ACCOUNTING FOR REVENUE AND EXPENSES

Which of the following is the first step in the MFRS 15 five-step model for revenue recognition?

• Determine the transaction price

• Identify the performance obligations

• Identify the contract with a customer

• Allocate the transaction price

Under MFRS 15, revenue is recognized when:

• Cash is received from the customer

• The performance obligation is satisfied

• The invoice is issued to the customer

• The product is manufactured

A contract contains multiple performance obligations. How should the transaction price be allocated?

• Based on the stand-alone selling price of each obligation

• Equally among all obligations

• Based on the cost incurred to fulfill each obligation

• Randomly as per management’s discretion

Under the accrual basis of accounting, when should an expense be recognized?

• When it is paid

• When it is incurred

• When it is budgeted

• When the invoice is received

Prepaid expenses are:

• Expenses that have been paid but not yet incurred

• Expenses that have been incurred but not yet paid

• Never recognized in financial statements

• Only recognized at the end of the year

The matching principle requires:

• Revenues to be recognized when received

• Expenses to be recognized when paid

• Expenses to be recognized in the same period as the revenues they help generate

• Expenses to be ignored if they are immaterial

Prepaid expenses are recorded as:

• An expense

• A liability

• An asset

• Equity

Under MFRS 15, when should revenue from the sale of goods be recognized?

• When the goods are shipped

• When the customer receives and accepts the goods

• When cash is received

• When an invoice is issued

Which of the following is a step in the five-step revenue recognition model?

• Measure the profit margin

• Identify the contract with a customer

• Calculate total expenses

• Record cash flows

Which of the following is an example of a capital expenditure?

• Salaries

• Purchase of equipment

• Electricity expenses

• Rent