Current Liabilities – NBC Institute

AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

Question

You are part of an audit team engaged on the audit of an engineering company which has a substantial amount of plant and machinery in its books. While reviewing the accounts, you also observed that there were some current assets and liabilities that may require external confirmations.

Required:

a. How would you establish the amount and level of audit evidence required for the current assets and liabilities? (5 Marks)

b. State which procedures will be applied to generate audit evidence in the following scenarios:

i. Confirming the accuracy of figures in the trade receivables account
ii. Confirming that the plant and machinery purchased in the year is actually in use during the year
iii. Ascertaining that the change in performance is in line with expectations
iv. Confirming the accuracy of the total receivable figures in the statement of financial position
v. Confirming contingent liability as to legal fees (5 Marks)

c. State the audit procedures you would take concerning the disposal of plant and machinery. (5 Marks)

d. State the requirements of ISA 505 concerning maintaining control over the external confirmation requests of current assets and liabilities. (5 Marks)

Answer

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Tags: Audit evidence, Current Liabilities, Engineering Assets, External Confirmations, ISA 505 Compliance, Plant and Machinery Disposal
Level: Level 2

Topic: Audit evidence
Series: NOV 2022

AA – Nov 2014 – L2 – Q2 – Audit Evidence

Discuss factors affecting sufficiency of audit evidence and audit procedures for current liabilities in Radcliffe Co.

Question

Radcliffe Co.

ISA 500 Audit Evidence states that the objective of the auditor is to “design and perform audit procedures in such a way as to enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion.”

Required:

a. List and explain the factors which will influence the auditors’ judgment concerning the sufficiency of audit evidence obtained. (4 Marks)

b. You are the audit senior in charge of the audit of Radcliffe Co, a company that has been trading for over 50 years. Radcliffe Co manufactures and sells tables and chairs directly to the public. The company’s year-end is 31 December. Current liabilities are shown on Radcliffe Co’s statement of financial position as follows:

Description	2013	2012
Trade payables	884,824	816,817
Accruals	56,903	51,551
Provision for legal action	60,000	–
Total	1,001,727	868,368

The provision for legal action relates to a claim from a customer who suffered an injury while assembling a chair supplied by Radcliffe Co. The directors of Radcliffe Co dispute the claim, although they are recommending an out-of-court settlement to avoid damaging publicity.

List the substantive audit procedures that you should undertake in the audit of the current liabilities of Radcliffe Co for the year ended 31 December 2013. For each procedure, explain the purpose.

Marks are allocated as follows:

Trade payables (9 Marks)
Accruals (3 Marks)
The provision for legal action (4 Marks)

Answer

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Tags: Audit evidence, Audit Judgment, Current Liabilities, ISA 500, Substantive Procedures
Level: Level 2

Topic: Audit evidence

FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts

This question asks for the term used to describe the excess of current assets over current liabilities.

Question

The excess of current assets over current liabilities is referred to as?

Answer

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Tags: Current Assets, Current Liabilities
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2011

MI – Nov 2014 – L1 – SB – Q1 – Budgeting

This question focuses on defining working capital, explaining the working capital cycle, and calculating it based on given data.

Question

a. Working capital is generally understood to mean the difference between current assets and current liabilities. Explain the term working capital cycle. (2 Marks)
b. List FIVE factors that determine the working capital requirements of a firm. (5 Marks)
c. GLORY Limited has provided you with the following data regarding next year’s budget that has just been presented to the board by the financial controller of the company:

Budgeted Average Amount Outstanding	N
Inventory: Raw materials	480,000
Work-in-Progress	360,000
Finished goods	244,800
Receivables	600,600
Payables	(422,400)
Budgeted Average Working Capital	1,263,000

The following are available daily averages:

Daily Averages	N
Revenue	9,240
Cost of Sales	7,200
Purchases of raw materials	3,840

You are required to compute the working capital cycle based on the above figures. (13 Marks)

Answer

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Tags: Cash Cycle, Current Assets, Current Liabilities, Working Capital, Working Capital Management
Level: Level 1

Topic: Budgeting
Series: NOV 2014

FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-

Identify where students' subscription received in advance is recognized in the statement of financial position.

Question

In which of the following segments of the statement of financial position of the Institute of Professional Accountants is students’ subscription received in advance recognized?

A. Non-current assets
B. Fictitious assets
C. Current assets
D. Current liabilities
E. Intangible assets

Answer

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Tags: Current Liabilities, Prepayments, Subscription
Level: Level 1

Topic: Accruals and Prepayments
Series: NOV 2019

FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-

Calculate the working capital of the business.

Question

Calculate the working capital of the business.

The extract from the financial statements of Benchmark Ventures for the year ended September 30, 2019, is as follows:

Capital: N84,000
Net profit: N15,000
Drawings: N9,000
Cash and cash equivalent: N3,000
Accounts payables: N50,000
Inventory: N29,000
Accounts receivables: N35,000

Answer

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Tags: Current Assets, Current Liabilities, Working Capital
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2019

FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications

Treatment of under-provision of tax for Daaho Ltd for the year ending 31 August 2019. Question:

Question

Daaho Ltd (Daaho) manufactures and distributes security equipment. Daaho prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 August each year.

On 31 August 2019, the taxation liability account in the books of Daaho Ltd showed a debit balance of GH¢17,500 after paying the 2018 liability. The estimated liability for 2019 is GH¢84,500 and no entry has yet been made to record this.

Required:
Explain the appropriate accounting treatment of the above transaction for the year ending 31 August 2019.
(3 marks)

Answer

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Tags: Current Liabilities, Income Tax, Provision, Taxation Liability

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2019

AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

Question

Required:

a. How would you establish the amount and level of audit evidence required for the current assets and liabilities? (5 Marks)

b. State which procedures will be applied to generate audit evidence in the following scenarios:

c. State the audit procedures you would take concerning the disposal of plant and machinery. (5 Marks)

d. State the requirements of ISA 505 concerning maintaining control over the external confirmation requests of current assets and liabilities. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Current Liabilities, Engineering Assets, External Confirmations, ISA 505 Compliance, Plant and Machinery Disposal
Level: Level 2

Topic: Audit evidence
Series: NOV 2022

AA – Nov 2014 – L2 – Q2 – Audit Evidence

Discuss factors affecting sufficiency of audit evidence and audit procedures for current liabilities in Radcliffe Co.

Question

Radcliffe Co.

Required:

a. List and explain the factors which will influence the auditors’ judgment concerning the sufficiency of audit evidence obtained. (4 Marks)

Description	2013	2012
Trade payables	884,824	816,817
Accruals	56,903	51,551
Provision for legal action	60,000	–
Total	1,001,727	868,368

List the substantive audit procedures that you should undertake in the audit of the current liabilities of Radcliffe Co for the year ended 31 December 2013. For each procedure, explain the purpose.

Marks are allocated as follows:

Trade payables (9 Marks)
Accruals (3 Marks)
The provision for legal action (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Audit Judgment, Current Liabilities, ISA 500, Substantive Procedures
Level: Level 2

Topic: Audit evidence

FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts

This question asks for the term used to describe the excess of current assets over current liabilities.

Question

The excess of current assets over current liabilities is referred to as?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Assets, Current Liabilities
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2011

MI – Nov 2014 – L1 – SB – Q1 – Budgeting

This question focuses on defining working capital, explaining the working capital cycle, and calculating it based on given data.

Question

Budgeted Average Amount Outstanding	N
Inventory: Raw materials	480,000
Work-in-Progress	360,000
Finished goods	244,800
Receivables	600,600
Payables	(422,400)
Budgeted Average Working Capital	1,263,000

The following are available daily averages:

Daily Averages	N
Revenue	9,240
Cost of Sales	7,200
Purchases of raw materials	3,840

You are required to compute the working capital cycle based on the above figures. (13 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cash Cycle, Current Assets, Current Liabilities, Working Capital, Working Capital Management
Level: Level 1

Topic: Budgeting
Series: NOV 2014

FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-

Identify where students' subscription received in advance is recognized in the statement of financial position.

Question

In which of the following segments of the statement of financial position of the Institute of Professional Accountants is students’ subscription received in advance recognized?

A. Non-current assets
B. Fictitious assets
C. Current assets
D. Current liabilities
E. Intangible assets

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Liabilities, Prepayments, Subscription
Level: Level 1

Topic: Accruals and Prepayments
Series: NOV 2019

FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-

Calculate the working capital of the business.

Question

Calculate the working capital of the business.

The extract from the financial statements of Benchmark Ventures for the year ended September 30, 2019, is as follows:

Capital: N84,000
Net profit: N15,000
Drawings: N9,000
Cash and cash equivalent: N3,000
Accounts payables: N50,000
Inventory: N29,000
Accounts receivables: N35,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Assets, Current Liabilities, Working Capital
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2019

FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications

Treatment of under-provision of tax for Daaho Ltd for the year ending 31 August 2019. Question:

Question

Daaho Ltd (Daaho) manufactures and distributes security equipment. Daaho prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 August each year.

Required:
Explain the appropriate accounting treatment of the above transaction for the year ending 31 August 2019.
(3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Liabilities, Income Tax, Provision, Taxation Liability

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2019

Question Tag: Current Liabilities

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AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

AA – Nov 2014 – L2 – Q2 – Audit Evidence

Discuss factors affecting sufficiency of audit evidence and audit procedures for current liabilities in Radcliffe Co.

FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts

This question asks for the term used to describe the excess of current assets over current liabilities.

MI – Nov 2014 – L1 – SB – Q1 – Budgeting

This question focuses on defining working capital, explaining the working capital cycle, and calculating it based on given data.

FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-

Identify where students' subscription received in advance is recognized in the statement of financial position.

FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-

Calculate the working capital of the business.

FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications

Treatment of under-provision of tax for Daaho Ltd for the year ending 31 August 2019. Question:

AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

AA – Nov 2014 – L2 – Q2 – Audit Evidence

Discuss factors affecting sufficiency of audit evidence and audit procedures for current liabilities in Radcliffe Co.

FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts

This question asks for the term used to describe the excess of current assets over current liabilities.

MI – Nov 2014 – L1 – SB – Q1 – Budgeting

This question focuses on defining working capital, explaining the working capital cycle, and calculating it based on given data.

FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-

Identify where students' subscription received in advance is recognized in the statement of financial position.

FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-

Calculate the working capital of the business.

FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications

Treatment of under-provision of tax for Daaho Ltd for the year ending 31 August 2019. Question:

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AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

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AA – Nov 2014 – L2 – Q2 – Audit Evidence

Discuss factors affecting sufficiency of audit evidence and audit procedures for current liabilities in Radcliffe Co.

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FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts

This question asks for the term used to describe the excess of current assets over current liabilities.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts"

MI – Nov 2014 – L1 – SB – Q1 – Budgeting

This question focuses on defining working capital, explaining the working capital cycle, and calculating it based on given data.

You're reporting an error for "MI – Nov 2014 – L1 – SB – Q1 – Budgeting"

FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-

Identify where students' subscription received in advance is recognized in the statement of financial position.

You're reporting an error for "FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-"

FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-

Calculate the working capital of the business.

You're reporting an error for "FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-"

FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications

Treatment of under-provision of tax for Daaho Ltd for the year ending 31 August 2019. Question:

You're reporting an error for "FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications"

AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

You're reporting an error for "AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities"

AA – Nov 2014 – L2 – Q2 – Audit Evidence

Discuss factors affecting sufficiency of audit evidence and audit procedures for current liabilities in Radcliffe Co.

You're reporting an error for "AA – Nov 2014 – L2 – Q2 – Audit Evidence"

FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts

This question asks for the term used to describe the excess of current assets over current liabilities.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q18 – Accounting Concepts"

MI – Nov 2014 – L1 – SB – Q1 – Budgeting

This question focuses on defining working capital, explaining the working capital cycle, and calculating it based on given data.

You're reporting an error for "MI – Nov 2014 – L1 – SB – Q1 – Budgeting"

FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-

Identify where students' subscription received in advance is recognized in the statement of financial position.

You're reporting an error for "FA – Nov 2019 – L1 – SA – Q17 – Accounting Treatment for Accruals and Prepayments-"

FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-

Calculate the working capital of the business.

You're reporting an error for "FA – Nov 2019 – L1 – SA – Q10 – Financial Statements Preparation-"

FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications

Treatment of under-provision of tax for Daaho Ltd for the year ending 31 August 2019. Question:

You're reporting an error for "FR – Nov 2019 – L2 – Q2a – Financial Reporting Standards and Their Applications"

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