Accounting and Auditing - Financial Accounting Questions
42. Which of the following statements about reserves is incorrect?
- A
There is no definition of a reserve in the accounting standard or in the Corporations Act.
- B
Reserves may be established by normal practice.
- C
Movements in a revaluation reserve can be reclassified in a later period as part of profit or loss.
- D
The reserve's accounts of a company are regarded as equity.
43. For a company, retained earnings represent:
- A
contributed equity from shareholders;
- B
profits retained by the company before tax is paid to the government;
- C
net cash retained by the company before any payment for dividends to shareholders;
- D
profits retained by the company after payment and provision for dividends, and after any transfer to and from reserves;
- A
The tax-effect method focuses on the differences between an entity’s balance sheet prepared under accounting standards and its tax-based balance sheet prepared in accordance with income tax legislation.
- B
Accounting entries for current tax liabilities and assets are based on an assessment of an entity’s current taxable income or tax loss.
- C
AASB 112 requires a company to account for both the current and the future tax consequences of its economic events.
- D
Income tax expense recognized in the accounting records as a result of movements in current tax liabilities (assets).
