Quiz 2

What are the two common methods for recording transactions in branch accounting?

• Single-entry and double-entry

• Cash basis and accrual basis

• Centralized and decentralized accounting system

• Perpetual and periodic inventory systems

What is the purpose of maintaining branch accounting records at the head office?

• To record changes in capital, liabilities, and assets

• To ascertain branch profitability

• To monitor theft or fraud at the branches

• All of the above

What does IAS 21 deal with?

• Depreciation of assets

• Effects of changes in foreign exchange rates

• Valuation of inventory

• Revenue recognition

How are foreign currency monetary items translated at the balance sheet date under IAS 21?

• Using the exchange rate at the date of transaction

• Using the closing rate

• Using the historical rate

• Using the fair value rate

What is the main benefit of keeping branch accounting records at headquarters?

• Easier control and monitoring

• Higher profitability

• Increased independence for branches

• Less need for auditors

How are non-monetary items measured at fair value in a foreign currency translated?

• Using the closing rate when the trial balance was prepared

• Using the exchange rate at the date when the fair value was determined

• Using the exchange rate at the transaction date of the tems

• Using the historical rate when the non-monetary items were purchased

Which of the following transactions would NOT be affected by IAS 21?

• Selling goods to a local customer

• Purchasing inventory from a foreign supplier

• Borrowing a loan in foreign currency

• Holding foreign currency bank balances

Which of the following statements about monetary and non-monetary items is TRUE?

• Monetary items are fixed and do not change in value

• Non-monetary items include accounts receivable

• Monetary items include cash and trade receivables

• Non-monetary items are translated using the closing rate

How can a business reduce the risk of theft at its branches?

• Conduct frequent stock audits

• Remove security cameras

• Allow all employees to handle cash

• Avoid keeping any financial records

If a foreign currency transaction was completed at an exchange rate of 4.5, but at the balance sheet date the rate is 4.7, how would this affect a monetary liability?

• The liability would decrease

• The liability would increase

• The liability would remain unchanged

• The liability would be eliminated