economic benefits consumed has changed. Under IAS 8, how should this change be accounted for?

  1. As a prior period error adjusted in opening retained earnings
  2. Prospectively, as a change in accounting estimate Correct answer.
  3. Retrospectively, by restating prior period comparatives
  4. By recognising the cumulative effect in other comprehensive income

Explanation

IAS 8 treats a change in depreciation method as a change in accounting estimate, not a change in accounting policy. The effect is applied prospectively from the date of change, with no restatement of prior period comparatives.

Question 45Financial Accounting

Under IAS 20, how is a government grant relating to an asset recognised in profit or loss?

  1. Immediately on receipt of cash
  2. Only when the asset is sold
  3. Over the asset's useful life Correct answer.
  4. As a credit to share capital

Explanation

IAS 20 requires a government grant relating to an asset to be recognised in profit or loss on a systematic basis over the periods in which the entity recognises the related costs. The grant may be presented as deferred income or deducted from the asset's carrying amount.

Question 46Financial Accounting

An entity buys inventory on credit for USD 10,000 on 1 December 2024, when the exchange rate is MMK 2,100 per USD. The invoice is unpaid at 31 December 2024, when the rate is MMK 2,150 per USD. Under IAS 21, at what amount is the payable initially recognised on 1 December 2024?

  1. MMK 21,000,000 Correct answer.
  2. MMK 20,500,000
  3. MMK 22,000,000
  4. MMK 21,500,000

Explanation

IAS 21 requires a foreign currency transaction to be recorded initially at the spot exchange rate on the transaction date. The payable is therefore USD 10,000 x MMK 2,100 = MMK 21,000,000 at initial recognition; the closing rate is used for subsequent retranslation.

Question 47Financial Accounting

Under IAS 24, which of the following is a related party of a reporting entity?

  1. A customer buying goods on normal terms
  2. A key management personnel member Correct answer.
  3. A trade union of the entity's employees
  4. A tax department collecting government revenue

Explanation

IAS 24 includes key management personnel, and their close family members, as related parties because they have authority and responsibility for planning, directing and controlling the entity's activities. A customer, trade union or tax department is not related solely because of that role.

Question 48Financial Accounting

A cash-generating unit has goodwill of MMK 5,000,000, property, plant and equipment of MMK 20,000,000 and a patent of MMK 5,000,000. An impairment loss of MMK 6,000,000 is identified for the unit. Under IAS 36, how should the loss be allocated?

  1. Goodwill 5m; PPE 0.5m; patent 0.5m, allocated equally
  2. Goodwill 6m; PPE nil; patent nil
  3. Goodwill nil; PPE 4.8m; patent 1.2m
  4. Goodwill 5m; PPE 0.8m; patent 0.2m Correct answer.

Explanation

IAS 36 allocates an impairment loss for a cash-generating unit first to reduce the carrying amount of goodwill allocated to the unit. The remaining MMK 1,000,000 is allocated to the other assets pro rata to their carrying amounts, 20:5, giving PPE MMK 800,000 and patent MMK 200,000.

Question 49Financial Accounting

An entity reports accounting profit before tax of MMK 100,000,000 for 2024. The profit includes a non-deductible fine of MMK 10,000,000. Depreciation charged was MMK 20,000,000 and tax depreciation allowed was MMK 30,000,000. The tax rate is 25%. What is the current tax expense for 2024?

  1. MMK 27,500,000
  2. MMK 25,000,000 Correct answer.
  3. MMK 22,500,000
  4. MMK 35,000,000

Explanation

Taxable profit is accounting profit of MMK 100,000,000 plus the non-deductible fine of MMK 10,000,000 less the excess tax depreciation of MMK 10,000,000, giving MMK 100,000,000. Current tax is therefore MMK 100,000,000 x 25% = MMK 25,000,000.

Question 50Financial Accounting

An entity's reporting date is 31 December 2024. On 15 February 2025, before the financial statements are authorised for issue, the directors declare a final dividend on 2024 profits. Under IAS 10, how should this dividend be treated in the 2024 financial statements?

  1. Recognised as a 2024 profit or loss expense
  2. Adjusted against opening retained earnings
  3. Recognised as a liability at year-end
  4. Disclosed as a non-adjusting event Correct answer.

Explanation

IAS 10 treats dividends declared after the reporting period as a non-adjusting event because no obligation exists at the reporting date. They are disclosed in the notes when material and are not recognised as a liability or an expense in the current year's financial statements.