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Myanmar DA Part II Module I study materials
Myanmar DA Part II Module I study resources

Myanmar DA Part II Module I practice questions

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Question 1Financial Accounting

A business buys office equipment for 5,000 on credit. What is the immediate effect on the accounting equation?

  1. Assets increase by 5,000 and liabilities increase by 5,000. Correct answer.
  2. Assets increase by 5,000 and liabilities decrease by 5,000.
  3. Assets remain unchanged and liabilities increase by 5,000.
  4. Assets increase by 5,000 and capital increases by 5,000.

Explanation

The accounting equation is assets equals liabilities plus capital. A credit purchase increases the equipment asset and the trade payable liability by the same amount. It does not immediately affect capital because no profit or owner transaction has occurred.

Question 2Financial Accounting

Which double entry records a credit sale of goods, at the transaction price, in the seller's books?

  1. Debit trade receivables; credit sales. Correct answer.
  2. Debit trade receivables; credit purchases.
  3. Debit sales; credit trade receivables.
  4. Debit cash; credit sales.

Explanation

A credit sale creates a receivable, so trade receivables is debited. Sales revenue is credited because income increases on the credit side. Cash is not affected until the customer pays.

Question 3Financial Accounting

At year-end, wages of 1,200 for the last week of December are unpaid and not yet recorded. What is the required adjusting entry?

  1. Debit wages expense; credit accrued wages. Correct answer.
  2. Debit wages expense; credit cash.
  3. Debit accrued wages; credit cash.
  4. Debit accrued wages; credit wages expense.

Explanation

Under the accrual basis, the wages expense is recognised in the period the employees worked. Because the amount is unpaid, a liability is recorded rather than a cash payment. The entry debits wages expense and credits accrued wages.

Question 4Financial Accounting

An entity buys a machine for 36,000. It estimates residual value of 6,000 and a useful life of 5 years. Using straight-line depreciation, what is the annual depreciation charge?

  1. 8,400
  2. 7,000
  3. 6,000 Correct answer.
  4. 7,200

Explanation

Straight-line depreciation is depreciable amount divided by useful life. The depreciable amount is 36,000 minus 6,000 residual value, which equals 30,000. Dividing 30,000 by 5 years gives an annual charge of 6,000.

Question 5Financial Accounting

A cash book shows a debit balance of 8,400. The bank statement shows a balance of 9,600. Cheques issued but not yet presented total 1,800, and bank charges of 600 appear only on the bank statement. What is the adjusted cash book balance?

  1. 8,400
  2. 9,600
  3. 7,200
  4. 7,800 Correct answer.

Explanation

The cash book must be updated for items shown on the bank statement but not yet entered, such as the 600 bank charges. Outstanding cheques are a timing difference and do not change the cash book balance. Therefore the adjusted cash book balance is 8,400 minus 600, which equals 7,800.

Question 6Financial Accounting

At 31 December, trade receivables are 50,000 before writing off a specific debt of 2,000. The debt is written off and an allowance of 5% of the remaining receivables is required. The allowance brought forward was 2,000. What total amount is charged to profit or loss for irrecoverable debts and the allowance?

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

Explanation

After the write-off, receivables are 48,000, so the required allowance is 5% of 48,000, or 2,400. The allowance increases from 2,000 to 2,400, an increase of 400. The total charge is the 2,000 write-off plus the 400 allowance increase, which equals 2,400.

Question 7Financial Accounting

An entity holds three inventory lines. Cost and net realisable value are: line A cost 10,000 and NRV 11,000; line B cost 6,000 and NRV 5,200; line C cost 4,000 and NRV 4,500. What is total inventory value applying the lower of cost and NRV line by line?

  1. 19,700
  2. 19,200 Correct answer.
  3. 20,700
  4. 20,000

Explanation

Inventory is measured at the lower of cost and net realisable value, normally applied item by item. Line A is valued at 10,000, line B at 5,200 and line C at 4,000. The total is therefore 19,200.

Question 8Financial Accounting

An inexperienced bookkeeper records a payment for equipment repairs by debiting equipment and crediting cash. Which type of error is this?

  1. Compensating error
  2. Error of omission
  3. Error of principle Correct answer.
  4. Error of commission

Explanation

Repairs are revenue expenditure and should be debited to an expense account. Debiting equipment treats the cost as capital expenditure, so the error is one of principle. The trial balance still balances because debits and credits are equal.

Question 9Financial Accounting

Under the standard recognition criteria for provisions, when should a provision be recognised?

  1. When a board decision creates a constructive obligation for future operating losses.
  2. When a future obligation is expected and the amount can be estimated reliably.
  3. When there is a present obligation from a past event, a probable outflow, and a reliable estimate. Correct answer.
  4. When there is a possible obligation whose existence will be confirmed by a future event.

Explanation

A provision is recognised when a present obligation exists as a result of a past event, an outflow of resources is probable, and the amount can be estimated reliably. A future obligation does not meet the present obligation condition. Possible obligations and future operating losses are not recognised as provisions under these criteria.

Question 10Financial Accounting

Profit for the year is 60,000. Depreciation expense is 12,000. Trade receivables increased by 8,000 and trade payables decreased by 3,000. Using the indirect method, what is net cash generated from operating activities?

  1. 83,000
  2. 67,000
  3. 61,000 Correct answer.
  4. 49,000

Explanation

Depreciation is added back because it is a non-cash expense. An increase in receivables is deducted because cash collected is less than revenue, and a decrease in payables is deducted because cash paid to suppliers is more than purchases. The calculation is 60,000 plus 12,000 minus 8,000 minus 3,000, giving 61,000.

Question 11Financial Accounting

A Myanmar entity receives 1,200 in December for services that will be performed evenly in January and February. Under the accrual basis, how should this amount be treated in the December financial statements?

  1. Recognise 1,200 as deferred income and no revenue Correct answer.
  2. Recognise 1,200 as revenue in December
  3. Recognise 600 as revenue and 600 as deferred income
  4. Recognise 1,200 as an asset and no deferred income

Explanation

Under accrual accounting, revenue is recognised when the service is performed, not when cash is received. Because no service is performed in December, the cash received is a liability (deferred income) at that date. Revenue of 600 would be recognised in each of January and February as the service is delivered.

Question 12Financial Accounting

Which book of prime entry is used to record credit notes issued to customers for goods returned?

  1. Sales day book
  2. Sales returns day book Correct answer.
  3. General journal
  4. Purchases returns day book

Explanation

A credit note issued to a customer for returned goods is recorded in the sales returns day book, also called the returns inwards book. The sales day book records credit sales, not returns.

Question 13Financial Accounting

An entity faces a lawsuit at its year-end. Legal advice indicates a possible obligation whose existence will be confirmed only by a future court decision, and an outflow of resources is not probable. How should the item be treated in the financial statements?

  1. Disclose it as a contingent liability unless the possibility of outflow is remote Correct answer.
  2. Recognise a provision discounted to present value
  3. Make no disclosure and recognise no liability
  4. Recognise a provision for the full estimated amount

Explanation

A possible obligation depending on a future event is a contingent liability, not a provision, because a present obligation and probable outflow are not established. It is disclosed unless the possibility of outflow is remote. A provision is recognised only when a present obligation and probable outflow exist.

Question 14Financial Accounting

A trial balance fails to agree. Which error would cause the debit and credit totals to differ?

  1. A cash sale of 400 is debited to cash and credited to sales
  2. A credit sale of 800 is completely omitted from the accounting records
  3. A purchase of 600 is recorded as a debit of 600 and a credit of 600
  4. A payment of 900 to a supplier is credited to the supplier account but not debited to the bank account Correct answer.

Explanation

A trial balance agrees only when total debits equal total credits. Recording one side of a transaction without the other creates a one-sided entry and makes the totals differ. Complete omission and equal entries on both sides leave the trial balance in agreement.

Question 15Financial Accounting

The cash book shows a debit balance of 3,500. A standing order of 300 has been paid by the bank but is not yet entered in the cash book. Cheques issued but not yet presented total 500. What is the adjusted cash book balance?

  1. 3,900
  2. 3,200 Correct answer.
  3. 4,300
  4. 3,800

Explanation

The cash book is adjusted for items the bank has recorded that the entity has not, such as the standing order. The adjusted cash book balance is 3,500 - 300 = 3,200. Unpresented cheques affect the bank statement reconciliation, not the cash book balance.

Question 16Financial Accounting

In a period of rising purchase prices, an entity uses FIFO instead of the weighted average method. What is the effect on closing inventory and profit for the period?

  1. Closing inventory is lower and profit is lower
  2. Closing inventory is higher and profit is higher Correct answer.
  3. Closing inventory is lower and profit is higher
  4. Closing inventory is higher and profit is unchanged

Explanation

Under FIFO in a period of rising prices, the older, lower costs are charged to cost of sales first. The newer, higher costs remain in closing inventory, so closing inventory and profit are both higher than under weighted average.

Question 17Financial Accounting

At 31 December, trade receivables are 80,000. An allowance for doubtful debts of 5% is required. The allowance brought forward was 3,000. What is the charge to profit or loss for doubtful debts?

  1. 7,000
  2. 3,000
  3. 1,000 Correct answer.
  4. 4,000

Explanation

The required allowance is 5% of 80,000 = 4,000. The increase needed is 4,000 - 3,000 = 1,000, and this increase is the expense charged to profit or loss.

Question 18Financial Accounting

An entity sells a machine for 6,000. The machine originally cost 20,000 and accumulated depreciation at the date of sale was 12,000. What is the profit or loss on disposal?

  1. Loss of 6,000
  2. Loss of 2,000 Correct answer.
  3. Profit of 2,000
  4. Profit of 6,000

Explanation

The carrying amount at disposal is cost 20,000 less accumulated depreciation 12,000 = 8,000. Proceeds of 6,000 are 2,000 below the carrying amount, giving a loss on disposal of 2,000.

Question 19Financial Accounting

A and B are partners sharing profits 3:2. The partnership agreement provides A with a salary of 10,000 and interest on capital of A 2,000 and B 1,000. Profit before appropriations is 45,000. What is B's total share of profit?

  1. 13,800 Correct answer.
  2. 18,000
  3. 14,800
  4. 12,800

Explanation

Profit after the salary and interest on capital is 45,000 - 10,000 - 2,000 - 1,000 = 32,000. B's share of that residual profit is 2/5 × 32,000 = 12,800, plus B's interest on capital of 1,000, giving 13,800.

Question 20Financial Accounting

The sales ledger control account shows a debit balance of 50,000. The list of customer balances totals 49,200. A customer's credit balance of 300 has been included in the list as a debit, and a contra with the purchases ledger of 500 has been omitted from the control account. What is the corrected sales ledger control account balance?

  1. 48,600
  2. 49,200
  3. 50,500
  4. 49,500 Correct answer.

Explanation

The omitted contra is recorded by crediting the sales ledger control account with 500, reducing its debit balance from 50,000 to 49,500. The customer's credit balance affects the list of balances, not the control account, so it is not used to correct the control account.

Question 21Financial Accounting

Which accounting assumption supports preparing a Myanmar entity's financial statements on the basis that the entity will continue in operation for the foreseeable future and has neither the intention nor the need to liquidate?

  1. Prudence
  2. Consistency
  3. Accrual basis
  4. Going concern Correct answer.

Explanation

Going concern is the assumption that the entity will continue in operation for the foreseeable future. It justifies preparing financial statements on a continuity basis rather than at liquidation values. Accrual, consistency and prudence are separate accounting concepts.

Question 22Financial Accounting

In a Myanmar company's ledger, which account normally carries a credit balance?

  1. Inventory
  2. Bank overdraft Correct answer.
  3. Motor vehicles at cost
  4. Rent expense

Explanation

A bank overdraft is a liability, and liabilities normally have credit balances. Inventory and motor vehicles are assets with debit balances, while rent expense is an expense with a debit balance.

Question 23Financial Accounting

A Myanmar entity incurs the following costs in connection with a new factory building. Which cost is capital expenditure to be included in the cost of the building?

  1. Annual fire insurance premium after the building is brought into use
  2. Repainting the building two years after it was brought into use
  3. Legal fees directly attributable to acquiring the building Correct answer.
  4. Monthly cleaning of the building

Explanation

Capital expenditure acquires or enhances an asset and is included in its carrying amount. Legal fees directly attributable to acquiring the building form part of its cost. Insurance, cleaning and later repainting are revenue expenses.

Question 24Financial Accounting

An entity buys a delivery van for 10,000. It expects to sell the van for 1,000 at the end of its useful life. Depreciation is charged at 25% per year on the reducing balance. What is the depreciation charge for the second year?

  1. 1,406
  2. 2,250
  3. 1,875 Correct answer.
  4. 2,500

Explanation

Under reducing balance, the rate is applied to the carrying amount at the start of each year. Year 1 depreciation is 25% of 10,000 = 2,500, leaving 7,500. Year 2 depreciation is 25% of 7,500 = 1,875.

Question 25Financial Accounting

A customer's debt of 1,500 was written off as irrecoverable in the previous year. In the current year the customer pays the full amount by cheque. In the seller's books, what is the double entry to record the receipt?

  1. Debit trade receivables 1,500; credit irrecoverable debts recovered 1,500
  2. Debit bank 1,500; credit irrecoverable debts recovered 1,500 Correct answer.
  3. Debit irrecoverable debts recovered 1,500; credit bank 1,500
  4. Debit bank 1,500; credit trade receivables 1,500

Explanation

A recovery of a debt previously written off is treated as income in the current period. The bank account is debited for the receipt and an irrecoverable debts recovered account is credited. Trade receivables is not credited because the debt was already removed from receivables.

Question 26Financial Accounting

A credit purchase of goods of 900 is entered in the purchases day book as 90. The error is found before the trial balance is extracted. Which journal entry corrects the error?

  1. Debit purchases 810; credit payables 810 Correct answer.
  2. Debit purchases 90; credit payables 90
  3. Debit purchases 810; credit suspense 810
  4. Debit trade payables 810; credit purchases 810

Explanation

Both purchases and trade payables are understated by 810, calculated as 900 minus 90. To correct, debit purchases and credit payables with 810. No suspense account is needed because the error is corrected before the trial balance.

Question 27Financial Accounting

At the year-end an entity holds damaged goods that cost 4,000. They can be repaired for 500 and then sold for 3,600. Selling costs are expected to be 200. What amount should be used as net realisable value for these goods?

  1. 2,900 Correct answer.
  2. 3,400
  3. 4,000
  4. 3,100

Explanation

Net realisable value is estimated selling price less costs to complete, repair and sell. It is 3,600 minus 500 minus 200 = 2,900. Because this is below cost of 4,000, the goods are written down to 2,900.

Question 28Financial Accounting

An entity's year-end is 31 December. On 20 February, before the financial statements are approved for issue, a customer owing 12,000 at 31 December is declared insolvent. The amount was expected to be collectable at year-end. How should this be treated?

  1. Reclassify the amount as a long-term loan
  2. Disclose only as a non-adjusting event
  3. Write off 12,000 as an irrecoverable debt Correct answer.
  4. Ignore because it occurred after the year-end

Explanation

The insolvency provides evidence of a condition that existed at the reporting date, so it is an adjusting event. The receivable should be written off in the year-end financial statements. Non-adjusting treatment is for events that do not concern conditions at the reporting date.

Question 29Financial Accounting

A company issues 20,000 ordinary shares of nominal value 1 each at 3.20. Issue costs of 4,000 are paid and are charged against share premium. What is the increase in share premium?

  1. 40,000 Correct answer.
  2. 64,000
  3. 60,000
  4. 44,000

Explanation

Total proceeds are 20,000 multiplied by 3.20 = 64,000, of which 20,000 is share capital. Gross share premium is 44,000; deducting issue costs of 4,000 gives an increase of 40,000.

Question 30Financial Accounting

An entity revalues a building upward by 20,000. The same building had previously been revalued downward by 12,000, and that decrease was recognised in profit or loss. How much of the new increase is recognised in profit or loss?

  1. 20,000
  2. 12,000 Correct answer.
  3. 0
  4. 8,000

Explanation

A revaluation increase is recognised in other comprehensive income, except to the extent it reverses a previous decrease for the same asset that was charged to profit or loss. Therefore 12,000 is recognised in profit or loss, and the remaining 8,000 goes to other comprehensive income.

Question 31Financial Accounting

A Myanmar entity pays a trade payable of 2,000 by bank transfer. What is the effect on the accounting equation?

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

Explanation

Paying a payable settles a liability and reduces the bank balance, so both assets and liabilities fall by the same amount. Equity is unaffected because the expense was recognised when the purchase was made.

Question 32Financial Accounting

A payment for repairs to machinery was debited to the machinery account. Which type of error has occurred?

  1. Error of original entry
  2. Error of commission
  3. Compensating error
  4. Error of principle Correct answer.

Explanation

An error of principle occurs when a transaction is recorded in the wrong class of account, such as capital expenditure instead of revenue expenditure. Repairs are revenue expenditure but were debited to a non-current asset account.

Question 33Financial Accounting

In a statement of cash flows prepared under IAS 7, which item is classified as an investing activity?

  1. Payment of dividends to ordinary shareholders
  2. Purchase of plant and equipment for cash Correct answer.
  3. Interest paid on a bank overdraft facility
  4. Issue of ordinary shares for cash proceeds

Explanation

Investing activities include the acquisition and disposal of long-term assets such as property, plant and equipment. Share issues and dividend payments are financing activities, while interest paid may be operating or financing depending on accounting policy.

Question 34Financial Accounting

A machine is bought on 1 July for 24,000. It has an estimated residual value of 4,000 and a useful life of five years. Depreciation is charged on a straight-line basis with a full month's charge in the month of acquisition. The entity's year-end is 31 December. What is the depreciation expense for the first year?

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

Explanation

Annual straight-line depreciation is (24,000 - 4,000) / 5 = 4,000. The machine is held for six months, so the first-year charge is 4,000 x 6/12 = 2,000.

Question 35Financial Accounting

At 31 December, an entity has paid electricity bills of 8,000 during the year. It owes 1,200 for December electricity and has paid 500 in advance for January. What amount is charged to profit or loss for electricity for the year?

  1. 8,700 Correct answer.
  2. 8,500
  3. 7,300
  4. 9,700

Explanation

The expense is cash paid plus the closing accrual less the closing prepayment: 8,000 + 1,200 - 500 = 8,700. The accrual recognises electricity used but not yet billed, and the prepayment removes cost relating to the next period.

Question 36Financial Accounting

An entity sells goods for 500,000 during the year under a 12-month warranty. Past experience indicates that the required closing warranty provision is 2% of the year's sales. The warranty provision brought forward was 4,000 and claims paid during the year were 3,000. What is the warranty expense for the year?

  1. 9,000 Correct answer.
  2. 12,000
  3. 10,000
  4. 6,000

Explanation

The closing provision required is 2% x 500,000 = 10,000. The expense is the closing provision plus claims paid less the opening provision: 10,000 + 3,000 - 4,000 = 9,000.

Question 37Financial Accounting

On 30 December an entity recorded a sale of 4,000 and a cost of sales of 2,500 for goods shipped to a customer. The terms are FOB destination and the goods arrived on 3 January. What adjustment is required at 31 December?

  1. Reverse the sale only and leave the cost of sales unchanged in the ledger.
  2. No adjustment is needed because the sale is recorded when the goods are shipped.
  3. Reverse sale and cost of sales; include goods in closing inventory. Correct answer.
  4. Record an accrual for the full sales price until the goods are delivered.

Explanation

Under FOB destination, control passes on delivery, so the sale is not complete at 31 December. The sale and cost of sales must be reversed, and the goods, which remain the seller's inventory, must be included in closing inventory.

Question 38Financial Accounting

A petty cash fund is operated on an imprest of 500. At the end of the month, cash in hand is 90 and paid vouchers total 390. What amount should be reimbursed to restore the imprest?

  1. 500
  2. 390
  3. 410 Correct answer.
  4. 400

Explanation

The imprest is restored by reimbursing the actual cash spent, which is the imprest less cash in hand: 500 - 90 = 410. The vouchers total 390, so there is a 20 cash shortage to investigate separately.

Question 39Financial Accounting

An entity's cash book shows a debit balance of 6,000 at 31 December. The bank statement shows a credit balance of 7,800. Unpresented cheques are 2,400 and deposits not yet credited are 1,200. What is the amount of bank charges not yet entered in the cash book?

  1. 2,400
  2. 600 Correct answer.
  3. 1,200
  4. 1,800

Explanation

Adjusted bank statement balance is 7,800 + 1,200 - 2,400 = 6,600. The cash book shows 6,000, so charges of 600 have been made by the bank but not recorded in the cash book.

Question 40Financial Accounting

A company has 200,000 ordinary shares of 1 each, share premium of 50,000 and retained earnings of 120,000. It makes a 1-for-5 bonus issue, using share premium first and then retained earnings. What are the balances in share premium and retained earnings after the bonus issue?

  1. Share premium 50,000; retained earnings 80,000
  2. Share premium 10,000; retained earnings 80,000
  3. Share premium 10,000; retained earnings 120,000 Correct answer.
  4. Share premium 0; retained earnings 130,000

Explanation

A 1-for-5 bonus issue creates 40,000 new shares of 1 each, requiring 40,000 from reserves. Share premium of 50,000 covers this, leaving 10,000, so retained earnings remain 120,000.

Question 41Financial Accounting

Under the Conceptual Framework for Financial Reporting, which description defines an asset of a Myanmar entity?

  1. The amount owed to the entity by its trade customers at the reporting date
  2. A present economic resource controlled by the entity from past events Correct answer.
  3. A future economic benefit that the entity expects to receive from a contract it has not yet signed
  4. A resource that the entity legally owns and expects to use within one year

Explanation

An asset is a present economic resource controlled by the entity as a result of past events, meaning a right with the potential to produce economic benefits. Legal ownership is not the test, and there is no requirement that the resource be consumed or used within one year.

Question 42Financial Accounting

Under IAS 38 Intangible Assets, how must a Myanmar entity account for expenditure incurred in the research phase of an internal project?

  1. Recognised as an intangible asset if the entity expects the project to be profitable
  2. Deferred and amortised over the expected life of the resulting product
  3. Recognised as an intangible asset once the project reaches the development phase
  4. Charged to profit or loss as an expense when it is incurred Correct answer.

Explanation

IAS 38 requires research expenditure to be expensed as it is incurred, because the entity cannot demonstrate that an identifiable asset generating probable future economic benefits exists. Only development expenditure meeting all the capitalisation criteria may be recognised as an intangible asset.

Question 43Financial Accounting

A Myanmar trading entity buys goods for a purchase price of 10,000. It pays import duty of 1,500 and freight of 500 to bring the goods to its warehouse. It also pays 300 for storage of the goods pending sale, which is not necessary to bring them to their present location, and loses 200 of the goods through abnormal wastage. At what amount should the remaining goods be measured in inventory, before any net realisable value test?

  1. 12,300
  2. 10,000
  3. 12,500
  4. 12,000 Correct answer.

Explanation

IAS 2 requires inventory cost to include the purchase price, import duties and transport costs directly attributable to bringing the goods to their present location and condition. Storage costs after purchase and abnormal wastage are excluded and expensed.

Question 44Financial Accounting

On 1 January 2023 a Myanmar entity bought a machine for 120,000 and depreciated it on the straight-line basis over eight years with no residual value. On 1 January 2026 the entity re-assessed the remaining useful life as four years from that date, with no change of method or residual value. What is the depreciation charge for the year ended 31 December 2026?

  1. 18,750 Correct answer.
  2. 25,000
  3. 9,375
  4. 15,000

Explanation

A revision of the estimated useful life is a change in accounting estimate applied prospectively. At 1 January 2026 the carrying amount is 75,000 (120,000 less three years of depreciation at 15,000), which is spread over the revised remaining four years to give 18,750.

Question 45Financial Accounting

Which of the following situations requires a Myanmar entity to recognise a provision in its statement of financial position at 31 December 2025?

  1. A customer's injury claim from goods sold in 2025, where an outflow is probable and reliably estimable at 40,000 Correct answer.
  2. A lawsuit notified in November 2025 where the entity's lawyers advise that any outflow is remote
  3. A guarantee of a supplier's bank loan where an outflow is only possible and cannot be measured reliably
  4. A board decision in December 2025 to refurbish a factory in 2026, with no contract signed and no work started

Explanation

A provision is recognised only where a present obligation exists from a past event, an outflow of resources is probable, and the amount can be reliably estimated. The product injury claim satisfies all three criteria, so 40,000 is recognised as a provision.

Question 46Financial Accounting

At 31 December 2025 an item of plant of a Myanmar entity has a carrying amount of 180,000. Its fair value less costs of disposal is 150,000 and its value in use is 160,000. What impairment loss must be recognised?

  1. 30,000
  2. Nil
  3. 20,000 Correct answer.
  4. 60,000

Explanation

Recoverable amount is the higher of fair value less costs of disposal (150,000) and value in use (160,000), which is 160,000. The impairment loss is the carrying amount of 180,000 less recoverable amount of 160,000, giving 20,000.

Question 47Financial Accounting

Which of the following errors made by a Myanmar entity will cause its trial balance to disagree?

  1. A credit purchase of 540 was entered in the purchases account as 450 and in the payables account as 450
  2. A cheque for 1,200 received from a customer was entered in the cash book as 210 Correct answer.
  3. A credit sale of 900 to a customer was completely omitted from the accounting records
  4. Goods returned by a customer were entered in the sales returns day book but not posted to the customer's account

Explanation

A trial balance disagrees only when the debit and credit sides of an entry differ in amount, or when an entry is made on one side only. Recording a receipt of 1,200 as 210 leaves 990 more on the debit side than on the credit side, so the trial balance will not balance.

Question 48Financial Accounting

A Myanmar entity sells a machine for 9,500. The machine had cost 40,000 and had accumulated depreciation of 32,000 at the date of sale. What is the gain or loss on disposal to be reported in profit or loss?

  1. Loss of 1,500
  2. Gain of 1,500 Correct answer.
  3. Gain of 17,500
  4. Loss of 30,500

Explanation

The carrying amount at disposal is cost of 40,000 less accumulated depreciation of 32,000, which is 8,000. Proceeds of 9,500 exceed the carrying amount by 1,500, so a gain of 1,500 is reported in profit or loss.

Question 49Financial Accounting

In 2026 a Myanmar entity discovers that inventory at 31 December 2025 was overstated by 30,000, so profit for 2025 was overstated. The 2025 financial statements were authorised for issue in March 2026 and the error is material. Ignoring tax, how should the correction be presented in the 2026 financial statements under IAS 8?

  1. As a charge against 2026 profit, with the 2025 comparative figures left unchanged
  2. As a reclassification within 2026 profit or loss, effective retrospectively only from 1 January 2026
  3. As a change in accounting policy, with the 2025 comparatives restated and the cumulative effect shown in other comprehensive income
  4. As an adjustment to the opening balance of retained earnings for 2026, with the 2025 comparative figures restated Correct answer.

Explanation

A material error discovered after the financial statements were authorised for issue is corrected retrospectively as a prior period error. The comparative figures are restated and the opening retained earnings of the earliest period presented is adjusted, with no charge to current-year profit.

Question 50Financial Accounting

A Myanmar entity reports profit before tax of 50,000 for the year. Depreciation charged was 12,000. Trade receivables increased by 5,000 and trade payables decreased by 3,000 during the year. Income tax paid was 8,000. Using the indirect method under IAS 7, what is the net cash generated from operating activities?

  1. 46,000 Correct answer.
  2. 62,000
  3. 54,000
  4. 38,000

Explanation

Depreciation is added back (50,000 + 12,000 = 62,000); the increase in receivables and decrease in payables are deducted as adverse working capital movements (62,000 - 8,000 = 54,000); tax paid of 8,000 is then deducted to give 46,000.