The 'Impairment of Assets' testing: Goodwill is allocated to: MCQ with Answer and Explanation

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The 'Impairment of Assets' testing: Goodwill is allocated to:

A. Parent company only

B. All assets equally

C. Cash-generating units (CGUs) or groups of CGUs that are expected to benefit from synergies

D. Individual assets

Answer: Option C

Solution (By JKSSB Mock Tests)

Goodwill must be tested for impairment at the CGU level.

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

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Question #1

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If a company changes its depreciation method from Straight Line to Written Down Value to manipulate profits, which accounting convention is violated?

A. Materiality

B. Consistency

C. Full Disclosure

D. Conservatism

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Correct Answer: Option B

Explanation:
The convention of Consistency requires that accounting policies remain unchanged from one period to another to allow valid comparisons.

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Question #2

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The use of artificial intelligence (AI) in accounting is currently transforming:

A. The legal definition of a company

B. Automated invoice processing and anomaly detection

C. The abolition of all taxes

D. The basic accounting equation

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Correct Answer: Option B

Explanation:
AI automates routine tasks like data entry and enhances fraud detection by recognizing patterns (anomalies) faster than human auditors.

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Question #3

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Under Cost Accounting, abnormal wastage of material is transferred to:

A. Costing Profit & Loss Account

B. Finished Goods Account

C. Factory Overheads Account

D. Work in Progress Account

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Correct Answer: Option A

Explanation:
Abnormal losses are not treated as a cost of production; they are transferred directly to the Costing P&L account to avoid inflating product costs.

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