🎯GAAP and IFRS: 7 MCQs

Responses

1. 

   Dean Aranha 23 January 2025

   But has not the furniture been purchased , we would have to record the purchase of new furniture because it would affect the cash or creditors.

   1. 

      Maroun, CPA 27 January 2025

      Hi Dean,

      Although the purchase agreement has been made, the furniture will not be delivered until next year. Under accrual accounting, transactions are recorded when the goods or services are received (or earned) and not simply when an agreement is made.
      In this case, a journal entry would only be required in the current year if cash has been paid upfront. If the company has already paid for the furniture, the journal entry would be:
      DR Prepaid Expense
      CR Cash

      However, if no payment has been made, and the furniture is not delivered yet, there’s no journal entry to record because no expense has been incurred, and no liability exists. The purchase will only impact the financial statements in the future when the furniture is delivered.

      Let me know if this clears things up!

      1. 

         HARIS BEG 5 February 2026

         Agreed, but the question did not make it clear whether an advance payment was made this year for the furniture.

         1. 

            Maroun, CPA 9 February 2026

            Hello Haris,

            You’re right that an advance payment could change the accounting. However, absent any additional information, we cannot assume that ABC made a deposit or paid cash this year.

            Based on what is given (“will be delivered next year”), the intent is that this is only a future purchase/commitment, and therefore it does not affect the current-year financial statements.

            By contrast, accrued wages payable relates to services already received in the current period, so recording the accrual is clearly the correct answer.

            Hope this helps!

2. 

   Mohammad Ali 28 August 2025

   Ah i got confused a personal loan taken by CEO is wrong because the CEO is just taking a personal loan. Not from the company.

   1. 

      Maroun, CPA 3 September 2025

      Hello Mohammad,

      Exactly! A personal loan means the CEO borrows money for personal use, usually from a bank, credit union, or other lender. It is not automatically connected to the company. Unless the company itself is the lender (which would then be reported as a loan receivable on the company’s books), it has no effect on the corporation’s financial statements.

      That’s why, in MCQ # 1, the option “a personal loan taken by the CEO” is not relevant—because the scenario did not specify that the company was involved in the transaction.

      I hope this helps!

3. 

   Al Mamun 8 November 2025

   I like the quiz

   1. 

      Maroun, CPA 10 November 2025

      Hello Al,

      Thank you for your feedback! Glad to hear that.