Multiple Choice Questions
1. Provisions for risks and liabilities are recorded
(a) In the expenses
(b) In the revenues
(c) In the shareholders’ equity and liabilities
(d) As a contra-asset
(e) None of these
2. An example of financial liabilities is
(a) Income tax payable
(b) Unearned revenues
(c) Bank borrowings
(d) Salaries payable
(e) None of these
3. An example of a current liability is
(a) Bank loan or borrowing (long-term portion)
(b) Unearned revenues
(c) Share capital
(d) Retained earnings
(e) None of these
4. An example of an item that is not a current liability is
(a) Accrued expenses
(b) Prepaid expenses
(c) Salaries payable
(d) Accounts payable
(e) Unearned revenues
(f) None of these
5. Warranty costs are recognized as an expense
(a) At the time the products covered by the warranty are sold
(b) At the time the costs are really incurred
(c) None of these
6. When the balance sheet is presented by nature, the current portion of a long-term liability is still included in the financial liabilities section of the balance sheet
(a) True
(b) False
7. Notes payable represent bills of exchange or promissory notes
(a) True
(b) False
8. The net salary (after deduction of withholdings) is recorded as such as an expense
(a) True
(b) False
9. A contingent liability is recorded
(a) As part of the assets
(b) As part of the shareholders’ equity and liabilities
(c) As part of the revenues
(d) As part of the expenses
(e) None of these
10. A provision for restructuring can be recorded as soon as a company has decided to close a business entity
(a) True
(b) False