OA The financial statements most frequently provided include all of the following except the

a.

balance sheet.

b.

statement of cash flows.

c.

income statement.

d.

statement of retained earnings.

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The correct answer is: statement of retained earnings.

Question 2

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OA The accrual basis means that

a.

The financial statements are normally prepared on the assumption that an enterprise will continue in
operation for the foreseeable futurE.

b.

Where parent and subsidiary relationship exists, consolidated statements for the affiliates are prepared
because the parent and the subsidiary are a “single economic entity”.

c.

The effects of transactions and other events are recognized when they occur and not as cash or its
equivalent is received or paid and they are recorded in the accounting records and reported in the
financial statements of the periods to which they relatE.

d.

The financial statements should be stated in terms of a common financial denominator.

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The correct answer is: The effects of transactions and other events are recognized when they occur and
not as cash or its equivalent is received or paid and they are recorded in the accounting records and
reported in the financial statements of the periods to which they relatE.

Question 3

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OA IFRS are determined by the

a.

International Accounting Standards BoarD.

b.

Internal Accounting Standards Body.

c.

International Auditors' Standards Body.

d.

International Accounting Studies BoarD.

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The correct answer is: International Accounting Standards BoarD.

Question 4

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OA All of the following are events considered as exchange or reciprocal transfer, except

a.

purchase of investment in equity securities

b.

borrowing of money from a bank

c.

sale of equipment for non-interest bearing note

d.

subscription of the entity’s own equity instrument (i.E., contributions by owners)

e.

exchange of a note payable for an account payable

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The correct answer is: subscription of the entity’s own equity instrument (i.E., contributions by owners)

Question 5
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OA It refers to the process of incorporating the effects of an accountable event in the statement of
financial position or the statement of profit or loss and other comprehensive income through a journal
entry.

a.

recognition

b.

realization

c.

posting

d.

derecognition

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The correct answer is: recognition

Question 6

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OA Which ONE of the following statements best describes the term 'going concern'?
a.

When current liabilities of an entity exceed current assets

b.

The expenses of an entity exceed its income

c.

The ability of the entity to continue in operation for the foreseeable future

d.

The potential to contribute to the flow of cash and cash equivalents to the entity

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The correct answer is: The ability of the entity to continue in operation for the foreseeable future

Question 7

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OA The international accounting standards are:

a.

principle based rather than rules based;

b.

focussed on quantitative rules.

c.

rules based rather than principles based;

d.

based on regulations not concepts;

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The correct answer is: principle based rather than rules based;

Question 8

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OA Accounting is I. A service activity and its function is to provide quantitative information, primarily
financial in nature, about economic entities, that is intended to be useful in making economic decision.
II. The art of recording, classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are in part at least of a financial character and interpreting the results
thereof. III. The process of identifying, measuring and communicating economic information to permit
informed judgment and decision by users of the information.

a.

I only

b.

III only

c.

I, II and III

d.

II only

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The correct answer is: I, II and III

Question 9

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OA These are events involving an entity and another external party.

a.

life events

b.

transactions

c.

external events

d.

internal events

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The correct answer is: external events

Question 10

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OA External users are those

a.
who do have the authority to demand financial reports tailored to their specific needs.

b.

who do not have the authority to demand financial reports tailored to their specific needs.

c.

who belong to countries other than the domicile country of the reporting entity.

d.

who do not have the authority to demand financial reports tailored to their common needs.

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The correct answer is: who do not have the authority to demand financial reports tailored to their
specific needs.

Question 11

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OA Which of the following statements is not an objective of financial reporting?

a.

Provide information on the liquidation value of an enterprisE.

b.

Provide information that is useful in assessing cash flow prospects.

c.

Provide information about enterprise resources, claims to those resources, and changes to them.
d.

Provide information that is useful in investment and credit decisions.

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The correct answer is: Provide information on the liquidation value of an enterprisE.

Question 12

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OA It is the accounting process of assigning numbers, commonly in monetary terms, to the economic
transactions and events.

a.

analyzing

b.

interpreting

c.

classifying

d.

measuring

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The correct answer is: measuring

Question 13

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OA All of the following are events considered nonreciprocal transfers, except

a.

payment of accounts payable

b.

imposition of fines

c.

declaration of stock dividends

d.

declaration of cash dividends

e.

theft

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The correct answer is: payment of accounts payable

Question 14

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OA These users are interested in the allocation of resources and activities of enterprises, and therefore
require information to regulate the activities of enterprises, determine taxation policies and as a basis
for national income and similar statistics.

a.

Governments and their agencies

b.

Public

c.

Suppliers and trade creditors

d.

Customers

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The correct answer is: Governments and their agencies

Question 15

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OA The information provided by financial reporting pertains to

a.

business industries, rather than to individual enterprises or an economy as a whole or to members of

society as consumers.

b.

individual business enterprises, industries, and an economy as a whole, rather than to members of
society as consumers.

c.

individual business enterprises, rather than to industries or an economy as a whole or to members of

society as consumers.

d.

an economy as a whole and to members of society as consumers, rather than to individual enterprises or
industries.

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The correct answer is: individual business enterprises, rather than to industries or an economy as a
whole or to members of society as consumers.

Question 16

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OA The purpose of the International Accounting Standards Board is to

a.

develop a uniform currency in which the financial transactions of companies throughout the world
would be measureD.

b.

promote uniform accounting standards among countries of the worlD.

c.

arbitrate accounting disputes between auditors and international companies.

d.

issue enforceable standards which regulate the financial accounting and reporting of multinational
corporations.

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The correct answer is: promote uniform accounting standards among countries of the worlD.

Question 17

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OA The primary objective of financial reporting is to provide

a.

information useful for investment and credit decisions.

b.

all of these

c.

information about economic resources, claims to these resources, and changes in them.

d.

information useful in predicting future cash flows.

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The correct answer is: all of these

Question 18

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OA GAAP stands for

a.

Generally Accepted Accounting Procedures.

b.

Generally Accepted Accounting Principles.

c.

Generally Accepted Auditing Procedures.

d.

Generally Accepted Auditing Principles.

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The correct answer is: Generally Accepted Accounting Principles.

Question 19

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OA Financial accounting

a.

Is the examination of financial statements by an independent CPA for the purpose of expressing an
opinion as to the fairness of the financial statements.
b.

Focuses on the preparation and presentation of general-purpose reports known as financial statements.

c.

Has no precise coverage but is used generally to refer to services to clients on matters of accounting,
finance, business policies, organization procedures, product costs, distribution and many other phases of
business conduct and operations.

d.

Is the preparation of annual income tax returns and determination of tax consequences of certain
proposed business venturE.

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The correct answer is: Focuses on the preparation and presentation of general-purpose reports known as
financial statements.

Question 20

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OA What is the basic purpose of accounting?

a.

To provide qualitative financial information about economic activities intended to be useful in making
economic decisions.

b.

To provide quantitative financial information about economic activities.

c.

To provide quantitative financial information about economic activities intended to be useful in making
economic decisions.

d.

To provide all information that users need in making economic decisions.

Feedback

The correct answer is: To provide quantitative financial information about economic activities intended
to be useful in making economic decisions.

Question 21

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OA Accounting provides which type of information?

a.

all of these

b.

qualitative

c.

financial information

d.

quantitative

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The correct answer is: all of these

Question 22
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OA Which is incorrect concerning financial statements?

a.

Financial statements also show the results of management’s stewardship of the resources entrusted to
it.

b.

The objective of general-purpose financial statements is to provide information about the financial
position, performance and cash flows of an enterprise that is useful to a wide range of users in making
economic decisions.

c.

The management of an enterprise has the primary responsibility for the preparation and presentation of
financial statements.

d.

Financial statements are prepared and presented at least annually and are directed toward the specific
needs of a wide range of users.

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The correct answer is: Financial statements are prepared and presented at least annually and are
directed toward the specific needs of a wide range of users.

Question 23

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OA Valuing assets at their liquidation values rather than their cost is inconsistent with the

a.

historical cost principlE.

b.

matching principlE.

c.

materiality constraint.

d.

periodicity assumption.

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The correct answer is: historical cost principlE.

Question 24

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OA The assumption that a business enterprise will not be sold or liquidated in the near future is known
as the

a.

conservatism assumption.

b.

economic entity assumption.

c.

going concern.

d.

monetary unit assumption.

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The correct answer is: going concern.

Question 25

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OA Users of financial reports include all of the following except

a.

creditors.

b.

government agencies.

c.

All of these are users.

d.

unions.

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The correct answer is: All of these are users.

Question 26

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OA Asset measurements in conventional financial statements

a.

are confined to historical cost.

b.

do not reflect output values.

c.

reflect several financial attributes.

d.

are confined to historical cost and current cost.

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The correct answer is: reflect several financial attributes.

Question 27

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OA Which of the following statements is false?

a.
Accountable events are those that have an effect in an entity's assets, liabilities, equity, income or
expenses.

b.

The term “recognition” as used in accounting refers to the process of incorporating the effects of an
accountable event in the statement of financial position or the statement of profit or loss and other
comprehensive income through a memo entry.

c.

External events are those that involve the reporting entity and an external party.

d.

The Board of Accountancy consists of a chairperson and six members.

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The correct answer is: The term “recognition” as used in accounting refers to the process of
incorporating the effects of an accountable event in the statement of financial position or the statement
of profit or loss and other comprehensive income through a memo entry.

Question 28

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OA The name that is now used for standards issued by the International Accounting Standards Board is:

a.

International Accounting Standards (IAS);

b.

International Generally Accepted Accounting Principles (IGAAP);

c.

International Financial Reporting Standards (IFRS).

d.

International Financial Accounting Interpretations (IFAI);

Feedback

The correct answer is: International Financial Reporting Standards (IFRS).

Question 29

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OA General purpose financial statements are

a.

those statements that cater to the common and specific needs of a wide range of external users.

b.

those statements that cater to the common needs of a wide range of external users and internal users.

c.

those statements that cater to the common needs of a limited range of external users.

d.

those statements that cater to the common needs of a wide range of external users.

Feedback

The correct answer is: those statements that cater to the common needs of a wide range of external
users.
Question 30

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OA When products or other assets are exchanged for cash or claims for cash, they are said to be

a.

earneD.

b.

realizeD.

c.

recognizeD.

d.

allocateD.

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The correct answer is: realizeD.

Question 31

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OA Information about the performance of an enterprise is required in order to assess potential changes
in the economic resources that it is likely to control in the futurE. This information is primarily pictured in
the
a.

Statement of retained earnings

b.

Statement of Cash Flows

c.

Statement of Comprehensive Income

d.

Statement of Financial Position

Feedback

The correct answer is: Statement of Comprehensive Income

CFFR Are the following statements regarding 'recognition' true or false? (1) Recognition is the process of
incorporating in the financial statements an item that meets the definition of an element. (2)
Recognition is the process of determining the amounts at which elements of the financial statements are
to be recognizeD. Statement (1) AND Statement (2) respectively

a.

True False

b.

False False

c.

True True

d.
False True

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The correct answer is: True False

Question 2

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CFFR Preparation of consolidated financial statements when a parent-subsidiary relationship exist is an

example of the

a.

Economic entity assumption

b.

Comparability characteristic

c.

Relevance characteristic

d.

Neutrality characteristic

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The correct answer is: Economic entity assumption

Question 3

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Question text

CFFR The quality of information that gives assurance that it is reasonably free of error and bias and
provides a true, correct and complete depiction of what it purports to represent is

a.

relevance.

b.

neutrality.

c.

faithful representation.

d.

verifiability.

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The correct answer is: faithful representation.

Question 4

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CFFR According to the Conceptual Framework, physical count of inventory is an example of

a.

direct verification.

b.
relevance.

c.

indirect verification.

d.

timeliness.

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The correct answer is: direct verification.

Question 5

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CFFR The accrual basis means that

a.

The financial statements should be stated in terms of a common financial denominator.

b.

Where parent and subsidiary relationship exists, consolidated statements for the affiliates are prepared
because the parent and the subsidiary are a “single economic entity”.

c.

The effects of transactions and other events are recognized when they occur and not as cash or its
equivalent is received or paid and they are recorded in the accounting records and reported in the
financial statements of the periods to which they relate.

d.
The financial statements are normally prepared on the assumption that an enterprise will continue in
operation for the foreseeable future.

Feedback

The correct answer is: The effects of transactions and other events are recognized when they occur and
not as cash or its equivalent is received or paid and they are recorded in the accounting records and
reported in the financial statements of the periods to which they relate.

Question 6

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CFFR Which of the following is not an element that is directly related to the measurement of an entity’s
financial position?

a.

assets

b.

equity

c.

liabilities

d.

income

Feedback

The correct answer is: income

Question 7

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CFFR During the lifetime of an entity, accountants produce financial statements at arbitrary points in
time in accordance with which basic accounting concept?

a.

Conservatism constraint

b.

Cost benefit constraint

c.

Matching principle

d.

Periodicity assumption

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The correct answer is: Periodicity assumption

Question 8

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CFFR Which of the following is considered a qualitative factor in making materiality judgments?

a.

5% of total revenues
b.

the context of an item in relation to the current economic state of the environment where the entity
operates.

c.

1% of total assets

d.

10% of profit or loss, in absolute terms

Feedback

The correct answer is: the context of an item in relation to the current economic state of the
environment where the entity operates.

Question 9

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CFFR Which of the following statements about materiality is not correct?

a.

Materiality is affected by an item’s relative size and/or importance.

b.

An item must make a difference; otherwise, it need not be reporteD.

c.

All of these are correct statements about materiality.

d.

An item is material if its inclusion or omission would influence or change the judgment of a reasonable
person.

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The correct answer is: All of these are correct statements about materiality.

Question 10

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CFFR Information has the quality of relevance when

a.

It is free from bias and error and can be depended upon by users to represent faithfully that which it
either purports to represent or could reasonably be expected to represent.

b.

Users are assumed to have a reasonable knowledge of business and economic activities and accounting
and a willingness to study the information with reasonable diligence.

c.

Users are informed of the accounting policies employed, any changes in those policies and the effects of
such changes.

d.

It influences the economic decisions of users by helping them evaluate past, present or future events or
confirming or correcting their past evaluations.

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The correct answer is: It influences the economic decisions of users by helping them evaluate past,
present or future events or confirming or correcting their past evaluations.

Question 11

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CFFR A Standard sometimes contains requirements that depart from the Conceptual Framework. In such
cases,

a.

the requirements of the Conceptual Framework will prevail over those of the StandarD.

b.

A Standard should never depart from the Conceptual Framework.

c.

the departure is explained in the ‘Basis for Conclusions’ on that StandarD.

d.

the entity’s management shall formulate its own accounting policy and disregards both the requirements
of the Conceptual Framework and the StandarD.

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The correct answer is: the departure is explained in the ‘Basis for Conclusions’ on that StandarD.

Question 12

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CFFR Which is incorrect concerning the qualitative characteristic of comparability?

a.

Dimensional comparability is the quality of information that allows comparisons between two or more
enterprises engaged in the same industry.

b.

The need for comparability should not be confused with mere uniformity and should not be allowed to
become an impediment to the introduction of improved accounting standards.

c.

Horizontal comparability is the quality of information that allows comparisons within a single enterprise
through time or from one accounting period to the next.

d.

It is appropriate for an enterprise to leave its accounting policies unchanged when more relevant and
reliable alternatives exist.

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The correct answer is: It is appropriate for an enterprise to leave its accounting policies unchanged when
more relevant and reliable alternatives exist.

Question 13

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CFFR When information about two different entities has been prepared and presented in a similar
manner, the information exhibits the characteristic of

a.

reliability.
b.

comparability.

c.

relevance.

d.

consistency.

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The correct answer is: comparability.

Question 14

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CFFR The two primary qualities that make accounting information useful for decision making are

a.

faithful representation and relevance.

b.

comparability and consistency.

c.

relevance and reliability.

d.
materiality and timeliness.

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The correct answer is: faithful representation and relevance.

Question 15

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CFFR A soundly developed conceptual framework of concepts and objectives should

a.

allow new and emerging practical problems to be more quickly soluble.

b.

enhance comparability among companies' financial statements.

c.

all of these.

d.

increase financial statement users' understanding of and confidence in financial reporting.

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The correct answer is: all of these.

Question 16

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CFFR The revised Conceptual Framework defines an asset as

a.

All of these.

b.

a resource controlled by the entity as a result of past events and from which future economic benefits
are expected to flow to the entity.

c.

a present economic resource controlled by the entity as a result of past events. An economic resource is
a right that has the potential to produce economic benefits.

d.

a physical object that can produce economic benefits for the entity.

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The correct answer is: a present economic resource controlled by the entity as a result of past events. An
economic resource is a right that has the potential to produce economic benefits.

Question 17

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CFFR Qualitative characteristics

a.

Are the generally accepted accounting principles.

b.
Are the basic notions and fundamental premises on which the accounting process is baseD.

c.

Refer to the definition, recognition and measurement of the elements from which financial statements
are constructeD.

d.

Are the attributes that make the information provided in financial statements useful to users.

Feedback

The correct answer is: Are the attributes that make the information provided in financial statements
useful to users.

Question 18

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CFFR Which ONE of the following statements best describes the term 'liability'?

a.

Resources to meet financial commitments as they fall due

b.

A present obligation of the entity arising from past events

c.

An excess of equity over current assets

d.
The residual interest in the assets of the entity after deducting all its liabilities

Feedback

The correct answer is: A present obligation of the entity arising from past events

Question 19

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CFFR Are the following statements regarding the term 'profit' true or false? (1) Profit is any amount over
and above that required to maintain the capital at the beginning of the perioD. (2) Profit is the residual
amount that remains after expenses have been deducted from income. Statement (1) AND Statement (2)
respectively

a.

True False

b.

True True

c.

False True

d.

False False

Feedback

The correct answer is: True True

Question 20

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CFFR The overriding criterion by which accounting information can be judged is that of

a.

Usefulness for decision making

b.

Timeliness

c.

Freedom from bias

d.

Comparability

Feedback

The correct answer is: Usefulness for decision making

Question 21

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CFFR Financial accounting is concerned with

a.

Specialized reports from income tax computation and recognition

b.
General-purpose reports on changes in stock prices and future estimates of market position

c.

Specialized reports for inventory management and control

d.

General purpose reports on financial position and results of operations

Feedback

The correct answer is: General purpose reports on financial position and results of operations

Question 22

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CFFR The providers of risk capital (investors)

a.

Are interested in information which enables them to assess the ability of the enterprise to provide
renumeration, retirement benefits and employment opportunities.

b.

Have an interest in information about the continuance of an enterprise especially when they have a long-
term involvement with or are dependent on the enterprise.

c.

Are concerned with the risk inherent in and return provided by their investments and need information
to help them determine whether they should buy or sell the investments.

d.
Are interested in information that enables them to determine whether their loans and the interest
attaching to them will be paid when due.

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The correct answer is: Are concerned with the risk inherent in and return provided by their investments
and need information to help them determine whether they should buy or sell the investments.

Question 23

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CFFR Which is incorrect concerning the quality of relevance?

a.

The predictive and confirmatory roles of information are not interrelateD.

b.

The information must be relevant to the decision-making needs of the users in order to be useful.

c.

The relevance of information is affected by its nature and materiality.

d.

Information about financial position and past performance is frequently used as a basis for predicting
future financial position and performance and other matters such as dividend and wage payments,
security price movements and the ability of the enterprise to meet its commitments when they fall due.

Feedback

The correct answer is: The predictive and confirmatory roles of information are not interrelateD.

Question 24

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CFFR The FRSC framework deals with (choose the incorrect one)

a.

Generally accepted accounting principles

b.

Qualitative characteristics

c.

Definition, recognition and measurement of the basic elements of financial statements

d.

Objective of financial statements

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The correct answer is: Generally accepted accounting principles

Question 25

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CFFR What is the authoritative status of the Framework?

a.

If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the

Framework. In the absence of a Standard or an Interpretation that specifically applies, the Framework
should be followeD.

b.

It has the highest level of authority. In case of a conflict between the Framework and a Standard or
Interpretation, the Framework overrides the Standard or Interpretation.

c.

If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the

Framework. In the absence of a Standard or an Interpretation that specifically applies to a transaction,
management should consider the applicability of the Framework in developing and applying an
accounting policy that results in information that is relevant and reliable.

d.

The Framework applies only when IASB develops new or revised Standards. An entity is never required
to consider the Framework.

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The correct answer is: If there is a Standard or Interpretation that specifically applies to a transaction, it
overrides the Framework. In the absence of a Standard or an Interpretation that specifically applies to a
transaction, management should consider the applicability of the Framework in developing and applying
an accounting policy that results in information that is relevant and reliable.

Question 26

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CFFR Which statement is incorrect concerning faithful representation of information?

a.

The information should reflect the economic substance of the transactions rather than their mere legal
form.
b.

The information must be neutral, meaning free from bias.

c.

The information must be complete within the bounds of materiality and cost.

d.

Prudence is the inclusion of a degree of caution in the exercise of judgment needed in making an
estimate required under conditions of uncertainty, such that assets or income are overstated and
liabilities or expenses are understateD.

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The correct answer is: Prudence is the inclusion of a degree of caution in the exercise of judgment
needed in making an estimate required under conditions of uncertainty, such that assets or income are
overstated and liabilities or expenses are understateD.

Question 27

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CFFR The Filipino adage “Aanhin mo pa ang damo pag patay na ang kabayo” relates to which of the
following qualitative characteristics?

a.

Comparability

b.

Faithful representation

c.

Relevance
d.

Timeliness

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The correct answer is: Timeliness

Question 28

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CFFR Decision makers vary widely in the types of decisions they make, the methods of decision making
they employ, the information they already possess or can obtain from other sources, and their ability to
process information. Consequently, for information to be useful there must be a linkage between these
users and the decisions they make. This link is

a.

relevance.

b.

understandability.

c.

materiality.

d.

reliability.

Feedback

The correct answer is: understandability.

Question 29
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CFFR Which of the following statements about the IASB Framework are correct? (1) The Framework
deals with the qualitative characteristics of financial statements. (2) The Framework normally prevails
over International Accounting Standards where there is a conflict between the two. (3) The Framework
deals with the objectives of financial statements.

a.

Statement (1) and Statement (2) only

b.

Statement (2) and Statement (3) only

c.

All of them

d.

Statement (1) and Statement (3) only

Feedback

The correct answer is: Statement (1) and Statement (3) only

Question 30

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CFFR Information is considered relevant when it

a.

can be depended on to represent the economic conditions and events that it is intended to represent.

b.

is verifiable and neutral.

c.

is capable of making a difference in a decision.

d.

is understandable by reasonably informed users of accounting information.

Feedback

The correct answer is: is capable of making a difference in a decision.

Question 31

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CFFR Which of the following is most likely to result in the recognition of a liability?

a.

Agreeing on an irrevocable future commitment that is not burdensome at present.

b.

Intention to acquire inventories in a future perioD.

c.

Customers become entitled to rebates for their past purchases.

d.

Entering into a purchase contract for future delivery.

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The correct answer is: Customers become entitled to rebates for their past purchases.

Question 32

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CFFR Which of the following is not an indication of an economic resource’s potential to produce
economic benefits for the entity?

a.

The resource cannot be used in the entity’s operations but has a resale value.

b.

The economic benefits from the resource were already consumed by the entity.

c.

The resource has no use to the entity but it can be exchanged for another resource with another party.

d.

The entity does not intend to sell or use the resource but instead distribute it to the owners as dividends.

Feedback

The correct answer is: The economic benefits from the resource were already consumed by the entity.

Question 33

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CFFR Information is neutral if it

a.

can be compared with similar information.

b.

has no impact on a decision maker.

c.

provides benefits which are at least equal to the costs of its preparation.

d.

is free from bias toward a predetermined result.

Feedback

The correct answer is: is free from bias toward a predetermined result.

Question 34

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CFFR Which of the following is true?

a.

IFRS companies have agreed to adopt the Sarbanes-Oxley Act related to internal control in 2015.
b.

Transaction analysis is basically the same under U.S. GAAP and IFRS.

c.

Financial frauds have not occurred in U.S. companies because GAAP has detailed accounting and
disclosure requirements.

d.

Equity is defined under GAAP as the residual interest in the liabilities of the company.

Feedback

The correct answer is: IFRS companies have agreed to adopt the Sarbanes-Oxley Act related to internal
control in 2015.

Question 35

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CFFR Which of the following is considered a pervasive constraint by the Conceptual Framework?

a.

Cost restraint

b.

Cost constraint

c.

Verifiability
d.

Conservatism

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The correct answer is: Cost constraint

Question 36

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CFFR The overall objective of financial reporting is to provide information

a.

that allows owners to assess management's performance.

b.

that is useful to primary users in making economic decisions about providing resources to the entity.

c.

about an entity's financial performance during a perioD.

d.

about an entity's assets, liabilities, and equity.

Feedback

The correct answer is: that is useful to primary users in making economic decisions about providing
resources to the entity.

Question 37

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CFFR The residual interest in a corporation belongs to the

a.

Management

b.

Creditors

c.

Common stockholders

d.

Preferred stockholders

Feedback

The correct answer is: Common stockholders

PE The primary users of financial statements under the Conceptual Framework include I. Existing and
potential investors II. Employees III. Lenders and other creditors IV. Suppliers and other trade creditors V.
Customers VI. Governments and their agencies VII. Public VIII. Professional accountants, including
auditors

a.

all of these

b.

I and III

c.
I, II, III, IV, V, VI

d.

I, II, III, IV, V, VI, VII

Feedback

The correct answer is: I and III

Question 2

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PE Entity A computes for its profit or loss periodically instead of waiting until the end of the life of the
business before doing so. This is an application of which of the following accounting concepts?

a.

time period or reporting period

b.

accrual basis

c.

historical cost

d.

stable monetary unit

Feedback

The correct answer is: time period or reporting period

Question 3
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PE What is the authoritative status of the Conceptual Framework?

a.

The Conceptual Framework applies only to the IASB when developing or amending Standards. A
reporting entity should never use the Conceptual Framework.

b.

If there is a Standard that specifically applies to a transaction, that Standard overrides the Conceptual
Framework. In the absence of such a Standard, the requirement of the Conceptual Framework should be
followeD.

c.

If there is a Standard that applies to a transaction, that Standard overrides the Conceptual Framework. In
the absence of such a Standard, the entity’s management should consider the applicability of the
Conceptual Framework in developing and applying an accounting policy that will result in useful
information.

d.

It has the highest level of authority. In case of a conflict between the Conceptual Framework and a
Standard, the Conceptual Framework overrides that StandarD.

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The correct answer is: If there is a Standard that applies to a transaction, that Standard overrides the
Conceptual Framework. In the absence of such a Standard, the entity’s management should consider the
applicability of the Conceptual Framework in developing and applying an accounting policy that will
result in useful information.

Question 4

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PE The elements of faithful representation do not include

a.

free from error.

b.

completeness.

c.

comparability.

d.

neutrality.

Feedback

The correct answer is: comparability.

Question 5

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PE Financial reporting standards continuously change primarily in response to

a.

changes in social environments.

b.
political influencE.

c.

government regulations.

d.

users’ needs.

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The correct answer is: users’ needs.

Question 6

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PE It is the branch of accounting that focuses on the preparation of general purpose financial
statements.

a.

All-around accounting

b.

Financial accounting

c.

All-purpose Accounting

d.

General Accounting
Feedback

The correct answer is: Financial accounting

Question 7

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PE Entity A appropriates ₱1M to fund employee benefits for the last quarter of the following year. Entity
A deposits the ₱1M fund in a payroll account. This economic activity is most appropriately referred to as

a.

savings.

b.

investment.

c.

production.

d.

exchangE.

Feedback

The correct answer is: savings.

Question 8

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PE During the lifetime of an entity, accountants produce financial statements at arbitrary points in time
in accordance with which basic accounting concept?

a.

Cost/benefit constraint

b.

Matching principle

c.

Periodicity assumption

d.

Conservatism constraint

Feedback

The correct answer is: Periodicity assumption

Question 9

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PE The PFRSs consist of all of the following except

a.

PASs.

b.

Conceptual Framework.
c.

Interpretations.

d.

PFRSs.

Feedback

The correct answer is: Conceptual Framework.

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PE Information on the utilization of economic resources is most useful when assessing an entity’s

a.

financial strengths and weaknesses, including the entity’s needs for additional financing.

b.

management stewardship.

c.

financial position and financial performancE.

d.

liquidity and solvency.

Feedback

The correct answer is: management stewardship.

Question 11

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PE The Conceptual Framework broadly classifies the qualitative characteristics into

a.

primary and secondary qualitative characteristics.

b.

cold and hot qualitative characteristics.

c.

major and minor qualitative characteristics.

d.

fundamental and enhancing qualitative characteristics.

Feedback

The correct answer is: fundamental and enhancing qualitative characteristics.

Question 12

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PE These are events that do not involve an external party.

a.
nonreciprocal

b.

external events

c.

special event

d.

internal events

Feedback

The correct answer is: internal events

Question 13

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PE The element that is related to the measurement of an entity’s financial performance is

a.

neither a nor b

b.

expenses.

c.

incomE.
d.

a and b

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The correct answer is: a and b

Question 14

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PE Financial statements are said to be a mixture of fact and opinion. Which of the following items is
factual?

a.

discount on capital stock

b.

patent amortization expense

c.

retained earnings

d.

cost of goods sold

Feedback

The correct answer is: discount on capital stock

Question 15

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PE Accounting is often called the "language of business" because

a.

it is fundamental to the communication of financial information.

b.

all business owners have a good understanding of accounting principles.

c.

it is easy to understanD.

d.

accountants in many companies share financial information.

Feedback

The correct answer is: it is fundamental to the communication of financial information.

Question 16

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PE Which of the following is incorrect regarding the use of the term ‘reporting entity’ under the
Conceptual Framework?

a.

All of these are correct.

b.

A reporting entity can be a parent and its subsidiaries viewed as a single entity.

c.

A reporting entity one that is required, or chooses, to prepare financial statements.

d.

A reporting entity must be a legal entity.

Feedback

The correct answer is: A reporting entity must be a legal entity.

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PE Which of the following are considered aspects of the qualitative characteristic of relevance under the
Conceptual Framework? I. Predictive value II. Confirmatory value III. Timeliness IV. Materiality

a.

I, II, III and IV

b.

I, II and IV

c.

I, II and III

d.
I and II

Feedback

The correct answer is: I, II and IV

Question 18

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PE Which of the following statements about the Norwalk Agreement is correct?

a.

The Norwalk Agreement is a short-term convergence between the FASB and the IASB which has long-
time been abolisheD.

b.

The Norwalk Agreement does not affect the financial reporting standards in the Philippines.

c.

The Norwalk Agreement requires all domestic companies in the U.S. to prepare financial statements in
accordance with the IFRSs.

d.

The Norwalk Agreement is a convergence between the FASB and the IASB to make their existing financial
reporting standards compatible and coordinate their future work programs to ensure that once
achieved, compatibility is maintaineD.

Feedback

The correct answer is: The Norwalk Agreement is a convergence between the FASB and the IASB to make
their existing financial reporting standards compatible and coordinate their future work programs to
ensure that once achieved, compatibility is maintaineD.

Question 19
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PE All of the following statements incorrectly refer to the concepts in the Conceptual Framework except

a.

The objective of general purpose financial statements is similar to the objective of general purpose
financial reporting.

b.

The financial statements prepared by a reporting entity comprising a parent and its subsidiaries are
referred to as ‘combined financial statements’.

c.

Financial statements are prepared and presented at least annually and are directed toward both the
common and specific information needs of a wide range of users.

d.

The Conceptual Framework is concerned with all-purpose financial statements.

Feedback

The correct answer is: The objective of general purpose financial statements is similar to the objective of
general purpose financial reporting.

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PE Under this qualitative characteristic, users are assumed to have a reasonable knowledge of business
activities and willingness to study the information with reasonable diligencE.
a.

Relevance

b.

Comparability

c.

Faithful representation

d.

Understandability

Feedback

The correct answer is: Understandability

Question 21

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PE This refers to the use of caution in the exercise of judgments needed in making estimates required
under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses
are not understateD.

a.

consistency

b.

faithful representation
c.

relevance

d.

prudence

Feedback

The correct answer is: prudence

Question 22

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PE Which of the following statements is true?

a.

Under the stable monetary unit assumption, the owners of the business and the business are viewed as
a single reporting entity. Therefore, the personal transactions of the owners are recorded in the books of
accounts.

b.

External users are those who do not have the authority to demand financial reports tailored to their
specific needs.

c.

The practice of accountancy in the Philippines is regulated under R.A. 9892.

d.

In current practice, accounting provides only quantitative information that is useful in making economic
decisions.

Feedback

The correct answer is: External users are those who do not have the authority to demand financial
reports tailored to their specific needs.

Question 23

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PE Which of the following statements is correct? I. Accounting provides qualitative information, financial
information, and quantitative information. II. Qualitative information is found in the notes to the
financial statements only. III. Accounting is considered an art because it is supported by an organized
body of knowledge IV. Accounting is considered a science because it involves the exercise of skill and
judgment. V. Measurement is the process of assigning numbers to objects such inventories or plant
assets and to events such as purchases or sales. VI. All quantitative information is also financial in naturE.
VII. The accounting process of assigning peso amounts or numbers to relevant objects and events is
called identification.

a.

I, II, III, IV and V

b.

I and V

c.

II, VI and V

d.

I, II, VI and V

Feedback

The correct answer is: I and V

Question 24

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PE According to the Conceptual Framework, the needs of the primary users that are met by financial
statements are

a.

majority of their common needs only.

b.

all of their common needs only.

c.

all of their needs.

d.

substantially a majority of their common and specific needs only.

Feedback

The correct answer is: majority of their common needs only.

Question 25

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PE You are the accountant of ABC Co. During the period, your company purchased staplers worth ₱1,500.
Although the staplers have an estimated useful life of 10 years, you have charged their cost as expensE.
Which of the following is most likely to be true?
a.

You are applying the concept of matching.

b.

You are applying the concept of verifiability.

c.

You are applying the concepts of materiality and cost-benefit consideration.

d.

You are just lazy to compute for the periodic depreciation.

Feedback

The correct answer is: You are applying the concepts of materiality and cost-benefit consideration.

Question 26

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PE The information provided by financial reporting pertains to

a.

individual business entities and the economy as a whole, rather than to industries or to members of
society as consumers

b.

individual business entities and industries, rather than to the economy as a whole or to members of
society as consumers
c.

individual business entities, industries and the economy as a whole, rather than to members of society
as consumers

d.

individual reporting entities, rather than to industries, the economy as a whole or members of society as
consumers

Feedback

The correct answer is: individual reporting entities, rather than to industries, the economy as a whole or
members of society as consumers

Question 27

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PE Which of the following statements is incorrect regarding the basic accounting concepts?

a.

The time period concept means that financial statements are prepared only at the end of the life of a
business.

b.

Under the consistency concept, the financial statements should be prepared on the basis of accounting
principles which are followed consistently.

c.

One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have yet been filed
against ABC, ABC recognized a liability for the probable loss on the event. This is an application of the
prudence or conservatism concept.
d.

Under the entity theory, the business is viewed as a separate entity. Therefore, the personal transactions
of the business owners are not recorded in the business’ accounting records.

Feedback

The correct answer is: The time period concept means that financial statements are prepared only at the
end of the life of a business.

Question 28

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PE Which of the following events is considered as an internal event?

a.

borrowing of money

b.

sale of inventory on account

c.

payment of liabilities

d.

conversion of raw materials into finished goods

e.

provision of capital by owners

Feedback
The correct answer is: conversion of raw materials into finished goods

Question 29

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PE Which of the following may result to an expense?

a.

Increase in liability

b.

Increase in asset

c.

Distribution to holders of equity claims

d.

Decrease in liability

Feedback

The correct answer is: Increase in liability

Question 30

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PE The foundation of the Conceptual Framework is formed from

a.

the objective of general purpose financial reporting.

b.

the concept of reporting entity.

c.

the qualitative characteristics that makes information useful to users.

d.

the principles and objectives of presentation and disclosure of financial information.

Feedback

The correct answer is: the objective of general purpose financial reporting.

Question 31

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PE It is the official accounting standard setting body in the Philippines. It is composed of a chairperson
and 14 members.

a.

Accounting Standards Committee (ASC)

b.

Financial Reporting Standards Committee (FRSC)

c.
Financial Reporting Standards Council (FRSC)

d.

Accounting Standards Council (ASC)

Feedback

The correct answer is: Financial Reporting Standards Council (FRSC)

Question 32

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PE Which of the following events is considered as an external event?

a.

b, c and d

b.

gifts and charitable contributions

c.

provision of capital by owners

d.

payment of taxes

e.

production

Feedback
The correct answer is: b, c and d

Question 33

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PE This concept defines the area of interest of the accountant. It determines which transactions are
recognized in the books of accounts and which are not.

a.

Full disclosure

b.

Matching

c.

Separate entity

d.

Articulation

Feedback

The correct answer is: Separate entity

Question 34

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PE The Conceptual Framework uses the term “economic resources” to refer to

a.

equity.

b.

liabilities.

c.

incomE.

d.

assets.

Feedback

The correct answer is: assets.

Question 35

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PE The measurement bases described under the Conceptual Framework are least applicable to the
measurement of

a.

liabilities.

b.

assets.
c.

equity.

d.

incomE.

Feedback

The correct answer is: equity.

Question 36

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PE Entity A is making a materiality judgment. Entity A considers an item to be material, and therefore
included in the financial statements, if it pertains to a related party transaction. What type of materiality
assessment is Entity A using?

a.

Relevance

b.

Qualitative

c.

Faithful representation

d.

Quantitative

Feedback
The correct answer is: Qualitative

Question 37

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PE Which of the following statements is true? I. Loss from theft is classified as a nonreciprocal transfer. II.
Internal events are changes in economic resources by actions of other entities that do not involve
transfers of resources and obligations. III. Nonreciprocal transfers involve the transfer of resources in
only one direction, either from an entity to other entities or from other entities to the entity. IV. Internal
events are sudden, substantial, unanticipated reductions in resources not caused by other entities. V.
Fire, earthquake and flood are examples of accountable events classified as internal events.

a.

I, II, III and V

b.

II, III, IV and V

c.

I, III and V

d.

I, III, IV and V

Feedback

The correct answer is: I, III and V

Question 38

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Question text

PE What accounting concept justifies the use of accruals and deferrals?

a.

Going concern assumption

b.

Monetary unit assumption

c.

Consistency characteristic

d.

Materiality constraint

Feedback

The correct answer is: Going concern assumption

Question 39

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PE What is the objective of general purpose financial statements according to the Conceptual
Framework?

a.

To prepare and present a balance sheet, an income statement, a cash flow statement, and a statement of
changes in equity.
b.

To prepare and present comparable, relevant, reliable, and understandable information for investors and
creditors.

c.

To provide information about the financial position, financial performance, and changes in financial
position of an entity that is useful to primary users in making economic decisions.

d.

To prepare financial statements in accordance with all applicable Standards and Interpretations.

Feedback

The correct answer is: To provide information about the financial position, financial performance, and
changes in financial position of an entity that is useful to primary users in making economic decisions.

Question 40

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PE Accounting has been given various definitions, which of the following is not one of those definitions?

a.

Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of
money, transactions and events which are, in part of at least, of a financial character and interpreting the
results thereof.

b.

Accounting is the process of identifying, measuring, and communicating economic information to permit
informed judgment and decisions by users of information.

c.
Accounting is a service activity. Its function is to provide quantitative information, primarily financial in
nature, about economic entities that is intended to be useful in making economic decisions.

d.

Accounting is a systematic process of objectively obtaining and evaluating evidence regarding assertions
about economic actions and events to ascertain the degree of correspondence between these assertions
and established criteria and communicating the results to interested users.

Feedback

The correct answer is: Accounting is a systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the results to
interested users.

Question 41

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PE Which of the following statements correctly refer to the accounting process? I. Measuring is the
accounting process of analyzing business activities as to whether or not they will be recognized in the
books. II. Recognition refers to the process of including the effects of an event in the totals of the
statement of financial position or the statement of profit or loss and other comprehensive income
through memo entries. III. Disclosure of events in the notes to financial statement without including
their effect in the totals of the statement of financial position or statement of profit or loss and other
comprehensive income is not an application of the recognition principlE. IV. An accountable event is an
event that has an effect on the assets, liabilities or equity of an entity and its effect can be measured
reliably. V. Sociological and psychological matters are within the scope of accounting.

a.

III and IV

b.

IV

c.
I, II, III, IV and V

d.

I, II, III and IV

Feedback

The correct answer is: III and IV

Question 42

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PE According to the Conceptual Framework, the pervasive constraint on the information that can be
provided by financial reporting is

a.

materiality.

b.

cost-benefit.

c.

historical.

d.

going concern.

Feedback

The correct answer is: cost-benefit.

Question 43
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PE Which of the following statements is true?

a.

The accounting process of assigning numbers, commonly in monetary terms, to the economic
transactions and events is referred to as classifying.

b.

All events and transactions of an entity are recognized in the books of accounts.

c.

The basic purpose of accounting is to provide information about economic activities intended to be
useful in making economic decisions.

d.

General purpose financial statements are those statements that cater to the common and specific needs
of a wide range of external users.

Feedback

The correct answer is: The basic purpose of accounting is to provide information about economic
activities intended to be useful in making economic decisions.

Question 44

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PE The term ‘liquidity’, as used in relation to the assessment of an entity’s financial position, refers to
a.

the entity’s ability to collect its current receivables.

b.

the entity’s ability to pay its short-term obligations.

c.

the entity’s ability to flow like water.

d.

the entity’s ability to pay its long-term obligations.

Feedback

The correct answer is: the entity’s ability to pay its short-term obligations.

Question 45

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PE The ability through consensus among measurers to ensure that information represents what it
purports to represent is an example of the concept of

a.

comparability.

b.

verifiability.
c.

relevancE.

d.

feedback valuE.

Feedback

The correct answer is: verifiability.

Question 46

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PE The accounting standards used in the Philippines are adapted from the standards issued by the

a.

Federal Accounting Standards Board (FASB).

b.

International Accounting Standards Board (IASB).

c.

Democratic People's Republic of Korea Accounting Standards Committee (DPKRASC).

d.

Philippine Institute of Certified Public Accountants (PICPA).

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The correct answer is: International Accounting Standards Board (IASB).

Question 47
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PE This refers to the comparability of financial statements of the same entity but in different periods.

a.

Intro-comparability

b.

Extra-comparability

c.

Intra-comparability

d.

Inter-comparability

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The correct answer is: Intra-comparability

Question 48

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PE The bottom part of each of Entity A’s financial statements states the following “This statement should
be read in conjunction with the accompanying notes.” This is most likely an application of which of the
following accounting concepts?
a.

consistency

b.

accrual basis

c.

time period

d.

articulation

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The correct answer is: articulation

Question 49

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PE Identify the qualitative characteristics that enhance the usefulness of financial information.

a.

IV, V, VI and VII

b.

II, III, IV, V and VII

c.

Relevance II. Reliability III. Faithful representation IV. Comparability V. Verifiability VI. Timeliness VII.
Understandability

d.

I and II

e.

I and III

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The correct answer is: II, III, IV, V and VII

Question 50

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PE Which of the following statements is incorrect concerning materiality?

a.

Materiality can be assessed quantitatively or qualitatively

b.

Materiality is a matter of judgment

c.

Materiality is a quantitative matter. It should never be assessed qualitatively.

d.

There are no specific materiality thresholds provided under the PFRSs

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The correct answer is: Materiality is a quantitative matter. It should never be assessed qualitatively.

Question 51

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PE According to the revised Conceptual Framework, an item is recognized if

a.

it meets the definition of an asset, liability, equity, income or expensE.

b.

recognizing it would provide useful information.

c.

it is probable that the item will result to an inflow or outflow of economic benefits and its cost can be
measured reliably.

d.

a and b

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The correct answer is: a and b

Question 52

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PE A CPA employed as an accountant in a government agency is considered to be in

a.

servicE.

b.

private practicE.

c.

public practicE.

d.

academE.

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The correct answer is: private practicE.

Q1P1 PAS 1 requires an assessment of the entity’s ability to continue as a going concern each time
financial statements are prepareD. Who is responsible in making this assessment?

a.

Accountant

b.

Management

c.

Government regulatory body

d.

Auditor
Feedback

The correct answer is: Management

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Q1P1 Comprehensive income (or total comprehensive income) includes

a.

a and b

b.

Transactions with owners

c.

All of these

d.

Other comprehensive income

e.

Profit or loss

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The correct answer is: a and b

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Q1P1 The cost of inventory is recognized as expense

a.

using the matching concept.

b.

immediately.

c.

any of these as a matter of accounting policy choice

d.

by systematic allocation.

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The correct answer is: using the matching concept.

Question 4

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Q1P1 Who is responsible for the preparation and the fair presentation of an entity’s financial statements
in accordance with the PFRSs?

a.

Auditor
b.

Management

c.

Certified Public Accountant

d.

Any accountant

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The correct answer is: Management

Question 5

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Q1P1 This type of presentation of statement of financial position does not show distinctions between
current and noncurrent items.

a.

Awesome presentation

b.

Unclassified presentation

c.

Non-discriminating presentation

d.
Classified presentation

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The correct answer is: Unclassified presentation

Question 6

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Q1P1 How might users of IAS 1 apply the information provided in the presentation of IFRS financial
statements?

a.

To make economic decisions regarding the company’s financial performance, environmental position,
and community service

b.

To make economic decisions regarding the company’s financial performance, cash flows, and hiring
guidelines

c.

To make economic decisions regarding the company’s cash flows, hiring guidelines, and environmental
position

d.

To make economic decisions regarding the company’s financial position, financial performance, and cash
flows

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The correct answer is: To make economic decisions regarding the company’s financial position, financial
performance, and cash flows

Question 7
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Q1P1 According to PAS 1, the judgments and estimates embodied in the financial statements, for
example, materiality judgments, assessments of uncertainty and risk, and the like, are the responsibility
of the entity’s

a.

accountant.

b.

janitor.

c.

management.

d.

auditor.

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The correct answer is: management.

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Q1P1 When an entity breaches a covenant under a long-term loan agreement on or before the balance
sheet date with the effect that the liability becomes payable on demand, the liability is classified as
noncurrent when I. The lender has agreed on or before the balance sheet date to provide a grace period
ending at least twelve months after the balance sheet date. II. The lender has agreed after the balance
sheet date and before the financial statements are authorized for issue not to demand payment as a
consequence of the breach.

a.

I only

b.

II only

c.

Neither I nor II

d.

Both I and II

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The correct answer is: I only

Question 9

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Q1P1 This comprises all “non-owner changes in equity.” It excludes owner changes in equity, such as
subscription, issuance, and reacquisition of share capital and declaration of dividends.

a.

Changes in equity

b.
Other comprehensive income

c.

Profit or loss

d.

Total comprehensive income

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The correct answer is: Total comprehensive income

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Q1P1 Which of the following statements is correct when an entity departs from a provision of a PFRS?

a.

PAS 1 requires certain disclosures when an entity departs from a provision of a PFRS.

b.

b and c

c.

PAS 1 permits such a departure if the relevant regulatory framework requires, or otherwise does not
prohibit, such a departure.

d.

The entity’s financial statements would be grossly incorrect; therefore, PAS 1 does not allow such a
departure.

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The correct answer is: b and c

Question 11

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Q1P1 What is the purpose of reporting comprehensive income?

a.

To combine income from continuing operations with income from discontinued operations and
extraordinary items.

b.

To report changes in equity due to transactions with owners.

c.

To report a measure of the overall financial performance of an entity.

d.

To replace profit with a better measure.

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The correct answer is: To report a measure of the overall financial performance of an entity.

Question 12

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Q1P1 In making an economic decision, an investor needs information on the amounts of an entity’s
economic resources and claims to those resources. That investor would most likely refer to which of the
following financial statements?

a.

Statement of cash flows

b.

Statement of comprehensive income

c.

Statement of changes in equity

d.

Statement of financial position

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The correct answer is: Statement of financial position

Question 13

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Q1P1 Which of the following financial statements would not be dated as covering a certain reporting
period?

a.

Statement of profit or loss and other comprehensive income

b.

Statement of cash flows

c.

Statement of changes in equity

d.

Statement of financial position

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The correct answer is: Statement of financial position

Question 14

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Q1P1 Imagine you are a business manager. You would be most awesome as a manager in which of the
following independent scenarios?

a.

Your company has an average total assets of ₱10M during the year. At the end of the year, your company
reported profit of ₱1M. The average return of other similar companies with the same level of assets is
30%.

b.

You changed your company’s method of allocating costs from an accelerated method to a straight-line
methoD. The change met the requirements of the PFRSs. This led to the smoothing of expenses, which
increased your company’s profit during the period by 12%, above the industry average.

c.

Your adoption of accounting policy has led to the immediate recognition of expenses. Those costs could
have otherwise been allocated over several periods. Accordingly, your company did not declare
dividends during the perioD. This resulted to a decline in the market value of your company’s stocks
while the prices of all other stocks in the stock market have increaseD.

d.

You are great at closing deals, that’s why you’re a boss. Eager to increase your company’s resources, you
were able to obtain a ₱20M loan from a bank. Interest expense on the loan during the year was ₱3.4M
while the return on investments of loan proceeds was 2%.

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The correct answer is: You changed your company’s method of allocating costs from an accelerated
method to a straight-line methoD. The change met the requirements of the PFRSs. This led to the
smoothing of expenses, which increased your company’s profit during the period by 12%, above the
industry average.

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Q1P1 Which statement is incorrect?

a.

The standard does not prescribe the order or format in which the line items are to be presenteD.

b.

Additional line items, headings and subtotals shall be presented on the face of the balance sheet when
such presentation is relevant to an understanding of the entity’s financial position.

c.

As a minimum, the face of the balance sheet shall include line items that are sufficiently different in
nature or function to warrant separate presentation.
d.

When entity presents current and noncurrent captions, it shall classify deferred tax assets and deferred
tax liabilities as current.

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The correct answer is: When entity presents current and noncurrent captions, it shall classify deferred
tax assets and deferred tax liabilities as current.

Question 16

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Q1P1 Identify the fundamental qualitative characteristics under the Conceptual Framework. I. Relevance
II. Reliability III. Faithful representation IV. Comparability V. Verifiability VI. Timeliness VII.
Understandability

a.

IV, V, VI and VII

b.

I and II

c.

I, II, III, IV, V and VI

d.

I and III

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The correct answer is: I and III

Question 17
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Q1P1 Which of the following is not one of the decisions that primary users make?

a.

deciding on whether to hold or sell investment in stocks

b.

deciding on whether to buy investment in stocks

c.

deciding on how to run the day-to-day operations of the entity

d.

deciding on whether to extend loan to the reporting entity

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The correct answer is: deciding on how to run the day-to-day operations of the entity

Question 18

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Q1P1 An asset shall be classified as current when it satisfies any of the following criteria (choose the
incorrect one).

a.
It is expected to be realized in more than twelve months after the balance sheet date.

b.

It is held primarily for the purpose of being tradeD.

c.

It is expected to be realized in or is intended for sale or consumption in the entity’s normal operating
cycle.

d.

It is cash or a cash equivalent which is unrestricted from being exchanged or used to settle a liability for
at least twelve months after the balance sheet date.

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The correct answer is: It is expected to be realized in more than twelve months after the balance sheet
date.

Question 19

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Q1P1 “I say red; you say green.” The information lacks which of the following qualitative characteristics?

a.

Timeliness

b.

Relevance

c.
Colorfulness

d.

Verifiability

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The correct answer is: Verifiability

Question 20

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Q1P1 Which of the following is not a disclosure requirement of PAS 1?

a.

The reason for using a longer or shorter period when an entity changes the frequency of its reporting.

b.

Any material uncertainties on the entity’s ability to continue as a going concern.

c.

The recognition, measurement and disclosure of specific transactions and other events.

d.

The financial effect of a departure when an entity departs from a PFRS requirement.

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The correct answer is: The recognition, measurement and disclosure of specific transactions and other
events.

Question 21
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Q1P1 The objective of general purpose financial statements is to provide information about I. the
financial position, financial performance and cash flows of an entity that is useful to a wide range of
users in making economic decisions. II. results of management’s stewardship of the resources entrusted
to it.

a.

I only

b.

II only

c.

Neither I nor II

d.

Both I and II

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The correct answer is: Both I and II

Question 22

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Q1P1 If you plan to review a complete set of IFRS financial statements, what would be included in the
set?
a.

A balance sheet, an income statement, a statement of changes in equity, and a cash flow statement

b.

A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, a
financial review by management, and notes comprising a summary of significant accounting policies and
other explanatory notes

c.

A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, and
notes comprising a summary of significant accounting policies and other explanatory notes

d.

balance sheet, an income statement, a statement of changes in equity, a cash flow statement, a financial
review by management, value-added statements, and notes comprising a summary of significant
accounting policies and other explanatory notes

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The correct answer is: A balance sheet, an income statement, a statement of changes in equity, a cash
flow statement, and notes comprising a summary of significant accounting policies and other
explanatory notes

Question 23

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Q1P1 Which is incorrect concerning the concept of materiality and aggregation?

a.

Materiality depends on the size and nature of the item judged in the particular circumstances of its
omission or misstatement.
b.

Information is material if its nondisclosure could influence the economic decisions of users taken on the
basis of the financial statements.

c.

Materiality provides that the specific disclosure requirements of a PFRS must be met even if the resulting
information is not material.

d.

Items of a dissimilar nature or function shall be presented separately unless they are immaterial.

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The correct answer is: Materiality provides that the specific disclosure requirements of a PFRS must be
met even if the resulting information is not material.

Question 24

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Q1P1 Materiality judgment is least likely to be applied in which of the following?

a.

in determining whether information could influence the decisions of users, and therefore, must be
presented in the financial statements

b.

whether additional information needs to be provided, including the level of detail and conciseness of the
information’s presentation

c.
in determining whether the cost of processing and communicating information exceeds the benefits
expected to be derived from it

d.

in determining whether an item warrants separate presentation in the financial statements or is to be

aggregated with other items

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The correct answer is: in determining whether the cost of processing and communicating information
exceeds the benefits expected to be derived from it

Question 25

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Q1P1 Which statement is incorrect concerning financial statements?

a.

The management of an enterprise has the primary responsibility for the preparation and presentation of
financial statements.

b.

Financial statements are prepared at least annually and are directed toward the common information
needs of a wide range of users.

c.

The objective of general-purpose financial statements is to provide information about the financial
position, performance and cash flows of an enterprise that is useful to a wide range of users in making
economic decisions.

d.

Financial statements do not show the results of management’s stewardship of resources entrusted to it.
Feedback

The correct answer is: Financial statements do not show the results of management’s stewardship of
resources entrusted to it.

Question 26

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Q1P1 Which of the following statements is correct regarding the classification of financial liabilities as
current or noncurrent in accordance with PAS 1?

a.

Currently maturing obligations are presented as current liabilities even if their original term is longer
than one year and even if a refinancing agreement is completed after the end of the reporting period but
before the financial statements are authorized for issue.

b.

Currently maturing obligations are presented as noncurrent liabilities if a refinancing agreement is

completed after the financial statements are authorized for issue.

c.

Currently maturing obligations are presented as noncurrent liabilities only if a refinancing agreement is
completed after the end of the reporting period but before the financial statements are authorized for
issue.

d.

Currently maturing obligations are presented as noncurrent liabilities only if their original term is longer
than one year.

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The correct answer is: Currently maturing obligations are presented as current liabilities even if their
original term is longer than one year and even if a refinancing agreement is completed after the end of
the reporting period but before the financial statements are authorized for issue.
Question 27

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Q1P1 Financial accounting can be broadly defined as the area of accounting that prepares

a.

General purpose financial statements to be used by parties both internal and external to the business
enterprise

b.

Financial statements to be used primarily by management

c.

General purpose financial statements to be used by parties internal to the business enterprise only

d.

Financial statements to be used by investor only

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The correct answer is: General purpose financial statements to be used by parties both internal and
external to the business enterprise

Question 28

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Q1P1 These are the end product of the financial reporting process and the means by which information
gathered and processed is periodically communicated to users.
a.

Financial products

b.

Accounting statements

c.

Financial reporting

d.

Financial statements

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The correct answer is: Financial statements

Question 29

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Q1P1 Which of the following is not one of the general features of financial statements under PAS 1?

a.

Cash Basis

b.

Materiality and aggregation

c.
Going Concern

d.

Fair presentation and compliance with PFRSs

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The correct answer is: Cash Basis

Question 30

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Q1P1 Which is correct regarding the overall considerations in preparation and presentation of financial
statements?

a.

Assets and liabilities, and income and expenses, when material should be offset against each other.

b.

Financial statements should be prepared on liquidity concern basis.

c.

The presentation and classification of financial statement items should not be uniform from one
accounting period to the next.

d.

Each material item should be presented separately in the financial statements. Immaterial amounts of
similar nature and function should be grouped or condensed as one-line item in the financial statements.

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The correct answer is: Each material item should be presented separately in the financial statements.
Immaterial amounts of similar nature and function should be grouped or condensed as one-line item in
the financial statements.

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Q1P1 What predictions regarding company might be made through using IFRS financial statements?

a.

Predictions related to the company’s future financial performance, as well as their competitors’ financial
performance

b.

Predictions related to the company’s future cash flows, as well as cash flow timing and certainty

c.

Predictions related to the company’s future inventory flows, as well as inventory timing

d.

Predictions related to the company’s future financial position, as well as market timing and certainty

Feedback

The correct answer is: Predictions related to the company’s future cash flows, as well as cash flow timing
and certainty

Question 32

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Q1P1 Of the following items, the only one which should not be classified as a current liability is

a.

Current maturities of long-term debt

b.

Unearned revenues

c.

Short-term obligations expected to be refinanced

d.

Sales taxes payable

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The correct answer is: Short-term obligations expected to be refinanced

Question 33

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Q1P1 According to the Conceptual Framework, it is the right or the group of rights, the obligation or the
group of obligations, or the group of rights and obligations, to which recognition criteria and
measurement concepts are applieD.

a.

Unit of account

b.
Classifying

c.

Aggregation

d.

Executory contract

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The correct answer is: Unit of account

Question 34

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Q1P1 Which of the following financial statements would be dated as at a certain date?

a.

Statement of cash flows

b.

All of these

c.

Statement of profit or loss and other comprehensive income

d.

Statement of financial position

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The correct answer is: Statement of financial position

Question 35

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Q1P1 The operating cycle of an enterprise

a.

Is the time between the acquisition of assets for processing and their realization in cash or cash
equivalents.

b.

Is set by the industry’s trade association usually on an average length of time for all firms which are
members of the association.

c.

Is the period of time normally elapsed from the time the enterprise expends cash to the time it converts
trade receivables back into cash.

d.

Causes the distinction between current and noncurrent items to depend on whether they will affect cash
within one year.

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The correct answer is: Is the time between the acquisition of assets for processing and their realization in
cash or cash equivalents.

SCF Cash Flow Statements, requires that investing and financing transactions that do not require the use
of cash or cash equivalents should be:

a.
excluded from a cash flow statement;

b.

presented in the cash flow statement after operating activities and before investing and financing
activities;

c.

presented in a cash flow statement after the operating, investing and financing activities have been
presenteD.

d.

included in a cash flow statement before operating, investing and financing activities;

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The correct answer is: excluded from a cash flow statement;

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SCF Entity A acquires equipment by issuing shares of stocks. How should Entity A report the transaction
in the statement of cash flows?

a.

Not reported

b.

Operating activities

c.
Financing activities

d.

Investing activities

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The correct answer is: Not reported

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SCF Which of the following is considered as cash flows from operating activities?

a.

cash advances and loans made to other parties

b.

cash receipts and payments from contracts held for dealing or trading purposes

c.

Cash receipts from sales of property, plant and equipment, intangibles and other long-term assets

d.

cash receipts from the repayment of advances and loans made to other parties

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The correct answer is: cash receipts and payments from contracts held for dealing or trading purposes

Question 4

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SCF The following item would not appear in a cash flow statement:

a.

proceeds on disposal of non-current assets.

b.

payment of creditors;

c.

conversion of preference shares to ordinary shares;

d.

receipts of cash from customers;

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The correct answer is: conversion of preference shares to ordinary shares;

Question 5

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SCF Which of the following is presented under the investing activities section of a statement of cash
flows?

a.

Collection of accounts receivable

b.

Purchase of equipment through cash

c.

Issuance of share capital through cash

d.

Cash purchases of inventories

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The correct answer is: Purchase of equipment through cash

Question 6

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SCF In the statement of cash flows of a non-financial institution, interest income received is presented
under

a.

operating activities.

b.

investing activities.

c.

financing activities.
d.

a or c

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The correct answer is: a or c

Question 7

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SCF Which of the following statements best describes a statement of cash flows?

a.

The statement of cash flows shows information on an entity’s income and expenses during the perioD.

b.

The statement of cash flows is also called the statement of activities.

c.

The statement of cash flows shows historical changes of cash and cash equivalents during the perioD.

d.

The statement of cash flows shows information on an entity’s assets, liabilities and equity.

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The correct answer is: The statement of cash flows shows historical changes of cash and cash equivalents
during the perioD.

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SCF The following statements are true about Cash and Cash equivalents except?

a.

Cash flows include movements between items that constitute cash or cash equivalents because these
components are part of the cash management or an entity rather than part of its operating, investing
and financing activities.

b.

Cash management includes the investment of excess cash in cash equivalents

c.

Bank borrowings are generally considered to be financing activities

d.

Preferred shares acquired within a short period of their maturity and with a specified redemption date.

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The correct answer is: Cash flows include movements between items that constitute cash or cash
equivalents because these components are part of the cash management or an entity rather than part of
its operating, investing and financing activities.

Question 9

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SCF Which of the following is considered as cash flows from operating activities?

a.
Cash receipts from sales of property, plant and equipment, intangibles and other long-term assets

b.

cash receipts and payments from contracts held for dealing or trading purposes

c.

cash receipts from the repayment of advances and loans made to other parties

d.

cash advances and loans made to other parties

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The correct answer is: cash receipts and payments from contracts held for dealing or trading purposes

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SCF Which of the following is presented in the activities section of the statement of cash flows?

a.

Bank overdrafts that can be offset.

b.

Purchase of a treasury bill three months before its maturity date.

c.

Dividends paid this year although declared in a prior year.

d.

Acquisition of equipment through issuance of note payable.

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The correct answer is: Dividends paid this year although declared in a prior year.

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SCF The following statements are true about Cash and Cash equivalents except?

a.

Therefore, an investment normally qualifies as a cash equivalent only when it has a short maturity of,
say, three months or less from the date of acquisition.

b.

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for
investment or other purpose.

c.

Equity investments are included from cash equivalents.

d.

For an investment to qualify as a cash equivalent it must be readily convertible to a known amount of
cash and be subject to an insignificant risk of changes in value.

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The correct answer is: Equity investments are included from cash equivalents.

Question 12

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Question text

SCF Entity A, a financial institution, received cash dividends from its investments in marketable securities
during the year. How will the dividends be presented in Entity A’s statement of cash flows?

a.

a or b

b.

as investing activity

c.

as operating activity

d.

as financing activity

Feedback

The correct answer is: as operating activity

ME The issuance of financial reporting standards in the Philippines is the responsibility of the

a.

AASC.

b.

FRSC.

c.
CPE Council.

d.

PICPA.

Feedback

The correct answer is: FRSC.

Question 2

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Question text

ME Cash inflows in the cash flow statement are

a.

Inflows of cash and cash equivalents

b.

Inflows and outflows of cash

c.

Inflows and outflows of cash and cash equivalents

d.

Outflows of cash and cash equivalents

Feedback

The correct answer is: Inflows of cash and cash equivalents

Question 3

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Question text

ME Which can qualify as cash equivalents?

a.

Preferred shares with specified redemption date and acquired three months before redemption

b.

Six-month money market placements

c.

One-year BSP treasury bill

d.

Equity securities

Feedback

The correct answer is: Preferred shares with specified redemption date and acquired three months
before redemption

Question 4

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Question text

ME Which of the following can help users assess an entity’s prospects for future cash inflows?

a.

All of these contribute to the assessment of an entity’s prospects for future cash inflows.
b.

Information about the nature and amount of the entity’s economic resources and claims.

c.

Information about how the entity’s management has effectively and efficiently discharged its
responsibilities to use the entity’s economic resources.

d.

Information about the entity’s financial performance and other changes in financial position.

Feedback

The correct answer is: All of these contribute to the assessment of an entity’s prospects for future cash
inflows.

Question 5

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Question text

ME A complete set of financial statements does not include a

a.

statement of financial position.

b.

notes.

c.

statement of comprehensive incomE.

d.

statement of retained earnings.

Feedback

The correct answer is: statement of retained earnings.

Question 6

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Question text

ME Which of the following correctly relate(s) to the Monetary/ Stable monetary/ Monetary Unit
concept? I. assets, liabilities, equity, revenues and expenses should be stated in terms of a unit of
measure which is the peso in the Philippines. II. the purchasing power of the peso is stable or constant
and that its instability is insignificant and therefore ignoreD.

a.

II

b.

None

c.

I and II

d.

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The correct answer is: I and II

Question 7
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Question text

ME Two primary users are using the financial information of Entity A. If User #1 concludes that Entity A’s
sales has increased while User #2 concludes that it has decreased, Entity A’s financial information is not

a.

verifiablE.

b.

relevant.

c.

comparable

d.

faithfully representeD.

Feedback

The correct answer is: verifiablE.

Question 8

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Question text

ME Which method should be used in preparing the investing activities section of statement of cash
flows?
a.

Direct method

b.

Either direct or indirect

c.

Indirect method

d.

Neither direct or indirect

Feedback

The correct answer is: Direct method

Question 9

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Question text

ME Which statement is incorrect?

a.

Additional line items, headings and subtotals shall be presented on the face of the balance sheet when
such presentation is relevant to an understanding of the entity’s financial position.

b.

The standard does not prescribe the order or format in which the line items are to be presenteD.

c.
As a minimum, the face of the balance sheet shall include line items that are sufficiently different in
nature or function to warrant separate presentation.

d.

When entity presents current and noncurrent captions, it shall classify deferred tax assets and deferred
tax liabilities as current.

Feedback

The correct answer is: When entity presents current and noncurrent captions, it shall classify deferred
tax assets and deferred tax liabilities as current.

Question 10

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ME Entity A is making a materiality judgment. Entity A considers the size of the impact of an item to be
material if it exceeds 5% of total assets. What type of materiality assessment is this?

a.

Quantitative

b.

Qualitative

c.

Requirement of a Standard

d.

Relevance

Feedback
The correct answer is: Quantitative

Question 11

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Question text

ME Which method should be used in preparing the operating activities section of statement of cash
flows?

a.

Indirect method

b.

Neither direct or indirect

c.

Either direct or indirect

d.

Direct method

Feedback

The correct answer is: Either direct or indirect

Question 12

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Question text

ME The primary purpose of the statement of cash flows is

a.

To help investors, creditors and other users to assess the entity’s ability to generate positive future net
cash flows

b.

To disclose separately noncash investing and financing activities

c.

To assess the ability of the entity to pay dividends to stockholders

d.

To provide relevant information about cash receipts and cash payment of an entity during a period

Feedback

The correct answer is: To provide relevant information about cash receipts and cash payment of an entity
during a period

Question 13

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Question text

ME According to the revised Conceptual Framework, an item is recognized if

a.

it meets the definition of a financial statement element.

b.

recognizing it would provide useful information.

c.

it is probable that the item will result to an inflow or outflow of economic benefits and its cost can be
measured reliably.

d.

a and b

Feedback

The correct answer is: a and b

Question 14

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Question text

ME Which of the following statements is/are incorrect about the statement of cash flows? I. Cash flows
arising from taxes on income shall be separately disclosed and shall be classified as cash flows from
operating activities unless they can be specifically identified with financing and investing activities II.
When accounting for an investment in an associate or a subsidiary accounted for by use of the equity or
cost method, an investor restricts its reporting in the cash flow statements to the cash flows between
itself and the investor. III. The aggregate cash flows arising from acquisitions and from disposals of
subsidiaries or other business units shall be presented separately and classified as investing activities or
financing activities. IV. An entity shall not disclose the components of cash and cash equivalents

a.

II and IV only

b.

I and IV only

c.

I and II only
d.

III and IV only

Feedback

The correct answer is: III and IV only

Question 15

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Question text

ME According to the revised Conceptual Framework, income and expenses are classified as either

a.

recognized in profit or loss or in other comprehensive incomE.

b.

gains and revenues, and expenses and losses, respectively.

c.

contributions from, or distributions to, the entity’s owners.

d.

increases or decreases in the entity’s assets or liabilities.

Feedback

The correct answer is: recognized in profit or loss or in other comprehensive incomE.

Question 16

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Question text

ME An entity shall prepare a cash flow statements and shall present it as

a.

Supporting schedule for amount appearing as cash and cash equivalents

b.

Note to financial statements

c.

Supplementary financial statements

d.

Integral part of the enterprise’s basic financial statements

Feedback

The correct answer is: Integral part of the enterprise’s basic financial statements

Question 17

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Question text

ME Which of the following is not an aspect of the qualitative characteristic of relevance?

a.

Feedback or Confirmatory value

b.
Materiality

c.

Timeliness

d.

Predictive value

Feedback

The correct answer is: Timeliness

Question 18

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Question text

ME This method of presenting cash flows from (used in) operating activities shows each major class of
gross cash receipts and gross cash payments.

a.

Indirect method

b.

Direct method

c.

Inverse method

d.

Straight method
Feedback

The correct answer is: Direct method

Question 19

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Question text

ME The qualitative characteristics that enhance the usefulness of financial information includes all of the
following, except

a.

Comparability

b.

Verifiability

c.

Materiality

d.

Timeliness

Feedback

The correct answer is: Materiality

Question 20

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Question text
ME Which of the following statements is incorrect regarding the purpose of the Conceptual Framework?

a.

The Conceptual Framework prescribes the concepts for both general purpose and specific purpose
financial reporting.

b.

Globally acceptable Standards reduces the information gap between financial statement users and the
reporting entity’s management.

c.

Globally acceptable Standards contribute to economic efficiency by lowering the cost of capital and
reducing international reporting costs.

d.

The Conceptual Framework is intended to provide a foundation for the development of globally
acceptable Standards.

Feedback

The correct answer is: The Conceptual Framework prescribes the concepts for both general purpose and
specific purpose financial reporting.

Question 21

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Question text

ME The primary purpose of the cash flow statement is

a.

To help investors, creditors and other users to assess the entity’s ability to generate positive future net
cash flows
b.

To provide relevant information about cash receipts and cash payments of an entity during a period

c.

To disclose separately noncash investing and financing activities

d.

to assess the ability of the entity to pay dividends to stockholders

Feedback

The correct answer is: To provide relevant information about cash receipts and cash payments of an
entity during a period

Question 22

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Question text

ME How might users of IAS 1 apply the information provided in the presentation of IFRS financial
statements?

a.

To make economic decisions regarding the company’s financial position, financial performance, and cash
flows

b.

To make economic decisions regarding the company’s cash flows, hiring guidelines, and environmental
position

c.
To make economic decisions regarding the company’s financial performance, environmental position,
and community service

d.

To make economic decisions regarding the company’s financial performance, cash flows, and hiring
guidelines

Feedback

The correct answer is: To make economic decisions regarding the company’s financial position, financial
performance, and cash flows

Question 23

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Question text

ME The following item would not appear in a cash flow statement:

a.

conversion of preference shares to ordinary shares;

b.

receipts of cash from customers;

c.

payment of creditors;

d.

proceeds on disposal of non-current assets.

Feedback

The correct answer is: conversion of preference shares to ordinary shares;

Question 24

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Question text

ME Control is a necessary element of an asset. Control means

a.

the entity has the exclusive right over the benefits of an asset, including the ability to prevent others
from accessing those benefits.

b.

a legally enforceable right conferred to the entity by a law or other operation of law.

c.

the entity has the exclusive right over the entire economic resource, and not only a portion of it.

d.

that the entity can ensure that the resource will produce economic benefits in all circumstances.

Feedback

The correct answer is: the entity has the exclusive right over the benefits of an asset, including the ability
to prevent others from accessing those benefits.

Question 25

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Question text

ME If you plan to review a complete set of IFRS financial statements, what would be included in the set?
a.

A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, a
financial review by management, and notes comprising a summary of significant accounting policies and
other explanatory notes

b.

balance sheet, an income statement, a statement of changes in equity, a cash flow statement, a financial
review by management, value-added statements, and notes comprising a summary of significant
accounting policies and other explanatory notes

c.

A balance sheet, an income statement, a statement of changes in equity, and a cash flow statement

d.

A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, and
notes comprising a summary of significant accounting policies and other explanatory notes

Feedback

The correct answer is: A balance sheet, an income statement, a statement of changes in equity, a cash
flow statement, and notes comprising a summary of significant accounting policies and other
explanatory notes

Question 26

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Question text

ME Which of the following is least likely to be considered when determining whether an item meets the
definition of an asset?

a.

whether the right has a potential to produce economic benefits, evidenced by at least one circumstance
b.

whether the entity controls the right

c.

whether there is a present economic resource, which is a right, that has resulted from past events

d.

whether it is probable (more likely than not) that the resource will produce economic benefits

Feedback

The correct answer is: whether it is probable (more likely than not) that the resource will produce
economic benefits

Question 27

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Question text

ME Which of the following would not result to the recognition of a liability?

a.

A future commitment becomes burdensomE.

b.

Receipt of the proceeds of a bank loan.

c.

Paying in advance the purchase price of inventories for future delivery.

d.

Receipt of delivery of equipment purchased on credit.

Feedback

The correct answer is: Paying in advance the purchase price of inventories for future delivery.

Question 28

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Question text

ME According to the Conceptual Framework, the correct classifications of Relevance and Reliability,
respectively, are

a.

Enhancing, Fundamental

b.

Fundamental, None

c.

Fundamental, Fundamental

d.

Fundamental, Enhancing

Feedback

The correct answer is: Fundamental, None

Question 29

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Question text

ME What predictions regarding company might be made through using IFRS financial statements?

a.

Predictions related to the company’s future inventory flows, as well as inventory timing

b.

Predictions related to the company’s future financial performance, as well as their competitors’ financial
performance

c.

Predictions related to the company’s future financial position, as well as market timing and certainty

d.

Predictions related to the company’s future cash flows, as well as cash flow timing and certainty

Feedback

The correct answer is: Predictions related to the company’s future cash flows, as well as cash flow timing
and certainty

Question 30

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Question text

ME Which method of calculating cash flow from operations requires the adjustment of net income for
deferrals, accruals, noncash, and nonoperating expenses?

a.

The outflow methoD.

b.

The direct methoD.

c.

The inflow methoD.

d.

The indirect methoD.

Feedback

The correct answer is: The indirect methoD.

Question 31

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Question text

ME Entity A determined that a previously recognized asset no longer meet the definition of an asset.
Accordingly, Entity A removed the carrying amount of the asset from the statement of financial position
and recognized it as an expensE. Entity A is applying which of the following principles?

a.

Derecognition

b.

Recognition

c.

Matching
d.

Presentation and disclosure

Feedback

The correct answer is: Derecognition

Question 32

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ME Which statement is incorrect concerning financial statements?

a.

The management of an enterprise has the primary responsibility for the preparation and presentation of
financial statements.

b.

Financial statements do not show the results of management’s stewardship of resources entrusted to it.

c.

The objective of general-purpose financial statements is to provide information about the financial
position, performance and cash flows of an enterprise that is useful to a wide range of users in making
economic decisions.

d.

Financial statements are prepared at least annually and are directed toward the common information
needs of a wide range of users.

Feedback

The correct answer is: Financial statements do not show the results of management’s stewardship of
resources entrusted to it.
Question 33

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ME Which is correct regarding the overall considerations in preparation and presentation of financial
statements?

a.

Each material item should be presented separately in the financial statements. Immaterial amounts of
similar nature and function should be grouped or condensed as one line item in the financial statements.

b.

Assets and liabilities, and income and expenses, when material should be offset against each other.

c.

The presentation and classification of financial statement items should not be uniform from one
accounting period to the next.

d.

Financial statements should be prepared on liquidity concern basis.

Feedback

The correct answer is: Each material item should be presented separately in the financial statements.
Immaterial amounts of similar nature and function should be grouped or condensed as one line item in
the financial statements.

Question 34

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Question text
ME Company M paid the shares of the profits of the corporation to the existing shareholders. The
transaction shall be reflected in the statement of cash flows under which activity?

a.

Not reflected

b.

Investing activity

c.

Financing activity

d.

Operating activity

Feedback

The correct answer is: Financing activity

Question 35

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Question text

ME Cash Flow Statements, requires that investing and financing transactions that do not require the use
of cash or cash equivalents should be:

a.

excluded from a cash flow statement;

b.
included in a cash flow statement before operating, investing and financing activities;

c.

presented in the cash flow statement after operating activities and before investing and financing
activities;

d.

presented in a cash flow statement after the operating, investing and financing activities have been
presenteD.

Feedback

The correct answer is: excluded from a cash flow statement;

Question 36

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Question text

ME Which of the following is incorrect regarding the objective of general purpose financial statements?

a.

General purpose financial statements show information on the reporting entity’s assets, liabilities,
equity, income and expenses.

b.

General purpose financial statements provide information that is useful in assessing the entity’s ability to
generate future net cash inflows.

c.

General purpose financial statements are intended to show the value of the reporting entity.
d.

General purpose financial statements provide information that is useful in assessing the entity’s
management stewardship in relation to the use of the entity’s economic resources.

Feedback

The correct answer is: General purpose financial statements are intended to show the value of the
reporting entity.

Question 37

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ME How is it possible for a firm to be profitable and still go bankrupt?

a.

Sales have not improved even though credit policies have been easeD.

b.

The firm has positive net income but has failed to generate cash from operations.

c.

Net income has been adjusted for inflation.

d.

Earnings have increased more rapidly than sales.

Feedback

The correct answer is: The firm has positive net income but has failed to generate cash from operations.

Question 38

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ME Which of the following is correct when determining the existence of an asset or a liability?

a.

An asset or a liability exists if the associated right or obligation arises from legal or contractual
requirements.

b.

An asset or a liability can exist even if its potential to produce, or cause a transfer of, economic benefits
is not certain or even likely – what is important is that the right or the obligation exists in the present and
that in at least one circumstance it will produce, or cause a transfer of, economic benefits.

c.

All of these are correct.

d.

An asset or a liability exists only if the expected inflows or outflows of economic benefits from the asset
or the liability are probable, meaning they are more likely than not to occur.

Feedback

The correct answer is: An asset or a liability can exist even if its potential to produce, or cause a transfer
of, economic benefits is not certain or even likely – what is important is that the right or the obligation
exists in the present and that in at least one circumstance it will produce, or cause a transfer of,
economic benefits.

Question 39

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Question text

ME An entity’s financial position or condition refers to which of the following?

a.

All of thesE.

b.

The level of change in the entity’s economic resources and claims to those resources, also referred to as
the economic phenomenA.

c.

The amount of return that the entity has generated from its economic resources during the perioD.

d.

The status of the entity’s assets, liabilities and equity.

Feedback

The correct answer is: The status of the entity’s assets, liabilities and equity.

Question 40

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ME The revised Conceptual Framework defines a liability as

a.

a present obligation of the entity to transfer an economic resource as a result of past events.

b.

All of thesE.
c.

a present economic resource controlled by the entity as a result of past events. An economic resource is
a right that has the potential to produce economic benefits.

d.

a present obligation of the entity arising from past events, the settlement of which is expected to result
in an outflow from the entity of resources embodying economic benefits.

Feedback

The correct answer is: a present obligation of the entity to transfer an economic resource as a result of
past events.

Question 41

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ME When an entity breaches a covenant under a long-term loan agreement on or before the balance
sheet date with the effect that the liability becomes payable on demand, the liability is classified as
noncurrent when I. The lender has agreed on or before the balance sheet date to provide a grace period
ending at least twelve months after the balance sheet datE. II. The lender has agreed after the balance
sheet date and before the financial statements are authorized for issue not to demand payment as a
consequence of the breach.

a.

Neither I nor II

b.

I only

c.

II only
d.

Both I and II

Feedback

The correct answer is: I only

Question 42

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ME Late information lacks this qualitative characteristiC.

a.

Timeliness

b.

Verifiability

c.

Comparability

d.

Tardiness

Feedback

The correct answer is: Timeliness

Question 43

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Question text

ME Effective communication makes information more useful. Effective communication requires all of the
following except

a.

classifying information in a manner that groups similar items and separates dissimilar items.

b.

focusing on presentation and disclosure objectives and principles rather than focusing on rules

c.

aggregating information in such a way that it is not obscured either by unnecessary detail or by excessive
aggregation.

d.

using standardized descriptions, A.k.A. ‘boilerplate’, rather than entity-specific information.

Feedback

The correct answer is: using standardized descriptions, A.k.A. ‘boilerplate’, rather than entity-specific
information.

Question 44

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ME Prior to the full adoption of the IFRSs in 2005, the reporting standards used in the Philippines were
primarily based on

a.

Spaniard GAAP.
b.

a combination of a, b and c and a little bit of Lapu-lapu’s accounting concepts.

c.

US GAAP (SFASs).

d.

Japanese GAAP.

Feedback

The correct answer is: US GAAP (SFASs).

Question 45

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ME A company is issuing its comparative financial statements for the years 20x2 and 20x3. If the
company is required to issue an additional statement of financial position, such statement should be
dated

a.

as of Jan. 1, 20x1.

b.

as of DeC. 31, 20x2.

c.

as of Jan. 1, 20x2.
d.

as of DeC. 31, 20x1.

Feedback

The correct answer is: as of Jan. 1, 20x1.

Question 46

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ME To be relevant, information should have which of the following?

a.

Confirmatory valuE.

b.

Understandability.

c.

Verifiability.

d.

Costs and benefits.

Feedback

The correct answer is: Confirmatory valuE.

Question 47

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ME Which of the following is considered a primary user of general purpose financial reports under the
Conceptual Framework?

a.

all of these are primary users

b.

the entity’s management

c.

government regulatory body

d.

potential investor

Feedback

The correct answer is: potential investor

Question 48

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ME Under this concept of capital maintenance, profit is earned if net assets increased during the period
after excluding the effects of transactions with the owners.

a.

Financial capital maintenance

b.

Repairs and maintenance

c.

Building maintenance

d.

Physical capital maintenance

Feedback

The correct answer is: Financial capital maintenance

Question 49

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ME The revised definitions of an asset and a liability emphasize that

a.

an asset is a controlled resource, and a liability is an obligation, that is expected to cause inflows or
outflows of economic benefits.

b.

an asset is the physical object and the liability is ultimate outflow of economic benefits from settling the
obligation.

c.

All of these are emphasized in the revised definitions.

d.

an asset is a right, and a liability is an obligation, that has the potential to produce, or cause the transfer
of, economic benefits.

Feedback

The correct answer is: an asset is a right, and a liability is an obligation, that has the potential to produce,
or cause the transfer of, economic benefits.

Question 50

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ME This refers to financial statements that are 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.

a.

Managerial reports

b.

Unisex financial statements

c.

All-purpose financial statements

d.

General purpose financial statements

Feedback

The correct answer is: General purpose financial statements

Question 51
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Question text

ME Entity A deliberately overstated its liabilities from ₱1M to ₱1.2M. What qualitative characteristic is
violated?

a.

Timeliness

b.

Faithful representation

c.

Relevance

d.

Understandability

Feedback

The correct answer is: Faithful representation

Question 52

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Question text

ME According to the Conceptual Framework, before an item is recognized, it must meet the definition of
an asset, liability, equity, income or expense, and recognizing that item would provide relevant and
faithfully represented information. Which of the following relates to faithful representation rather than
relevance?
a.

A high level of measurement uncertainty associated with the asset.

b.

It is uncertain whether the asset exists.

c.

The asset exists but the probability that it will produce inflows of economic benefits is low.

d.

None of thesE. An item that meets the definition of an asset is always recognized as an asset.

Feedback

The correct answer is: A high level of measurement uncertainty associated with the asset.

Question 53

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ME According to the Conceptual Framework, this principle refers to presenting information in a concise
manner by summarizing voluminous data, but not too concise that important detail is either omitted or
obscureD.

a.

Offsetting

b.

Classifying
c.

Aggregation

d.

Use of entity-specific information, rather than ‘boiler-plate’ descriptions

Feedback

The correct answer is: Aggregation

Question 54

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Question text

ME Which of the following is an acceptable method of reporting other comprehensive income and its
components?

a.

In the notes only.

b.

All of these

c.

In a statement of profit or loss and other comprehensive incomE.

d.

In a statement of changes in equity

Feedback
The correct answer is: In a statement of profit or loss and other comprehensive incomE.

Question 55

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Question text

ME How would payments for dividend be classified?

a.

Operating outflow.

b.

Investing outflow.

c.

Operating inflow.

d.

Financing outflow.

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The correct answer is: Financing outflow.

Question 56

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ME Choose the correct statement.

a.

General purpose financial statements must be prepared by a Certified Public Accountant.

b.

Financial accounting is an information system designed to provide information primarily to internal

users.

c.

The preparation of general purpose financial statements is usually based on the assumption that the
primary users use information in making decisions about providing resources to the reporting entity.

d.

Financial reporting cannot be influenced by changes in legal, political, business and social environments.

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The correct answer is: The preparation of general purpose financial statements is usually based on the
assumption that the primary users use information in making decisions about providing resources to the
reporting entity.

Question 57

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ME According to PFRS 1, an entity’s first PFRS financial statements shall include, at the minimum, at least
(choose the incorrect statement)

a.

two statements of financial position

b.

three statements of financial position

c.

two statements of cash flows

d.

two statements of comprehensive income

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The correct answer is: two statements of financial position

Question 58

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ME Cash receipts from royalties, fees, commissions and other revenue are

a.

Cash outflows from operating activities

b.

Cash inflows from operating activities

c.

Cash outflows from financing activities

d.

Cash inflows from investing activities

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The correct answer is: Cash inflows from operating activities

Question 59

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ME Recognizing a financial statement element requires measuring it in monetary terms. Which of the
following statements is incorrect regarding measurement?

a.

Measurement uncertainty will always cause the non-recognition of a financial statement element.

b.

The Conceptual Framework only describes the measurement bases used in financial reporting but does
not specify how a particular financial statement element should be measured – this is addressed by the
Standards.

c.

The Conceptual Framework broadly classifies the measurement bases used in financial reporting into
two, namely, historical cost and current valuE.

d.

Measuring a financial statement element often requires estimation.

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The correct answer is: Measurement uncertainty will always cause the non-recognition of a financial
statement element.

Question 60

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ME Financing activities are the

a.

Borrowings and subsequent payments of the borrowings only.

b.

Activities that result in changes in the size and composition of equity capital and borrowings of the
enterprisE.

c.

Principal revenue-producing activities of the enterprisE.

d.

Acquisition and disposal of long-term assets and other investments not included in cash equivalents.

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The correct answer is: Activities that result in changes in the size and composition of equity capital and
borrowings of the enterprisE.

Question 61

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ME The objective of general purpose financial statements is to provide information about I. the financial
position, financial performance and cash flows of an entity that is useful to a wide range of users in
making economic decisions. II. results of management’s stewardship of the resources entrusted to it.

a.

I only
b.

Neither I nor II

c.

Both I and II

d.

II only

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The correct answer is: Both I and II

Question 62

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ME An asset is an economic resource and an economic resource is a right that has the potential to
produce economic benefits. Which of the following is not one of the potentials of an economic resource
to produce economic benefits for an entity?

a.

The resource can be converted into cash.

b.

Service potential, i.E., the resource can be used to provide services in the entity’s normal business
activities.

c.

The resource causes more outflows of cash from the entity than inflows.
d.

The resource has the ability to provide cost-savings to the entity.

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The correct answer is: The resource causes more outflows of cash from the entity than inflows.

Question 63

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ME Bank overdrafts are

a.

Financing activities

b.

Component of cash and cash equivalents if they are repayable on demand and the bank balance often
fluctuates from positive to negativE.

c.

Investing activities

d.

Operating activities

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The correct answer is: Component of cash and cash equivalents if they are repayable on demand and the
bank balance often fluctuates from positive to negativE.

Question 64

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ME Entity A’s current year financial statements include the preceding year’s financial statements as
comparative information. This is most in keeping with the concept of

a.

Inter-comparability.

b.

Intra-comparability.

c.

Verifiability.

d.

Faithful representation.

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The correct answer is: Intra-comparability.

Question 65

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ME Which of the following will most likely to cause the non-recognition of an asset or a liability?

a.

It is uncertain whether the asset or liability exists.

b.

There is a measurement uncertainty regarding the asset or liability.

c.

Recognizing the asset or liability would not provide relevant and faithfully represented information.

d.

The probability of an inflow (outflow) of future economic benefits from the asset (liability) is low.

Feedback

The correct answer is: Recognizing the asset or liability would not provide relevant and faithfully
represented information.

Question 66

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ME The statement of cash flows measures:

a.

The estimated cash flowing in and flowing out during an accounting perioD.

b.

The actual cash flowing in during an accounting perioD.

c.

The actual cash flowing out during an accounting perioD.

d.

The actual cash flowing in and flowing out during an accounting perioD.

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The correct answer is: The actual cash flowing in and flowing out during an accounting perioD.

Question 67

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ME The statement of cash flows is, in reality, another way of presenting the _____________ of a
company.

a.

Cash book.

b.

Income statement.

c.

Statement of changes in equity.

d.

Balance sheet.

Feedback

The correct answer is: Cash book.

QP8 An example of an item that should be reported as a prior period adjustment is the

a.
payment of taxes resulting from examination of prior years' income tax returns.

b.

receipt of insurance proceeds for damage to a building sustained in a prior year.

c.

correction of an error in financial statements of a prior year.

d.

collection of previously written off accounts receivable.

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The correct answer is: correction of an error in financial statements of a prior year.

Question 2

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QP8 Which of the following statements is incorrect regarding accounting changes?

a.

The standard generally reflects a preference for restating prior results to improve comparability for
financial statements.

b.

A change in depreciation method is classified as a change in accounting policy.

c.

A change in depreciation method is classified as a change in accounting estimate.

d.

A change in accounting estimate is reflected in the current and future periods.

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The correct answer is: A change in depreciation method is classified as a change in accounting policy.

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QP8 A change in accounting policy requires that the cumulative effect of the change for prior periods
should be reported as an adjustment to

a.

Net income for the period in which the change occurred.

b.

Beginning accumulated profits or losses of the earliest period presented.

c.

Comprehensive income for the earliest period presented.

d.

Shareholders’ equity for the period in which the change occurred.

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The correct answer is: Beginning accumulated profits or losses of the earliest period presented.

Question 4

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QP8 An entity makes a change in accounting estimate. How does the entity recognize the effects of the
change in profit or loss?

a.

Prospectively in the current and future periods

b.

Prospectively in the current period

c.

Retrospectively starting from the earliest period presented

d.

a or b

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The correct answer is: a or b

Question 5

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QP8 Which of the following should be reported as a change in accounting estimate?

a.

Increase in the rate applied to net credit sales from 1 percent to 1-1/2 percent in determining losses
from uncollectible receivables

b.

Change made to comply with a new FASB pronouncement

c.

Change in the reported beginning inventory amount due to a discovery of a bookkeeping error

d.

Change from the completed-contract method to the percentage-of- completion method for revenue
recognition on long-term construction contracts

Feedback

The correct answer is: Increase in the rate applied to net credit sales from 1 percent to 1-1/2 percent in
determining losses from uncollectible receivables

Question 6

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QP8 An accounting change that requires that the cumulative effect of the adjustment be presented in
the statement of changes in equity is

a.

a change in the life of equipment from five to seven years.

b.

a change in the specific subsidiaries included in consolidated financial statements.

c.
a change in the percentage used to determine the allowance for bad debts.

d.

a change in depreciation method from straight-line to double-declining-balance.

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The correct answer is: a change in the specific subsidiaries included in consolidated financial statements.

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QP8 A company changes from an accounting principle that is not generally accepted to one that is
generally accepteD. The effect of the change should be reported, net of applicable income taxes, in the
current

a.

retained earnings statement as an adjustment of the opening balance.

b.

income statement after extraordinary items.

c.

income statement after income from continuing operations and before extraordinary items.

d.

retained earnings statement after net income but before dividends.

Feedback

The correct answer is: retained earnings statement as an adjustment of the opening balance.
Question 8

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QP8 At the time Fisher Corporation became a subsidiary of Ashbury Corporation, Fisher switched
depreciation of its plant assets from the straight-line method to the sum-of-the-years'-digits method
used by Ashbury. With respect to Fisher, this change was a

a.

change in accounting principle

b.

change in the reporting entity

c.

change in an accounting estimate.

d.

correction of an error.

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The correct answer is: change in an accounting estimate.

Question 9

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QP8 Which of the following is not a change in accounting principle or policy?

a.

A change from double-declining-balance to straight-line depreciation

b.

A change from eight years to five years in the useful life of a depreciable asset

c.

A change from completed-contracts to percentage-of-completion

d.

A change from FIFO to LIFO for inventory valuation

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The correct answer is: A change from eight years to five years in the useful life of a depreciable asset

Question 10

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QP8 Which of the following changes in accounting principle does not require retroactive adjustment of
the accounts?

a.

All of the above require retroactive adjustment.

b.

Change of inventory method from LIFO to FIFO

c.

Change of inventory method from FIFO to LIFO

d.

Change from the percentage-of-completion to the completed-contract method

Feedback

The correct answer is: All of the above require retroactive adjustment.

Question 11

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QP8 When it is difficult to distinguish a change in accounting policy from a change in accounting
estimate, the change is treated as

a.

a change in an accounting policy.

b.

a correction of prior period error.

c.

a change in an accounting estimate.

d.

not accounted for.

Feedback

The correct answer is: a change in an accounting estimate.

Question 12

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QP8 A change in the amortization rate for an intangible asset should be accounted for

a.

On a prospective basis

b.

On a current basis

c.

By means of a prior period adjustment

d.

By means of retroactive basis

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The correct answer is: On a prospective basis

Question 13

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QP8 Which of the following concepts or principles relates most directly to reporting accounting changes
and errors?
a.

Consistency

b.

Conservatism

c.

Objectivity

d.

Materiality

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The correct answer is: Consistency

Question 14

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QP8 A change in depreciation method, estimate of useful life or residual value is accounted for as a

a.

correction or error.

b.

change in accounting estimate.

c.

change in accounting policy.

d.

any of these

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The correct answer is: change in accounting estimate.

Question 15

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QP8 Which of the following is the proper time period in which to record a change in accounting
estimate?

a.

Retroactively only

b.

Current period and retroactively

c.

Current period and future periods

d.

Current period only

Feedback

The correct answer is: Current period and future periods

QI10 Events that occur after the current year-end but before the financial statements are issued and
provide additional evidence about conditions that existed at the current year-end and affect the
realizability of accounts receivable should be
a.

Disclosed only in the notes to the financial statements

b.

Discussed only in the management commentary of the annual report

c.

Used to record and adjustment directly to retained earnings

d.

Used to record an adjustment to bad debt expense for the year

Feedback

The correct answer is: Used to record an adjustment to bad debt expense for the year

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QI10 Which of the following events after the reporting period would require adjustment of the accounts
before issuance of the financial statements?

a.

Loss on an uncollectible account receivable resulting from a customer’s major flood loss

b.

Loss on a lawsuit the outcome of which was seemed uncertain at year-end

c.

Change in the quoted market price of financial asset held as an investment

d.

Loss of plant as a result of fire

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The correct answer is: Loss on a lawsuit the outcome of which was seemed uncertain at year-end

Question 3

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QI10 According to PAS 10, dividends declared after the reporting period, but before the financial
statements are authorized for issue, are

a.

any of these.

b.

not recognized as liability at the end of reporting period.

c.

disclosed only as an adjusting event.

d.

recognized as liability at the end of reporting period.

Feedback

The correct answer is: not recognized as liability at the end of reporting period.
Question 4

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QI10 Nonadjusting events after reporting period that generally result in disclosure include all of the
following, except

a.

Major purchase of asset or expropriation of major asset after reporting period

b.

Destruction of a major production plant by a fire before the reporting period

c.

Announcing a plan to discontinue an operation

d.

A major business combination after the reporting period

Feedback

The correct answer is: Destruction of a major production plant by a fire before the reporting period

Question 5

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QI10 The financial statements are authorized for issue

a.

When the financial statements are made available to shareholders.

b.

When the shareholders approve the financial statements at their annual meeting.

c.

When the approved financial statements are filed with a regulatory body.

d.

When the board of directors reviews the financial statements and authorizes them for issue.

Feedback

The correct answer is: When the board of directors reviews the financial statements and authorizes them
for issue.

Question 6

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QI10 Adjusting events after balance sheet date include all of the following, except

a.

Resolution after balance sheet date of a court case because it confirms that the entity had already a
present obligation.

b.

Business combination after the balance sheet date

c.

Discovery of fraud or errors that show that the financial statements were incorrect

d.

Bankruptcy of a customer which occurs after the balance sheet date

Feedback

The correct answer is: Business combination after the balance sheet date

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QI10 Adjusting events after reporting period include all of the following, except

a.

Determination after reporting period and before the issuance of the statements of the cost of asset
purchased before the end of the reporting period.

b.

The settlement of a court case after the issuance of the financial statements that confirms that the entity
has a present obligation.

c.

Bankruptcy of a customer occurring between the end of the reporting period and date of issuance of
financial statements.

d.

The discovery of fraud or errors between the end of the reporting period and the date of issuance of
financial statements.
Feedback

The correct answer is: The settlement of a court case after the issuance of the financial statements that
confirms that the entity has a present obligation.

Question 8

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QI10 Events after balance sheet date are events that occur between the balance sheet date and the date
on which the financial statements are authorized for issue. An event after balance sheet date for which
an adjustment is not necessary is;

a.

Sale of inventories after the balance sheet date that may give evidence about the net realizable value at
balance sheet date.

b.

Resolution after the balance sheet date of a court case.

c.

The determination after the balance sheet date of the cost of an asset purchased or the proceeds from
assets sold before the balance sheet date.

d.

Entering into significant commitments or contingent liabilities, for example, by issuing guarantees.

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The correct answer is: Entering into significant commitments or contingent liabilities, for example, by
issuing guarantees.

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QI10 The factory and several items of equipment were damaged in an earthquake after the end of
reporting period but before the issuance of financial statements. What is the treatment of the quake
damage?

a.

A nonadjusting event

b.

Both an adjusting event and a nonadjusting event

c.

An adjusting event

d.

Neither an adjusting event nor a nonadjusting event

Feedback

The correct answer is: A nonadjusting event

Question 10

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QI10 Adjusting events are those that

a.
Provide evidence of conditions that existed at the end of reporting period.

b.

Are indicative of conditions that arose after the end of the reporting period.

c.

Are favorable or unfavorable and indicative of conditions that arose after the end of the reporting
period.

d.

Provide of conditions that existed after the date the financial statements were authorized for issue.

Feedback

The correct answer is: Provide evidence of conditions that existed at the end of reporting period.

Question 11

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QI10 Prior period errors include all of the following, except

a.

Effects of a change in the estimated useful life of an asset

b.

Effects of mathematical mistakes

c.

Mistakes in applying accounting policies

d.

Oversights or misinterpretation of facts and fraud

Feedback

The correct answer is: Effects of a change in the estimated useful life of an asset

Question 12

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QI10 Which of the following statements is true in relation to events after reporting period? I. A decline in
the market value of investments should normally be classified as an adjusting event. II. The settlement of
a long-running court case should normally be classified as a nonadjusting event.

a.

II only

b.

Both I and II

c.

Neither I nor II

d.

I only

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The correct answer is: Neither I nor II

Question 13
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QI10 Which of the following statements is true in relation to events after the reporting period? I. Notes
to financial statements shall give details of all material adjusting events included in those financial
statements. II. Notes to financial statements shall give details of all material adjusting events which could
influence the economic decisions of users.

a.

Neither I nor II

b.

Both I and II

c.

I only

d.

II only

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The correct answer is: II only

Question 14

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QI10 ABC Co. completes the draft of its December 31, 20x1 year-end financial statements on January 31,
20x2. On February 5, 20x2, the board of directors reviews the financial statements and authorizes them
for issue. The entity announces its profit and selected other financial information on February 23, 20x2.
The financial statements are made available to shareholders and others on March 1, 20x2. The
shareholders approve the financial statements at their annual meeting on March 18, 20x2 and the
approved financial statements are then filed with a regulatory body on April 1, 20x2. Events after the
reporting period are those occurring

a.

from January 1, 20x2 to February 23, 20x2.

b.

from December 31, 20x1 to February 5, 20x2.

c.

from January 1, 20x2 to February 5, 20x2.

d.

from January 1, 20x2 to March 18, 20x2.

Feedback

The correct answer is: from January 1, 20x2 to February 5, 20x2.

Question 15

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QI10 According to PAS 10, this is the date when management authorizes the financial statements for
issue regardless of whether such authorization is final or subject to further approval.

a.

Date of declaration
b.

Date of events after the reporting period

c.

Date of authorization of the financial statements

d.

Adjustment date

Feedback

The correct answer is: Date of authorization of the financial statements

Question 16

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QI10 Nonadjusting events after balance sheet date which require disclosure include all of the following,
except

a.

Plan to discontinue an operation

b.

Major purchase and disposal of asset or expropriation of major asset by government

c.

Destruction of a major production plant by a fire after the balance sheet date

d.
Determination after balance sheet date of the cost of assets purchased or proceeds from assets sold
before the balance sheet date

Feedback

The correct answer is: Determination after balance sheet date of the cost of assets purchased or
proceeds from assets sold before the balance sheet date

Question 17

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QI10 When after the end of reporting period an event occurs that is indicative of conditions that arose
after the end of reporting period I. The entity shall disclose the nature and effect of the event in the
financial statements. II. The entity shall adjust the related amounts recognized in the financial
statements.

a.

Both I and II

b.

II only

c.

Neither I nor II

d.

I only

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The correct answer is: I only

Question 18

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QI10 Items reported as prior period errors

a.

Do not affect the presentation of prior period comparative financial statements.

b.

Are reflected as adjustment of the opening balance of accumulated profits and losses of the earliest
period presented.

c.

Do not include the effect of a mistake in the application of accounting policy as this is accounted for as a
change in accounting policy rather than as a prior period error.

d.

Do not require further disclosure in the body of the financial statements.

Feedback

The correct answer is: Are reflected as adjustment of the opening balance of accumulated profits and
losses of the earliest period presented.

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QI10 The factory and several items of equipment were damaged in an earthquake before the end of
reporting period and the determination of the loss after the end of reporting period but before issuance
of financial statements. What is the treatment of the quake damage?
a.

Both an adjusting event and a nonadjusting event

b.

Neither an adjusting event nor a nonadjusting event

c.

An adjusting event

d.

A nonadjusting event

Feedback

The correct answer is: An adjusting event

SE Which of the following is not one of the aspects in the revised definition of a liability?

a.

Transfer of an economic resource

b.

Obligation

c.

Present obligation as a result of past events

d.

Probable outflows of economic benefits and reliable measurement of those outflows

Feedback

The correct answer is: Probable outflows of economic benefits and reliable measurement of those
outflows

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SE An income statement

a.

reports the changes in assets, liabilities, and equity over a period of time.

b.

presents the revenues and expenses for a specific period of time.

c.

reports the assets, liabilities, and equity at a specific date.

d.

summarizes the changes in equity for a specific period of time.

Feedback

The correct answer is: presents the revenues and expenses for a specific period of time.

Question 3

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SE An entity built a new factory building during 2011 at a cost of P20 million. At December 31, 2011, the
net book value of the building was P19 million. Subsequent to year-end March 15, 2012, the building
was destroyed by fire and the claim against the insurance entity proved futile because the cause of the
fire was negligence on the part of the caretaker of the building. If the date of authorization of the
financial statements for the year ended December 31, 2011, was March 31, 2012, the entity should

a.

Make a provision for three-fourths of the net book value of the building based on prudence.

b.

Write off the net book value to its scrap value because the insurance claim would not fetch any
compensation.

c.

Make a provision for one-half of the net book value of the building.

d.

Disclose this non-adjusting event in the notes.

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The correct answer is: Disclose this non-adjusting event in the notes.

Question 4

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SE Which of the following is not treated as a change in accounting policy?

a.

A change from cost recovery to percentage of completion

b.
A change from average cost to FIFO for inventory valuation

c.

A change to a different method of depreciation for plant assets

d.

A change from full cost to successful effort method in the extractive industry

Feedback

The correct answer is: A change to a different method of depreciation for plant assets

Question 5

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SE When it is difficult to distinguish between a change in estimate and a change in accounting policy, an
entity shall

a.

Apportion on a reasonable basis the relative amounts of change in estimate and the change in
accounting policy and treat each one accordingly.

b.

Treat the entire change as a change in accounting policy

c.

Treat the entire change as a change in estimate with appropriate disclosure.

d.
Ignore it in the year of the change and then wait for the following year to see how the change develops
and then treat it accordingly.

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The correct answer is: Treat the entire change as a change in estimate with appropriate disclosure.

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SE Which of the following statements in relation to a change in accounting estimate is true? I. Changes in
accounting estimate are accounted for retrospectively. II. Changes in accounting estimate result from
new information or new development.

a.

Neither I nor II

b.

II only

c.

I only

d.

Both I and II

Feedback

The correct answer is: II only

Question 7

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SE Which of the following is one of the fundamental qualitative characteristics?

a.

Comparability

b.

Reliability

c.

Relevance

d.

Faithful representation

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The correct answer is: Faithful representation

Question 8

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SE This means applying a new accounting policy to transactions, other events and conditions as if that
policy had always been applieD.

a.

Retrospective restatement
b.

Retrospective application

c.

Prospective restatement

d.

Prospective application

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The correct answer is: Retrospective application

Question 9

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SE Which of the following could result to the recognition of income?

a.

decrease in equity

b.

decrease in asset

c.

decrease in liability

d.

increase in liability
Feedback

The correct answer is: decrease in liability

Question 10

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SE A change in the estimated warranty liability requires

a.

Presenting the effect of proforma data on income and earnings per share for all prior periods presented

b.

Reporting current and future financial statements on the new basis

c.

Restating the financial statements of all prior periods presented

d.

Correcting prior period accumulated profits and losses

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The correct answer is: Reporting current and future financial statements on the new basis

Question 11

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SE Which of the following is the best explanation why accounting changes are classified into change in
accounting policy and change in accounting estimate?

a.

The need of managers to provide a favorable profit picture.

b.

Each change involves different method of recognition in the financial statements.

c.

The fact that some treatments are considered GAAP and some are not.

d.

The materiality of the change involveD.

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The correct answer is: Each change involves different method of recognition in the financial statements.

Question 12

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SE The concept that states that all the components of a complete set of financial statement are
interrelateD.

a.

Concept of Articulation

b.

Entity
c.

Principle of Fair Presentation

d.

Accounting Process

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The correct answer is: Concept of Articulation

Question 13

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SE According to the Conceptual Framework, contributions from, and distributions to, holders of equity
claims (i.e., the entity’s owners) are

a.

not recognized in the financial statements.

b.

not income and expenses, but rather direct adjustments to equity.

c.

income and expenses, respectively.

d.

income and expenses, respectively, that are recognized in other comprehensive income.

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The correct answer is: not income and expenses, but rather direct adjustments to equity.

Question 14

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SE Adjusting events after reporting period include all of the following, except

a.

Determination after reporting period and before the issuance of the statements of the cost of asset
purchased before the end of the reporting perioD.

b.

The discovery of fraud or errors between the end of the reporting period and the date of issuance of
financial statements.

c.

Bankruptcy of a customer occurring between the end of the reporting period and date of issuance of
financial statements.

d.

The settlement of a court case after the issuance of the financial statements that confirm that the entity
has a present obligation.

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The correct answer is: The settlement of a court case after the issuance of the financial statements that
confirm that the entity has a present obligation.

Question 15

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Question text

SE Entity A combines similar items and separates dissimilar items when presenting information. Entity A
is applying which of the following presentation and disclosure principles?

a.

Aggregates

b.

Offsetting

c.

Use of entity-specific information, rather than ‘boiler-plate’ descriptions

d.

Classifying

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The correct answer is: Classifying

Question 16

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SE The Conceptual Framework (choose the incorrect statement)

a.

prevails over the PFRSs in cases of conflicts.

b.
in the absence of a PFRS, shall be considered by management when making its judgment in developing
and applying an accounting policy that results in useful information.

c.

is not a PFRS.

d.

is concerned with general purpose financial reporting only.

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The correct answer is: prevails over the PFRSs in cases of conflicts.

Question 17

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SE According to the Conceptual Framework, the objective of general purpose financial statements is to
provide information about the reporting entity’s financial position, financial performance, and other
changes in financial position that is useful in assessing the entity’s

a.

prospects for future net cash inflows.

b.

management’s stewardship over economic resources.

c.

neither a nor b

d.
a and b

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The correct answer is: a and b

Question 18

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SE Information about the reporting entity’s economic resources, claims against the reporting entity and
changes in those resources and claims is referred to in the Conceptual Framework as the

a.

economic phenomenA.

b.

prospects for future cash flows.

c.

financial performance.

d.

entity’s return.

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The correct answer is: economic phenomenA.

Question 19

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Question text

SE Interest expense that is paid in cash is presented in the statement of cash flows under

a.

a or c

b.

investing activities

c.

financing activities

d.

operating activities.

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The correct answer is: a or c

Question 20

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SE Reporting entities usually place the sentence “See notes to the financial statements” or “See
accompanying notes to the financial statements” or a similar sentence on the face of the financial
statements. This practice is most in keeping with what accounting concept?

a.

Separate entity
b.

Articulation

c.

Full disclosure

d.

Materiality

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The correct answer is: Articulation

Question 21

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SE Information about an entity’s financial position and changes in financial position is referred to under
the Conceptual Framework as the

a.

phantom of the operA.

b.

economic phenomenA.

c.

economic sabotage.

d.
foundation of the Conceptual Framework.

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The correct answer is: economic phenomenA.

Question 22

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SE Materiality does not make any difference with regard to

a.

intentional errors.

b.

the disclosure of additional information in the notes.

c.

the level of rounding-off of amounts in the financial statements.

d.

the separate presentation of items in the financial statements.

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The correct answer is: intentional errors.

Question 23

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SE Which of the following cash flows does not appear in statement of cash flows using the indirect
method?

a.

Cash outflow for dividend payment

b.

Cash inflow from sale of equipment

c.

Cash received from customers

d.

Net cash flow from operating activities

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The correct answer is: Cash received from customers

Question 24

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SE A change in the residual value of an asset arising because additional information has been obtained is

a.

A correction of an error

b.

Not an accounting change

c.

An accounting change that should be reported by restating the financial statements of all prior periods
presented

d.

An accounting change that should be reported in the period of change and future periods if the change
affects both

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The correct answer is: An accounting change that should be reported in the period of change and future
periods if the change affects both

Question 25

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SE Which of the following is an element of the financial position of an entity?

a.

gains

b.

none of these

c.

loss

d.

income
Feedback

The correct answer is: none of these

Question 26

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SE PFRSs are adopted from the standards issued by the

a.

IASCF.

b.

IASC.

c.

FASB.

d.

IASB.

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The correct answer is: IASB.

Question 27

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SE Information has this quality when it can influence the economic decisions of users by helping them
predict future outcomes, or confirm or correct their previous evaluations.

a.

Relevance

b.

Predictive Value

c.

Reliability

d.

Understandability

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The correct answer is: Relevance

Question 28

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SE Preparation of consolidated financial statements when a parent-subsidiary relationship exist is an

example of the

a.

Neutrality characteristic

b.

Comparability characteristic
c.

Economic entity assumption

d.

Relevance characteristic

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The correct answer is: Economic entity assumption

Question 29

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SE The PFRSs do not apply to

a.

cooperatives.

b.

The PFRSs apply to all of these entities.

c.

non-profit organizations.

d.

sole proprietorships.

e.
partnerships.

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The correct answer is: The PFRSs apply to all of these entities.

Question 30

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SE Which of the following is not included among the general features of financial statement
presentation?

a.

Frequency of reporting

b.

Growing concern

c.

Accrual basis

d.

Comparative information

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The correct answer is: Growing concern

Question 31

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Question text

SE Entity A needs guidance in preparing its statement of changes in equity. Entity A should refer to which
of the following?

a.

PAS 1

b.

PAS 2

c.

PAS 8

d.

PAS 7

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The correct answer is: PAS 1

Question 32

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SE Comprehensive income excludes which of the following

a.

Distributions to owners

b.
Revaluation surplus

c.

Gains and losses from investments measured at fair value through profit or loss

d.

Income tax expense

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The correct answer is: Distributions to owners

Question 33

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SE Comprehensive income excludes which of the following?

a.

Gains and losses arising from translation of foreign operation.

b.

Gains and losses from investments measured at fair value through other comprehensive income.

c.

Share in the profit or loss of an associate that is accounted for using the equity methoD.

d.

Correction of prior period error.

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The correct answer is: Correction of prior period error.

Question 34

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SE Which of the following are elements of faithful representation under the Conceptual Framework? I.
Completeness II. Neutrality III. Free from error IV. Reliability

a.

I, II, III and IV

b.

I and II

c.

I, II and IV

d.

I, II and III

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The correct answer is: I, II and III

Question 35

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SE The notes to financial statements should be presented in what order? I. Statement of compliance with
PFRS II. Summary of significant accounting policies III. Supporting computations for items presented on
the face of the statements IV. Other disclosures, including contingent liabilities, unrecognized contractual
commitments and nonfinancial disclosures

a.

No specific order

b.

IV, I, II and III

c.

I, II, III and IV

d.

II, III, IV and I

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The correct answer is: I, II, III and IV

Question 36

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SE The Conceptual Framework uses the term “economic resources” to refer to

a.

assets.

b.
income.

c.

equity.

d.

a and c

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The correct answer is: assets.

Question 37

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SE What type of users’ needs is catered by general purpose financial statements?

a.

common needs

b.

a and b

c.

neither a nor b

d.

specific needs

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The correct answer is: common needs

Question 38

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SE During the lifetime of an entity, accountants produce financial statements at arbitrary points in time
in accordance with which basic accounting concept?

a.

Periodicity assumption

b.

Cost benefit constraint

c.

Matching principle

d.

Conservatism constraint

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The correct answer is: Periodicity assumption

Question 39

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SE Nonadjusting events after reporting period that generally result in disclosure include all of the
following, except

a.

Announcing a plant to discontinue an operation

b.

A major business combination after reporting period

c.

Destruction of a major production plant by a fire before the end of the reporting period

d.

Major purchase of asset or expropriation of major asset after reporting period

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The correct answer is: Destruction of a major production plant by a fire before the end of the reporting
period

Question 40

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SE Which of the following is not considered as a cash equivalent?

a.

A 60-day market placement

b.

A 90-day T bill
c.

A three-year treasury note maturing on May 30 of the current year purchased by the entity on January
15 of the current year

d.

A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15
of the current year

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The correct answer is: A three-year treasury note maturing on May 30 of the current year purchased by
the entity on January 15 of the current year

Question 41

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SE What is the basic requirement for cash and cash equivalent?

a.

Unrestricted in use for current operations

b.

Set aside for the liquidation of long-term debt

c.

Deposited in bank

d.

Available for the purchase of property, plant and equipment

Feedback

The correct answer is: Unrestricted in use for current operations

Question 42

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SE This means applying a new accounting policy to transactions and events occurring after the date at
which the policy is changeD.

a.

Prospective application

b.

Prospective restatement

c.

Retrospective application

d.

Retrospective restatement

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The correct answer is: Prospective application

QP24 PAS 24 requires the disclosure of key management personnel compensation. Which of the
following is not included in this disclosure?

a.

reimbursements of officers’ out-of-pocket expenses

b.

short-term employee benefits

c.

termination benefits

d.

share-based payment

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The correct answer is: reimbursements of officers’ out-of-pocket expenses

Question 2

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QP24 Which of the following is not required to be disclosed under PAS 24?

a.

A parent-subsidiary relationship when there were no transactions between them during the period.

b.

The name of the parent of the entity’s associate

c.

Loans to officers

d.
A parent-subsidiary relationship when there were transactions between them during the period.

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The correct answer is: The name of the parent of the entity’s associate

Question 3

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QP24 American Pie Corporation completed the following transactions in the current year: I. Sold a car to
the uncle of the entity’s finance director. II. Sold goods to another entity owned by the daughter of the
entity’s managing director. Which transaction/s would require disclosure in the financial statements of
the entity?

a.

Transaction I only

b.

Neither transaction

c.

Transaction II only

d.

Both transactions

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The correct answer is: Transaction II only

Question 4

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QP24 A related party transaction is a transfer of resources or obligations

a.

Between related parties when a price is charged

b.

Between unrelated parties when a price is charged

c.

Between related parties, regardless of whether a price is charged

d.

Between unrelated parties, regardless of whether a price is charged

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The correct answer is: Between related parties, regardless of whether a price is charged

Question 5

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QP24 Entity A is the parent company of Entity B. Which of the following is required to be disclosed in the
group’s (Entity A and B’s) consolidated financial statements?

a.

The related party transactions during the period

b.

The related party relationship between Entity A and Entity B

c.

The outstanding balances in (C)

d.

All of these

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The correct answer is: The related party relationship between Entity A and Entity B

Question 6

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QP24 Unrelated parties include all of the following, except

a.

Two venturers simply because they share joint control over a joint venture

b.

Key management personnel and close family members of such individuals

c.

Single customer with whom an entity transacts a significant volume of business merely by virtue of the
resulting economic dependence

d.
Providers of finance in the course of their normal dealings with an entity by virtue only of those dealings

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The correct answer is: Key management personnel and close family members of such individuals

Question 7

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QP24 Are the following statements in relation to related parties true or false, according to PAS 24?
Statement 1: A party is related to another entity that it is jointly controlled by. Statement 2: A party is
related to another entity that it controls. Statement 1 AND Statement 2 respectively.

a.

False, False

b.

True, True

c.

False, True

d.

True, False

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The correct answer is: True, True

Question 8

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QP24 Mr. Y and Ms. Z share joint control over Ventures, Inc. Which of the following are related parties?

a.

Ventures, Inc. and Mr. Y

b.

Ventures, Inc. and PAS 24

c.

Mr. Y and Ms. Z

d.

None of these

Feedback

The correct answer is: Ventures, Inc. and Mr. Y

Question 9

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QP24 According to PAS 24, related party disclosures are necessary

a.

to indicate the possibility that an entity’s financial position and performance might have been affected
by the existence of such relationship.
b.

because related party transactions may have resulted to assets and liabilities that were recognized in the
financial statements of the reporting entity.

c.

in order to eliminate or minimize the effects of related party transactions on the financial statements of
the reporting entity.

d.

to notify users of financial statements of the fact that related party transactions may not have been
made on arm’s length basis.

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The correct answer is: to indicate the possibility that an entity’s financial position and performance
might have been affected by the existence of such relationship.

Question 10

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QP24 What is overriding consideration when determining the existence of a related party relationship?

a.

The ability of one party to affect decisions of another party regarding relevant activities through the
existence of control, joint control or significant influence.

b.

The presence of relationship either by consanguinity or affinity.

c.

The presence of significant business transactions and economic dependence between the parties.
d.

The presence of a significant interest by one party over the other.

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The correct answer is: The ability of one party to affect decisions of another party regarding relevant
activities through the existence of control, joint control or significant influence.

Question 11

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QP24 Which of the following best indicates that two parties are related for purposes of PAS 24?

a.

One party is in the private sector and the other is a government regulatory body.

b.

One party has the ability to affect the financial and operating decisions of the other party through
control, significant influence or joint control.

c.

The parties are a parent and a subsidiary.

d.

One party is larger than the other.

Feedback

The correct answer is: One party has the ability to affect the financial and operating decisions of the
other party through control, significant influence or joint control.

Question 12
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QP24 Related parties include all of the following, except

a.

Associates

b.

Two entities that have a common director

c.

Affiliates

d.

Individuals owning, directly or indirectly, an interest in the voting power of the reporting entity that gives
them significant influence over the entity

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The correct answer is: Two entities that have a common director

Question 13

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QP24 An entity has a 70% subsidiary and is a venture in a joint venture. During the financial year-end,
the entity sold goods to both subsidiary and joint venture. Consolidated financial statements are
prepared combining the financial statements of entity and the subsidiary. Under the PAS 24, in the
separate financial statements of the entity for the current year, disclosure is required transactions with
a.

Neither subsidiary nor joint venture

b.

Joint venture only

c.

Subsidiary only

d.

Both subsidiary and joint venture

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The correct answer is: Both subsidiary and joint venture

Question 14

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QP24 Close family members of an individual include all of the following, except

a.

Children of the individual’s spouse

b.

Brothers and sisters of the individual

c.
Dependents of the individual or individual’s spouse

d.

The individual’s spouse and children

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The correct answer is: Brothers and sisters of the individual

Question 15

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QP24 Which of the following are not related parties?

a.

Two or more subsidiaries with the same parent

b.

A parent and its subsidiary

c.

A company and its Chief Executive Officer

d.

Two co-venturers of a common joint venture business

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The correct answer is: Two co-venturers of a common joint venture business

Question 16

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QP24 An entity carried out the following four transactions during the current year. All of the following
are considered related party transactions, except

a.

Transferred goods from inventory to a shareholder owning 40% of the entity’s ordinary shares

b.

Sold an asset to an associate

c.

Took out a huge bank loan

d.

Sold an entity car to the wife of the managing director

Feedback

The correct answer is: Took out a huge bank loan

Q1IFR Which of the following statements is correct concerning interim financial reporting? I. PAS 34 does
not mandate which entities are required to publish interim financial reports, how frequently, or how
soon after the end of an interim period. II. Entities that provide interim financial reports in conformity
which generally accepted accounting principles shall conform to the recognition, measurement and
disclosure principles set out in the standard.

a.

Both I and II

b.

I only
c.

Neither I nor II

d.

II only

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The correct answer is: Both I and II

Question 2

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Q1IFR Interim financial reports should include as a minimum

a.

A balance sheet and income statement only

b.

A complete set of financial statements

c.

A condensed balance sheet, income statement and cash flow statement only

d.

A condensed set of financial statements and selected notes.

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The correct answer is: A condensed set of financial statements and selected notes.
Question 3

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Q1IFR Which of the following is correct regarding the provisions of PAS 34?

a.

PAS 34 encourages publicly listed entities to prepare at least three quarterly financial reports to be
issued not later than 45 days after the end of each interim period.

b.

PAS 34 requires both publicly and non-publicly listed entities to prepare at least a semi-annual financial
report to be issued not later than 60 days after the end of the interim period.

c.

PAS 34 encourages publicly listed entities to prepare at least a semi-annual financial report to be issued
not later than 60 days after the end of the interim period.

d.

PAS 34 requires publicly listed entities to prepare at least a semi-annual financial report to be issued not
later than 60 days after the end of the interim period.

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The correct answer is: PAS 34 encourages publicly listed entities to prepare at least a semi-annual
financial report to be issued not later than 60 days after the end of the interim period.

Question 4

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Q1IFR If an entity does not prepare interim financial reports

a.

Interim financial reports should be included in the year-end financial statements

b.

The year-end financial statements compliance with PFRS is not affected.

c.

The year-end financial statements are deemed not to comply with PFRS.

d.

The year-end financial statements will not be acceptable under local legislation

Feedback

The correct answer is: The year-end financial statements compliance with PFRS is not affected.

Question 5

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Q1IFR Which of the following is correct regarding the provisions of PAS 34?

a.

PAS 34 does not require any entity to publish interim reports, and how often.

b.

All publicly-listed entities should publish semi-annual interim reports.

c.

All publicly-listed entities should publish quarterly interim reports.

d.

All entities should publish quarterly interim reports.

Feedback

The correct answer is: PAS 34 does not require any entity to publish interim reports, and how often.

Question 6

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Q1IFR PAS 34 relates to

a.

the accounting for inventories.

b.

the identification and disclosure of related party relationships.

c.

interim financial reporting.

d.

the presentation of financial instruments.

Feedback

The correct answer is: interim financial reporting.

Question 7
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Q1IFR An interim financial report shall include, as a minimum, all of the following components, except

a.

Condensed balance sheet and income statement

b.

Condensed cash flow statement

c.

Condensed statement of changes in equity or statement of recognized gains and losses

d.

Accounting policies and explanatory notes

Feedback

The correct answer is: Accounting policies and explanatory notes

Question 8

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Q1IFR According to PAS 34, measurements in the interim period are made on

a.

a or b, as matter of accounting policy choice.

b.

a discrete basis.

c.

a year-to-date basis.

d.

an item-by-item basis.

Feedback

The correct answer is: a year-to-date basis.

Question 9

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Q1IFR Interim financial reporting should be viewed primarily in which of the following ways?

a.

As reporting under a comprehensive basis of accounting other than GAAP

b.

As if the interim period were an annual accounting period

c.

As reporting for an integral part of an annual period

d.
As useful only if activity is spread evenly throughout the year

Feedback

The correct answer is: As reporting for an integral part of an annual period