The 'Expected Credit Loss' for trade receivables: MCQ with Answer and Explanation

The 'Expected Credit Loss' for trade receivables:

A. Can use simplified approach (lifetime ECL) if there is no significant financing component

B. Always requires 12-month ECL

C. No impairment

D. Only when default occurs

Answer: Option A

Ind AS 109 allows the simplified approach for trade receivables and contract assets.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1 Report Error

As per Schedule III of the Companies Act 2013, a liability is classified as current if it is expected to be settled within:

A. 24 months

B. 5 years

C. 12 months or the company's operating cycle

D. 6 months

Correct Answer: Option C

Explanation:
A liability is current if it is due to be settled within 12 months after the reporting date or within the normal operating cycle.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2 Report Error

The 'First-time Adoption of Ind AS' (Ind AS 101) requires:

A. Prospective application

B. Full retrospective application of all Ind AS with certain optional exemptions and mandatory exceptions

C. Only current year change

D. No changes

Correct Answer: Option B

Explanation:
Ind AS 101 sets the transition rules with some relief.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #3 Report Error

Which ratio measures the profitability of a business relative to shareholders' funds?

A. Net profit ratio

B. Gross profit ratio

C. Return on equity (ROE)

D. Current ratio

Correct Answer: Option C

Explanation:
ROE = Net Profit / Shareholders' Equity. It measures how effectively management is using equity to generate profit.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping