PAS 1 Presentation of Financial Statement:

Statement of financial Position

Financial Statements are the means by which the information accumulated and processed in financial accounting is
periodically communicated to the users.

General purpose financial statements

 Simply referred to as financial statements are those intended to meet the needs of users who are not in a position to
require an entity to prepare reports tailored to their particular information needs.
 Are directed to all common users and not to specific users.

Components of financial statements:

 Statement of financial position
 Income statement
 Statement of comprehensive income
 Statement of changes in equity
 Statement of cash flows
 Notes, comprising a summary of significant accounting policies and other explanatory notes

Objective of financial statements

 To provide information about the financial position, financial performance and cash flows of an entity that is useful
to a wide range of users in making economic decisions.
 Financial statements also shows the result of the management’s stewardship of the resources entrusted to it.

Statement of financial position

 A statement of financial position is a formal statement showing the three elements comprising financial position,
namely assets, liabilities and equity.
 Investors, creditors and other statement users analyze the statement of financial position to evaluate such factors as
liquidity, solvency and the need of the entity for additional financing.

ASSETS
CURRENT ASSETS NONCURRENT ASSETS
 Cash and cash equivalents  Property, plant and equipment
 Financial assets at fair value such as  Long-term investments
trading securities and other  Intangible assets
investments in quoted equity  Deferred tax assets
instrument  Other noncurrent assets
 Trade and other receivables
 Inventories
 Prepaid expenses

LIABILITY
CURRENT LIABILITIES NONCURRENT LIABILITIES
 Trade and other payables  Noncurrent portion of long-term debt
 Current provisions  Finance lease liability
 Short-term borrowing  Deferred tax liability
 Current portion of long-term debt  Long-term obligations to company
 Current tax liability officers
 Long-term deferred revenue

EQUITY
 Owner’s equity in a proprietorship
 Partner’s equity in a partnership
 Stockholders’ equity or shareholders’ equity in a corporation
Asset is an economic resource controlled by an entity as a result of past event

Economic resource is a right that has the potential to produce economic benefits

Property, plant and equipment defines as tangible assets which are held by an entity or use in production or supply of
goods and services, for rental to others, or for administrative purposes, and are expected to be used during more than one
period.
 Land (Cost less Accumulated Depreciation), Building, Machinery, Equipment, Furniture. Fixture, Patterns, Molds,
Dies and Tools.

Long-term investments defines as an asset held by an entity for the accretion of wealth through capital distribution, such
as interest, royalties, dividends and rentals, for capital appreciation or for other benefits to the investing entity such as those
obtained through trading relationships

Other noncurrent
Intangible assets asset
defined as an identifiable nonmonetary asset without physical substance
  Long-term advances to officers, directors, shareholders and employees, or abandoned property and long-term
Identifiable
refundable deposit.
o Patent, Franchise, Copyright, Lease right, Trademark and Computer software
 Unidentifiable
Liability is a present obligation of an entity to transfer an economic resource as a result of past event
o Goodwill
Trade and other payables
 Accounts payable
 Notes payable
 Accrued interest on note payable
 Dividend payable
 Accrued expenses

Equity- is the residual interest in the assets of the entity after deducting all of its liabilities

Shareholders’ equity is the residual interest of owners in the net assets of a corporation measured by the excess of assets
over liabilities

Notes to financial statements provide narrative description or disaggregation of items presented in the financial statements
and information about items that do not qualify for recognition

Forms of statement of financial position

1. Report form – Sets three major sections in a downward sequence of assets, liabilities and equity.
2. Account form – The presentation follows that of an account, meaning, the assets are shown on the left side and
the liabilities and equity on the right side of the statement of financial position.

Problem 1
Simple Company provided the following accounr balances on December 31, 2019:

Share capital 5,000,000

Share premium 500,000
Retained earnings 880,000
Serial bonds payable (P500,000 due every July 1 of each year 2,500,000
Employees income tax payable 20,000
Notes payable 100,000
 Accrued expenses 30,000
Accrued interest on note payable 10,000
income tax payable 60,000
Allowance for doubtful accounts 50,000
Advances from customers 100,000
Accounts receivable 500,000
Accumulated depreciation-building 1,600,000
Accumulated depreciation-machinery 1,300,000
Investment in bonds 1,500,000
Land 1,500,000
Machinery 2,000,000
Factory supplies 50,000
Notes receivable 150,000
Building 4,000,000
Cash 420,000
Claim receivable 20,000
Finished goods 400,000
Franchise 200,000
Goods in process 600,000
Prepaid insurance 20,000
Raw materials 200,000
Trading securities 250,000
Tools 40,000
Goodwill 100,000
Plant expansion fund 500,000
Accounts payable 300,000

Required: Prepare a properly classified statement of financial position on December 31, 2019

Problems 1 Answer

Simple Company
Statement of Financial Position
December 31, 2019

ASSETS

Current assets: Note

Cash 420,000
Trading securities 250,000
Trade and other receivables (1) 620,000
Inventories (2) 1,250,000
 Prepaid expenses (3) 20,000
Total current assets 2,560,000

Noncurrent assets:
Property, plant and equipment (4) 4,640,000
Long-term investments (5) 2,000,000
Intangible assets (6) 300,000
Total noncurrent assets 6,940,000
Total assets 9,500,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities: Note

Trade and other payables (7) 620,000
Serial bonds payable - current portion 500,000
Total current liabilities 1,120,000

Noncurrent liabilities:
Serial bonds payable - remaining portion 2,000,000

Shareholders’ equity:
Share capital 5,000,000
Share premium 500,000
Retained earnings 880,000
Total shareholders’ equity 6,380,000
Total liabilities and shareholders’ equity 9,500,000

Note 1 - Trade and other receivables

Accounts receivable 500,000

Allowance for doubtful accounts ( 50,000)
Notes receivable 150,000
Claim receivable 20,000
Total 620,000

Note 2 - Inventories

Finished goods 400,000

Goods in process 600,000
Raw materials 200,000
Factory supplies 50,000
Total 1,250,000

Note 3 - Prepaid expenses

Prepaid insurance 20,000

Note 4 - Property, plant and equipment

Accum. Book
Cost depr. value
Land 1,500,000 - 1,500,000
Building 4,000,000 1,600,000 2,400,000
Machinery 2,000,000 1,300,000 700,000
Tools 40,000 - 40,000
Total 7,540,000 2,900,000 4,640,000

Note 5 - Long-term investments

Investment in bonds 1,500,000

Plant expansion fund 500,000
Total 2,000,000

Note 6 - Intangible assets

Franchise 200,000
Goodwill 100,000
Total 300,000

Note 7 - Trade and other payables

Accounts payable 300,000

Notes payable 100,000
Income tax payable 60,000
Advances from customers 100,000
Accrued expenses 30,000
Accrued interest on note payable 10,000
Employees income tax payable 20,000
Total 620,000

Problem 2
Exemplar Company provided the following account balances on December 31, 2019

Accounts receivable 400,000

Advances to officers-not currently collectible 100,000
Sinking fund 400,000
Building 5,000,000
Long-term refundable deposit 50,000
Cash and cash equivalents 500,000
Cash surrender value 60,000
Equipment 1,000,000
Patent 100,000
Accrued interest on notes receivable 10,000
Inventories 1,300,000
Land 1,500,000
Land held for speculation 500,000
Notes receivable 250,000
Computer software 3,250,000
Prepaid expenses 70,000
Trading securities 280,000
Unearned rent income 40,000
 Retained earnings (deficit) (1,800,000)
Share premium – preference 500,000
Premium on bonds payable 1,000,000
Preference share capital 2,000,000
Share premium – ordinary 200,000
Notes payable 300,000
SSS payable 10,000
Accounts payable 400,000
Accrued salaries 100,000
Accumulated depreciation – building 2,00,000
Accumulated depreciation – equipment 200,000
Allowance for doubtful accounts 20,000
Bonds payable 5,000,000
Dividends payable 120,000
Ordinary share capital 5,000,000
Withholding tax payable 30,000
Preference share redemption fund 350,000

Required: Prepare a properly classified statement of financial position on December 31, 2019

Problems 2 Answer
Exemplar Company
Statement of Financial Position
December 31, 2019

ASSETS

Current assets: Note

Cash and cash equivalents 500,000
Trading securities 280,000
Trade and other receivables (1) 640,000
Inventories 1,300,000
Prepaid expenses 70,000
Total current assets 2,790,000
Noncurrent assets:
Property, plant and equipment (2) 5,300,000
Long-term investments (3) 1,310,000
Intangible assets (4) 3,350,000
Other noncurrent assets (5) 150,000
Total noncurrent assets 10,110,000
Total assets 12,900,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

 Note
Current liabilities:
Trade and other payables (6) 1,000,000
Noncurrent liabilities:
Bonds payable 5,000,000
Premium on bonds payable 1,000,000
Total noncurrent liabilities 6,000,000

Shareholders’ equity:
Share capital (7) 7,000,000
Reserves (8) 700,000
Retained earnings (deficit) (1,800,000)
Total shareholders’ equity 5,900,000
Total liabilities and shareholders’ equity 12,900,000

Note 1 - Trade and other receivables

Accounts receivable 400,000

Allowance for doubtful accounts ( 20,000)
Notes receivable 250,000
Accrued interest on notes receivable 10,000
Total 640,000

Note 2 - Property, plant and equipment

Accum. Book
Cost depr. value
Land 1,500,000 - 1,500,000
Building 5,000,000 2,000,000 3,000,000
Equipment 1,000,000 200,000 800,000
Total 7,500,000 2,200,000 5,300,000

Note 3 - Long-term investments

Land held for speculation 500,000

Sinking fund 400,000
Preference share redemption fund 350,000
Cash surrender value 60,000
Total 1,310,000

Note 4 - Intangible assets

Computer software 3,250,000

Lease rights 100,000
Total 3,350,000
Note 5 - Other noncurrent assets

Advances to officers, not collectible currently 100,000

Long-term refundable deposit 50,000
Total 150,000

Note 6 - Trade and other payables

Accounts payable 400,000

Notes payable 300,000
Unearned rent income 40,000
SSS payable 10,000
Accrued salaries 100,000
Dividends payable 120,000
Withholding tax payable 30,000
Total 1,000,000

Note 7 – Share capital

Preference share capital 2,000,000

Ordinary share capital 5,000,000
Total 7,000,000

Note 8 - Reserves

Share premium – preference 500,000

Share premium – ordinary 200,000
Total 700,000
Problem 3
Relax Company provided the following information for the purpose of presenting the statement of financial position
on December 31, 2019:

Cash 400,000
Accounts receivable 800,000
Allowance for doubtful accounts 50,000
Inventories 1,000,000
Land 500,000
Building 5,000,000
Accumulated depreciation – building 2,000,000
Machinery 3,000,000
Accumulated depreciation – machinery 1,200,000
Equipment 400,000
Accumulated depreciation – equipment 100,000
Investment in associate 1,300,000
Prepaid expenses 100,000
Notes payable 750,000
Accounts payable 350,000
Income tax payable 50,000
Accrued expenses 60,000
Mortgage note payable in quarterly installments of P100,000 2,000,000
Estimated liability for damages 140,000
Retained earnings appropriated for plant expansion 1,000,000
Retained earnings appropriated for contingencies 100,000
Share capital 3,000,000
Share premium 300,000
Retained earning unappropriated 1,250,000
Trademark 150,000
Secret processes and formulas 200,000
Bank loan payable – due June 30, 2021 500,000
Required: Prepare in good form a properly classified statement of financial position on December 31, 2019 with
supporting notes and computations

Problems 3 Answer
Relax Company
Statement of Financial Position
December 31, 2019

ASSETS

Current assets: Note

Cash 400,000
Trade accounts receivable (1) 750,000
Inventories 1,000,000
Prepaid expenses 100,000
Total current assets 2,250,000
Noncurrent assets:
Property, plant and equipment (2) 5,600,000
Investment in associate 1,300,000
Intangible assets (3) 350,000
Total noncurrent assets 7,250,000
Total assets 9,500,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

Note
Current liabilities:
Trade and other payables (4) 1,350,000
Mortgage note payable-current portion 400,000
Total current liabilities 1,750,000

Noncurrent liabilities:
Mortgage note payable, remaining position 1,600,000
Bank loan payable, due June 30, 2010 500,000
Total noncurrent liabilities 2,100,000

Shareholders’ equity:
 Share capital 3,000,000
Reserves (5) 1,400,000
Retained earnings 1,250,000
Total shareholders’ equity 5,650,000
Total liabilities and shareholders’ equity 9,500,000

Note 1 - Trade accounts receivable

Accounts receivable 800,000

Allowance for doubtful accounts ( 50,000)
Net realizable value 750,000

Note 2 - Property, plant and equipment

Accum. Book
Cost depr. value
Land 500,000 - 500,000
Building 5,000,000 2,000,000 3,000,000
Machinery 3,000,000 1,200,000 1,800,000
Equipment 400,000 100,000 300,000
Total 8,900,000 3,300,000 5,600,000

Note 3 - Intangible assets

Trademark 150,000
Secret processes and formulas 200,000
Total 350,000

Note 4 - Trade and other payables

Notes payable 750,000

Accounts payable 350,000
Income tax payable 50,000
Accrued expenses 60,000
Estimated liability for damages 140,000
Total 1,350,000

Note 5 - Reserves

Additional paid in capital 300,000

Retained earnings appropriated for plant expansion 1,000,000
Retained earnings appropriated for contingencies 100,000
Total 1,400,000
Problem 4
Summa Company revealed the following account balances on December 31, 2019:

Accounts payable 1,000,000

Accounts receivable, net of allowance for doubtful accounts P50,000 600,000
Accrued taxes 50,000
Accrued interest receivable 30,000
Authorized share capital, 50,000 shares, P100 par 5,000,000
Building, net of accumulated depreciation to P2,500,000 3,000,000
Cash on hand 50,000
Cash in bank 650,000
Bond sinking fund 2,000,000
Furniture and equipment, net of accumulated depreciation of P900,000 1,500,000
Inventory 1,200,000
Investment property 700,000
Land 1,000,000
Deferred tax liability 650,000
Bonds payable due June 30, 2020 2,000,000
Notes payable 850,000
Notes receivable 200,000
Patent 370,000
Other accrued liabilities 150,000
Prepaid expenses 100,000
Share premium 300,000
Retained earnings appropriated for contingencies 200,000
Retained earnings 2,700,000
Share subscription receivable 500,000
Subscribed share capital, 2,000 shares 1,000,000
Unissued share capital 2,000,000

Required: Prepare a statement of financial position, presented and classified according to generally accepted
accounting principles with appropriate notes.
Problems 4 Answer

Summa Company
Statement of Financial Position
December 31, 2019

ASSETS

Current assets: Note

Cash (1) 700,000
Bond sinking fund 2,000,000
Trade and other receivables (2) 830,000
Inventory 1,200,000
Prepaid expenses 100,000
Total current assets 4,830,000

Noncurrent assets:
Property, plant and equipment (3) 5,500,000
Investment property 700,000
Intangible asset (4) 370,000
Total noncurrent assets 6,570,000
Total assets 11,400,000

LIABILITIES AND EQUITY

Note
Current liabilities:
Trade and other payables (5) 2,050,000
Bonds payable due June 30, 2009 2,000,000
Total current liabilities 4,050,000

Noncurrent liability:
Deferred tax liability 650,000

Equity:
Share capital (6) 3,500,000
Reserves (7) 500,000
Retained earnings 2,700,000
Total equity 6,700,000
Total liabilities and equity 11,400,000
Note 1 - Cash

Cash on hand 50,000

Cash in bank 650,000
700,000
Note 2 - Trade and other receivables

Accounts receivable 650,000

Allowance for doubtful accounts ( 50,000)
Notes receivable 200,000
Accrued interest receivable 30,000
Total 830,000

Note 3 - Property, plant and equipment

Accum. Book
Cost depr. value
Land 1,000,000 - 1,000,000
Building 5,500,000 2,500,000 3,000,000
Furniture and equipment 2,400,000 900,000 1,500,000
Total 8,900,000 3,400,000 5,500,000

Note 4 - Intangible asset

Patent 370,000

Note 5 - Trade and other payables

Accounts payable 1,000,000

Notes payable 850,000
Accrued taxes 50,000
Other accrued liabilities 150,000
Total 2,050,000

Note 6 – Share capital

Authorized share capital, 50,000 shares, P100 par 5,000,000

Unissued share capital (2,000,000)
Issued share capital 3,000,000
Subscribed share capital, 10,000 shares 1,000,000
Subscription receivable ( 500,000) 500,000
Paid in capital 3,500,000

Note 7 - Reserves

Share premium 300,000

Retained earnings appropriated for contingencies 200,000
Total 500,000
Theories:
1. To meet the objective of financial reporting, financial statements should provide information about all of the following, except
a. Asset, liabilities and equity
b. Income and expenses, including gains and losses
c. Contributions by and distribution to owners in their capacity as owners
d. Nature of business entities
2. When entity changed the end of reporting period longer or shorter than one year, the entity shall disclose all, except
a. Period covered by the financial statements
b. The reason for using a longer or shorter period
c. The fact that amounts presented are not entirely comparable
d. The fact that similar entities have done so
3. The operating cycle of an entity
a. Is the time between the acquisition of materials entering into a process and their realization in cash
b. Is the period of time normally elapsed in converting trade receivables back into cash
c. Is a period of one year
d. Refers to the seasonal variation experienced by entities
4. An entity shall classify an asset as current under all of the following conditions, except
a. The entity expects to realize the asset or intends to sell or consume it within the entity’s normal operating cycle
b. The entity holds the asset for the purpose of trading
c. The entity expects to realize the asset within twelve months after the reporting period
d. The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after the
reporting period 
5. An entity shall classify a liability as current when under all of the following conditions, except
a. The entity expects to settle the liability within the entity’s normal operating cycle
b. The entity holds the liability primarily for the purpose of trading
c. The liability is due to be settled within twelve months after the reporting period
d. The entity has an unconditional right to defer settlement of the liability for at least twelve months after the
reporting period
6. Which obligations are classified as current even if these are due to be settled after more than twelve months from the end of the
reporting period?
a. Trade payables and accruals for employee and other operating cost
b. Current portion of interest-bearing liabilities
c. Bank overdrafts
d. Dividends payable
7. Current and noncurrent presentation of assets and liabilities provides useful information when the entity
a. Supplies goods or services within a clearly identifiable operating cycle
b. Is a financial institution
c. Is a public utility
d. Is a nonprofit organization
8. A presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and
more relevant than a current and noncurrent presentation for
a. Financial institution
b. Public utility
c. Manufacturing entity
d. Service provider
9. A financial liabilities due within twelve months after the reporting period shall be classified as  noncurrent
a. When it is refinance on a long-term basis before the issue of financial statements
b. When the entity has no discretion to refinance for at least twelve months
c. When it is refinanced on a long-term basis after the end of reporting period
d. When it is refinanced on a long-term basis on or before the end of reporting period.

10. When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect the
liability becomes payable on demand, the liabilities is classified as
a. Current under all circumstances
b. Noncurrent under all circumstances
 c. Current if the lender has agreed after the reporting period and before the issuance of the statements not to
demand as a consequence of the breach
d. Noncurrent if the lender agreed after the reporting period to provide a grace period for at least twelve months after the
reporting period
11. In presenting a statement of financial position, an entity
a. Must make the current and noncurrent presentation
b. Must present assets and liabilities in order of liquidity
c. Must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation
d. Must make the current and noncurrent presentation, except when a presentation based on liquidity provides
information that is reliable and more relevant.
12. In which section of the statement of financial position should cash that is restricted for the settlement of a liability due 18
months after the reporting period be presented?
a. Current assets
b. Equity
c. Noncurrent liabilities
d. Noncurrent assets
13. In which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time
be presented?
a. Current liabilities
b. Current assets
c. Noncurrent liabilities
d. Noncurrent assets
14. An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two years
later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be
presented?
a. Current liabilities
b. Current assets
c. Noncurrent liabilities
d. Noncurrent assets
15. Which of the following must be included on the face of the statement of financial position?
a. Investment property
b. Number of shares authorized
c. Contingent asset
d. Shares in an entity owned by the entity
16. Which of the following is not required to be presented as minimum information on the face of the statement of financial
position?
a. Investment property
b. Investment accounted under the equity method
c. Biological asset
d. Contingent liability
17. Which of the following must be included as a line item in the statement of financial position?
a. Contingent asset
b. Property, plant and equipment analyzed by class
c. Share capital and reserves analyzed by class
d. Deferred tax liability
18. Which statement about the statement of financial position is not true?
a. Biological assets should be reported in the statement of financial position
b. The number of share authorized for issue should be reported in the statement of changes in equity or in the notes
c. Provisions should be recognized in the statement of financial position
d. A revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement.

19. In analyzing an entity's financial statements, which financial statement would a potential investor primarily use to assess
liquidity and financial flexibility?
a. Statement of financial position
b. Income statement
c. Statement of retained earnings
d. Statement of cash flows
20. Which is an essential characteristic of an asset?
a. To claims to an asset’s benefits are legally enforceable
b. An asset is tangible
c. An asset is obtained at a cost
d. An asset provides future benefits
21. The essential characteristics of an asset include all of the following, except
 a. The asset is the result of past event
b. The asset provides future economic benefit
c. The cost of the asset can be measured reliably
d. The asset is tangible.
22. Conceptually, asset valuation accounts are
a. Assets
b. Neither assets nor liabilities
c. Part or shareholders’ equity
d. Liabilities
23. Working capital is
a. The group of assets needed by the entity to operate profitably
b. Capital which has been reinvested in business
c. Unappropriated retained earnings
d. Current assets less current liabilities
24. As generally used, the term net assets represents
a. Retained earnings
b. Current assets less current liabilities
c. Total contributed capital
d. Total assets less total liabilities
25. Treasury shares should be, reported as
a. Current asset
b. Investment
c. Other asset
d. Reduction of shareholders' equity
26. The term "deficit" refers to
a. An excess of current assets over current liabilities
b. An excess of current liabilities over current assets
c. A debit balance in retained earnings
d. A prior period error
27. The basis for classifying assets as current or noncurrent is the period of time normally required to convert cash invested in
a. Inventory back into cash or 12 months, whichever is shorter.
b. Receivables back into cash or 12 months, whichever is longer
c. Property, plant and equipment back into cash or 12 months, whichever is longer
d. Inventory back into cash or 12 months, whichever is longer
28. Which should be classified as current asset?
a. Trade installment accounts receivable normally collectible in 18 months
b. Cash designated for the redemption of callable preference shares
c. Cash surrender value of a life insurance policy
d. A deposit on machinery ordered, delivery of which will be made within six months
29. Which should not be considered as current asset?
a. Installment notes receivable due over 18 months in accordance with normal trade practice
b. Prepaid taxes
c. Trading securities
d. Cash surrender value of life insurance policy

30. Current assets should never include

a. A receivable not collectible within one year
b. Current tax asset
c. Goodwill arising in a business combination
d. Premium paid on a bond investment
31. Equity investments held to finance construction of additional plant should be classified as
a. Current assets
b. Property, plant and equipment
c. Intangible assets
d. Noncurrent investments
32. Which of the following is not a noncurrent investment?
a. Cash surrender value of life insurance policy
b. Franchise
c. Land held for speculation
d. A sinking fund
33. The statement of financial position is useful for analyzing all of the following, except
a. Liquidity
 b. Solvency
c. Profitability
d. Financial flexibility
34. The statement of financial position is useful for all of the following, except
a. To compute rate of return
b. To analyze cash inflows and outflows for the period
c. To evaluate capital structure
d. To assess future cash flows
35. What is one criticism not normally aimed at a statement of financial position?
a. Failure to reflect current value information
b. The extensive use of separate classifications
c. An extensive use of estimate
d. Failure to include items of financial value that cannot be recorded objectively
36. The statement of financial position
a. Omits many items that are of financial value
b. Makes very limited use of judgment and estimate
c. Uses fair value for most assets and liabilities
d. All of the choices are correct
37. Which is a limitation of a statement of financial position?
a. Many items that are of financial value are omitted
b. Judgment and estimate are used
c. Current value is not reported
d. All of these are a limitation of the statement of financial position
38. The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as
a. Solvency
b. Financial flexibility
c. Liquidity
d. Exchangeability
39. Which of the following is not an acceptable major asset classification?
a. Current assets
b. Investments
c. Property, plant and equipment
d. Deferred charges
40. What is an example of an item which is not an element of working capital?
a. Accrued interest on notes receivable
b. Goodwill
c. Goods in process
d. Temporary investment

41. Accrued revenue would normally appear in the statement of financial position under
a. Noncurrent assets
b. Current liabilities
c. Noncurrent liabilities
d. Current assets
42. Which of the following is usually classified as a noncurrent asset
a. Plant expansion fund
b. Prepaid rent
c. Supplies
d. Goods in process
43. Notes to financial statements
a. Are relatively unimportant facts that do not belong in the basic financial statements
b. Document the source of financial statement facts
c. Are an integral part of an entity's financial statements 
d. Are irrelevant facts that are immaterial in amount
44. Which of the following best demonstrates the full disclosure principle?
a. The separate income statement
b. The auditor’s report
c. The tax return
d. The notes to financial statements
45. To meet the needs of full disclosure, entities use supplemental information including
a. Parenthetical comments or modifying comments placed on the face of the financial statements
 b. Disclosure notes conveying additional insights about operations, accounting principles, contractual agreements and
pending litigation
c. Supplemental financial statements that report more detailed information
d. All of these are correct
46. The recognition and measurement concepts recognize which of the following as a principle rather than an assumption?
a. Time period
b. Monetary unit
c. Going concern
d. Full disclosure
47. The full disclosure principle requires a balance between
a. Comparability and consistency
b. Relevance and cost effectiveness
c. Reliability and neutrality
d. Timeliness and predictive value