CONFIDENTIAL AC/DEC 2022/FAR210

UNIVERSITI TEKNOLOGI MARA

TEST (2nd)

COURSE : FINANCIAL ACCOUNTING 3

COURSE CODE : FAR 210

DATE : DEC 2022
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of two (2) parts: PART A (16 Multiple choice questions)
PART B (2 Short structured questions)

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) an Answer Booklet – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This question paper consists of 7 printed pages (including cover page)
1

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

 CONFIDENTIAL AC/DEC 2022/FAR210

PART A: Multiple Choice Questions

1. Choose the best statement to describe the Securities Commission.

A. A private sector professional accountancy bodies that regulate the financial accounting
and reporting in Malaysia
B. This body issued two sets of guidelines on financial reporting practices of financial
institutions.
C. It has a statutory power to conduct inspections and monitor programmes on registered
auditors.
D. A public sector statutory body established under the Securities Commission Act, 1993
with investigative and enforcement powers.

2. From the following, find the INCORRECT statement about the requirement of Companies
Act 2016?

A. The financial statements of a company must comply with the approved accounting
standards issued by MASB.
B. Directors of a company shall prepare the financial statements within 18 months from the
date of incorporation.
C. The consolidated financial statements for a financial year shall exclude all subsidiaries
of a company.
D. Every company must keep proper accounting and other records.

3. MPERS is a set of accounting standards issued for the application of the private entities.
Select the INCORRECT statement about the characteristic of the private entities.

A. A subsidiary to the public listed companies.

B. Not a subsidiary or associate to the entity that lodge a financial statement to Securities
Commission.
C. Not required to lodge a financial statement to Bank Negara Malaysia.
D. Required to comply with the approved accounting standards.

4. Financial Reporting Act 1997 has been gazetted on 6 March 1997. Two independent bodies
have been established. Choose the INCCORECT function of the Financial Reporting
Foundation.

A. Issue new accounting standards as approved accounting standards.

B. Review the performance of the MASB.
C. Provides its views to the MASB on the current issues that can be undertake.
D. Perform such other function as the Minister of Finance may prescribe by order
published in the Gazette.

5. Describe the functions of Malaysian Accounting Standards Board (MASB) under Section
7(1) of the Financial Reporting Act.

i. approving the budget or all financing arrangements for the operations.

ii. to issue statement of principles for financial reporting.
iii. to develop a conceptual framework.
iv. to sponsor or undertake the development of possible accounting standards.

© Hak Cipta Universiti Teknologi MARA 2 CONFIDENTIAL

 CONFIDENTIAL AC/DEC 2022/FAR210

A. i, ii and iii
B. ii and iii
C. ii, iii and iv
D. i and iv

6. Identify the entity that do NOT have power to enforce compliance.

A. Bank Negara Malaysia

B. Securities Commission
C. Inland Revenue Board (IRB)
D. Bursa Malaysia

7. Audit Oversight Board (AOB) are responsible to overseeing the auditors of public entities.
Choose the CORRECT statement about the powers of AOB.

A. To register auditors.
B. To sanction any registered auditors for failure to comply with any provisions on Pt
111A of the Securities Commission Act, 1993, notices or guidelines issued by the
Securities Commission.
C. To conduct the public consultation on registered auditors.
D. To monitor the performance of public entities.

8. Find the INCORRECT statement related to the requirements of Companies Act 2016 with
regards to system of internal control.

A. All records must be kept for seven years after the completion of the related
transactions.
B. The assets of the company are safeguarded against loss from unauthorized use or
disposal.
C. All transactions are properly authorized.
D. The transactions are recorded as necessary to enable the preparation of true and fair
view of the financial statements of the company.

9. The following statement describe:

 To comply with Approved Accounting Standards.

 To comply with the Companies Act 2016.
 To submit its audited financial statement to the Inland Revenue Board.
 To comply with Securities Commission’s guideline.

A. Partnership
B. Private company
C. Public company
D. Sole proprietorship

© Hak Cipta Universiti Teknologi MARA 3 CONFIDENTIAL

 CONFIDENTIAL AC/DEC 2022/FAR210

10. The following statements depict the situation about the financial reporting in Malaysia:

A. MFRS is a self-contained standard that comes in 35 sections related to financial

reporting by private entities.
B. Private entities now have a choice whether to voluntarily adopt MFRS Framework or by
January 2016, makes mandatory transition to the new MPERS Framework.
C. In November 2011, the MASB pronounced the new IFRS-compliant Financial Reporting
Standards known as the MPERS Framework.
D. In 2014, the MFRS Framework was endorsed as a standard for application by private
entities.

11. The 2018 Conceptual Framework is the revised version for the original Conceptual
Framework (2010). Identify the salient features of the revised Conceptual Framework.

i. The document came in eight chapters.

ii. It identifies relevance and reliability as the primary qualitative characteristics of
financial statements.
iii. The focus is to provide useful information to the primary users (investors,
potential investors, lenders and other creditors) rather than users generally.
iv. Adding a separate chapter on presentation and disclosure.

A. i, ii and iii
B. i, ii and iv
C. i, iii and iv
D. All of the above answers

12. Based on the following, choose the purpose of the revised Conceptual Framework.

i. to assist all parties to understand and interpret the Standards.

ii. to assist preparers to develop consistent accounting policies when no Standard
applies to a particular transaction or other event.
iii. to assist the MASB to develop MFRS Standards that are based on consistent
concept.
iv. to assist users to do more research about developing new accounting standards.

A. i, ii and iii
B. i, ii and iv
C. i, iii and iv
D. All of the above answers

13. From the following, identify two enhancing qualitative characteristics according to the 2018
Conceptual Framework.

A. Relevance and timeliness

B. Faithful representation and reliability
C. Completeness and materiality
D. Verifiability and understandability

© Hak Cipta Universiti Teknologi MARA 4 CONFIDENTIAL

 CONFIDENTIAL AC/DEC 2022/FAR210

14. When information is depicted without bias in the selection or presentation, it is to be said
that the information applies …………………………………. characteristic.

A. Neutrality
B. Completeness
C. Free from error
D. Verifiability

15. A reporting entity is an entity that is required, or chooses, to prepare financial statements.
Choose the CORRECT financial statements according to its types of reporting entity.

A. Single entity needs to prepare consolidated financial statements.

B. For both parent and subsidiary, they need to prepare unconsolidated financial
statements.
C. If a reporting entity comprises of two or more entities that are not all linked as parent-
subsidiary relationship, the reporting entity needs to prepare combined financial
statements.
D. If a reporting entity is the parent company alone, the reporting entity needs to prepare
consolidated financial statements.

16. If a company measures an item based on the present value of the cash flows or other
economic benefits that an entity expects to derive from the use of the item and from its
ultimate disposal, what is the most suitable measurement basis for this situation?

A. Current cost
B. Value in use
C. Fair value
D. Historical cost
(Total: 16 marks)

PART B: Short Structured Questions

Question 1

Rafflesia Perfume Bhd involves in manufacturing perfume-based products. Miss Alia who is the
owner of Rafflesia Perfume Bhd, had started the business three years ago with a total asset of
RM300,000. For this purpose, Miss Alia managed to secure a RM120,000 loan from BIMB and
another RM100,000 loan from Koperasi Usahawan Bumiputera of which both are payable
within 10 years.

Miss Alia had successfully managed Rafflesia Perfume Bhd and is confident to continue
handling the business activities in the future. Based on the increasing sales and growing market
demand, Miss Alia is also confident that Rafflesia Perfume Bhd will continue in business in the
foreseeable future.

On 15 July 2022, Rafflesia Perfume Bhd sold 45 boxes of perfume-based products amounted
to RM9,900 to Sakura Sdn Bhd. Rafflesia Perfume Bhd delivered the item on the same day.
Sakura Sdn Bhd paid RM3,900 cash upon delivery and the balance will be paid within 15 days.

© Hak Cipta Universiti Teknologi MARA 5 CONFIDENTIAL

 CONFIDENTIAL AC/DEC 2022/FAR210

Required:
Based on the above scenario:

a. Compute the initial equity claims of Rafflesia Perfume Bhd.

(2 marks)

b. Relevance is one of the fundamental characteristics listed in the Conceptual Framework.

Briefly assess on how the financial information can be considered as relevant.
(2 marks)

c. In the book of Rafflesia Perfume Bhd and based on the MASB’s revised (2018)
Conceptual Framework for Financial Reporting, assess whether the transaction on 15
July 2022 satisfy the definition of income.
(5 marks)
(Total: 9 marks)

Question 2

Rupawan Ent. involves in a production of facial masks. The company secured a contract from
the government to produce facial masks with SIRIM accreditation. In order to increase the
production capacity, the company constructed a new factory building in Segamat, Johor. The
construction commenced on 1 July 2021. The new factory building was immediately used once
the construction works completed on 1 September 2022. The estimated useful life of the new
constructed factory building is 20 years. The estimated salvage value of the new constructed
factory building is RM85,000. A similar factory building can be purchased in the market at
RM400,000.

The following costs were incurred on construction of the new factory building:

RM
Direct material 80,000
Direct labour 95,000
Electrical cabling and wiring 22,500
Engineer & architect fees 135,000
Installation of building security system 20,000
Direct overheads 7,500
Administrative overhead costs 3,000

Material wastage incurred during construction is RM30,000. During the construction period,
the company was also imposed by AgroBank with RM55,000 interest on loan taken by
Rupawan Ent. to finance the construction of the new factory building.

It is the policy of the company to depreciate the new factory building on straight line method,
yearly basis. Rupawan Ent. closes its books on 31 December every year.

Required:

a. Explain briefly three (3) reasons why information regarding the construction of a new
factory building would be useful to shareholders as well creditors.
(3 marks)

© Hak Cipta Universiti Teknologi MARA 6 CONFIDENTIAL

 CONFIDENTIAL AC/DEC 2022/FAR210

b. Discover whether the new constructed factory building satisfies the definition of an asset of
Rupawan Ent.
(3 marks)

c. Assess whether the new constructed factory building is an item of property, plant and
equipment in accordance with MFRS 116 Property, Plant and Equipment.
(3 marks)

d. Compute the initial cost of the new constructed factory building.

(3 marks)

e. Compute the depreciation of the new constructed factory building for the financial year end
31 December 2022.
(3 marks)

f. Rupawan Ent. has six (6) lorries used for delivery of its finished products to sales outlet
throughout the southern region. One (1) of the company’s lorries JUV1234 was involved
in an accident and damaged beyond repair. The management has decided to write off the
lorry JUV1234 from the company’s books at 30 May 2022. The lorry JUV1234 was
purchased on 1 April 2018 at a cost of RM152,000. The accumulated depreciation of the
lorry JUV1234 on 1 January 2022 is RM60,800. Rupawan Ent. received a cheque of
RM90,000 from Takafful GE Insurance as compensation.

Rupawan Ent. depreciates its lorries at 10% per annum, straight line method on yearly
basis.

As the Account Executive of Rupawan Ent.,

i. explain to the Junior Book-keeper whether Rupawan Ent. can derecognise the lorry
JUV1234 in accordance with MFRS116 Property, Plant and Equipment.
(5 marks)

ii. direct the Junior Book-keeper on the accounting treatment to write-off the lorry
JUV1234 from the company’s books at 30 May 2022.
(5 marks)
(Total: 25 marks)

END OF QUESTION PAPER

© Hak Cipta Universiti Teknologi MARA 7 CONFIDENTIAL