Financial Reporting
This principle requires that revenues and expenses be recognised in the same accounting period in which they are earned or incurred, regardless of cash flow.
Matching Principle Journal Entries
Complete the Standard: ISA 500 deals with _________.
Audit Evidence
This investment appraisal technique ignores the time value of money and measures how long it takes to recover the initial investment.
Payback Period
Which ethical principle requires accountants to avoid conflicts of interest and remain unbiased?
Objectivity.
What balance sheet account increases when a company purchases equipment using cash?
Asset
A trial balance shows: Debit side = ₹1,50,000; Credit side = ₹1,48,000. What does this difference indicate, and how should it be treated
Indicates a suspense account of ₹2,000; must be investigated and corrected.
Who am I?
I protect a company,
Yet I'm not insured.
When I'm weak,
Fraud smiles.
Internal Controls
An exporter expecting to receive US dollars in three months enters into an agreement today to lock in the exchange rate. This financial instrument is being used
Forward exchange contract
A company acquires another company and pays more than the fair value of its net assets.
IFRS 3 BUSINESS COMBINATIONS
What ratio measures a firm's ability to cover short-term obligations using only its most liquid assets, excluding inventory?
Quick (or Acid-test)
Riddle: I am the conservative rule for valuing goods on the shelf, I choose the lower of original cost or what you can actually sell them for yourself. What principle am I?
NRV (or Net-realizable-value)
A company occupies the 12th floor of a commercial building for 10 years. It pays a fixed monthly amount, cannot sell the property, and must return it to the owner when the agreement ends.Which risk is naturally highest in this situation?
Inherent Risk
A company expects interest rates to rise over the next six months and wants to protect the cost of its future borrowing. This derivative instrument can be used to hedge that risk.
Forward Rate Agreement
Under IFRS 16, what asset account is recognized on the balance sheet by a lessee at lease commencement?
Right-of-use
What term describes the risk that cannot be eliminated through portfolio diversification?
Systematic (or Market)
When a contract promises multiple distinct goods or services, I am the variable or fixed dollar amount allocated to each performance obligation based strictly on its standalone selling price proportion. What specific contract figure am I?
Transaction Price
Which financial statement assertion is tested when an auditor inspects title deeds to confirm real estate ownership?
Rights ( Rights and obligations)
This theory suggests that a company should choose a debt–equity mix that balances the tax benefits of debt against the increasing costs of financial distress.
Trade-off Theory of Capital Structure
Under IAS 2, what inventory valuation method is explicitly prohibited under IFRS rules?
LIFO - Last In First Out
If a project’s internal rate of return exceeds its cost of capital, what three letter metric measuring true economic value created above capital charges will strictly remain positive?
EVA (or Economic-value-added)
A parent company in India (functional currency INR) holds a 100% foreign subsidiary operating independently in Europe (functional currency EUR). At year-end, the subsidiary's financial statements are translated into INR for group consolidation.
Into which specific equity reserve component on the consolidated balance sheet must translation gains or losses arising from converting the subsidiary's net assets at the closing rate be recognized?
OCI (or Foreign-currency-translation-reserve)
During an external audit, you discover that the CEO is actively running a massive money laundering operation through dummy vendor accounts. When you confront the board, they threaten legal action if you breach client confidentiality, while applicable laws mandate immediate external reporting.
Under the IESBA Code of Ethics, what specific framework allows or mandates an auditor to override client confidentiality to report non-compliance with laws to authorities?
NOCLAR (Non-Compliance with Laws and Regulations)
A company operating in an inflationary environment discounts nominal cash flows using a real discount rate and concludes that a project has a positive NPV. The flaw in the analysis is that it has violated this fundamental principle of investment appraisal.
Consistency principle - matching nominal cash flows with a nominal discount rate, or real cash flows with a real discount rate.
Under the IESBA Code of Ethics (and ACCA/CPA frameworks), what specific conflict arises when a professional accountant’s objectivity is threatened by financial or other interests, leading them to promote a client’s or employer’s position to the point that their own independence is compromised?
Advocacy
Riddle:
I am the ultimate illusion on the financial statements: I strictly follow the matching principle by pairing current revenues with past historical costs. Yet, during rising prices, I trap a company in a hidden liquidity squeeze.
Even if sales volume stays completely flat, my artificially low Cost of Goods Sold creates a massive "paper profit." When tax day arrives, the tax authority demands real cash on those inflated earnings leaving the business with insufficient cash left over just to replace the physical inventory it just sold.
What accounting phenomenon am I?
Phantom profits (or Holding gains)