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Question to FA Test Paper FA No 4 |
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Test On Accounting Concept & Regulatory Framework |
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IDENTIFICATION OF THE VIOLATION OF THE FOLLOWING BASIC ACCOUNTING |
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(1) |
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Company A reported its fixed assets on its balance sheet at fair market value |
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(2) |
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Company A paid $20,000 insurance premium which relates for a period of two years period. It charged all this $20,000 out to the income statement as insurance expenses |
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(3) |
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Company A recognizes revenue for $20,000 advance payment received from its customers. However, the customer’s order can only be shipped next month. |
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(4) |
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Company A is involved in a major lawsuit where it has been sued for $100million relating to the infringement of its competitors patent. Company A felt that the suit is without merit and therefore does not disclosed its existence in its financial statements |
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(5) |
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Company A includes the personal assets of its principal shareholders. |
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Refer To Answer To FA No.4 |
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