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General-purpose financial statements are the product of;

a. financial accounting
b. managerial accounting
c. both financial and managerial accounting
d. neither financial accounting nor managerial accounting A
Which of the following statements is NOT an objective of financial reporting?
a. To provide information that is useful in investment and credit decisions.
b. To provide information about resources, claims against those resources and changes in them.
c. To provide information on the liquidation value of an entity.
d. To provide information that is useful in assessing cash flow prospects. C
The purpose of the International Accounting Standards Board is to;
a. issue enforceable standards which regulate the financial reporting of multinationals
b. develop a uniform currency in which the financial transactions of entities throughout the world
would be measured.
c. develop a single set of high quality IFRS.
d. arbitrate accounting disputes between auditors and international entities. C
The underlying theme in the conceptual framework is;
a. Decision Usefulness
b. Understandability
c. Reliability
d. Comparability A
The Conceptual Framework includes all of the following EXCEPT;
a. Objective of financial reporting
b. Supplementary information
c. Elements of financial statements
d. Qualitative characteristics of accounting information B
Which of the following is a FUNDAMENTAL quality of useful accounting information?
a. Conservatism
b. Comparability
c. Faithful Representation
d. Consistency C
In the Conceptual Framework, an enhancing qualitative characteristics is;
a. Predictive value
b. Free from error
c. Timeliness
d. Confirmatory value C
Which of the following is not a basic element of financial statements?
a. Assets
b. Statement of financial position
c. Equity
d. Income B
Which of the following is not a basic assumption underlying the financial accounting structure?
a. Economic entity assumption
b. Going concern assumption
c. Periodicity assumption
d. Historical cost assumption D
During the lifetime of an entity, accountants produce statements at artificial points in time.
a. Objectivity
b. Periodicity
c. Economic entity
d. Going concern B
When is revenue generally recognized?
a. when cash is received
b. when the warranty expires
c. when production is completed
d. when sale occurs D
Which of the following is NOT a required component of financial statements?
a. President's letter to shareholders
b. Statement of financial position
c. Income statement
d. Notes to financial statements A
Under Philippine Financial Reporting Standards, notes to Financial Statements;
a. must be quantifiable
b. must qualify as an element
c. amplify or explain items presented in the main body of the financial statements
d. all of the above D
Nominal accounts are also called;
a. Temporary accounts
b. Permanent accounts
c. Real accounts
d. Mixed accounts B
A trial balance may prove that debits and credits are equal but;
a. an amount could be entered in the wrong account.
b. a transaction could have been entered twice.
c. a transaction could have been omitted.
d. all of these D
A journal entry to record a receipt of rent revenue in advance will include a;
a. debit to rent revenue
b. credit to rent revenue
c. credit to cash
d. credit to unearned rent D
An adjusting entry to record an accrued expense involves a debit to;
a. expense account and a credit to a prepaid account
b. expense account and a credit to cash
c. expense account and a credit to a liability account
d. liability account and a credit to an expense account C
Reversing entries do not apply to which of the following items?
a. Unearned revenue
b. Accrued wages
c. Prepaid insurance
d. Depreciation D
The statement of financial position information is useful for all of the following, except;
a. To compute rates of return
b. To analyze cash inflows and outflows for the period
c. To evaluate capital structure
d. To assess future cash flows. A
A segment is to be reported separately when the segment revenue exceedes 10% of;
a. Total combined revenue of all segments reporting profits.
b. Total revenue of all the entity's industry segments.
c. Total export and foreign sales.
d. Combined net income of all segments reporting profits. B
All of the following statements are true regarding interim reporting, except;
a. PFRS requires a complete set of financial statements at the interim reporting date.
b. PFRS requires entities to expense interim amount, like advertising expenditures that could
benefit later interim periods.
c. PFRS allows a condensed set of complete set of financial statements.
d. No accruals or deferrals in anticipation of future events during the year should be reported.
Which of the following would represent the least likely use of an income statement?
a. Use by customers to determine an entity's ability to provide needed goods and services.
b. Use by labor unions to examine earnings closely as a basis for salary discussions.
c. Use by government agencies to formulate tax and economic policy.
d. Use by investors interested in the financial position of the entity. C
Changes in accounting estimate affect reported amounts;
a. retrospective only
b. prospective only
c. currently and prospectively
d. currently and retrospectively C
A change in accounting policy requires what kind of adjustments to the financial statements?
a. current period adjustment
b. prospective adjustment
c. retrospective adjustment
d. current and retrospective adjustment C
Which of the following does not appear in a statement of retained earnings?
a. net loss
b. prior period adjustment
c. preference share dividends
d. other comprehensive income. D
Which is not acceptable in displaying the components of other comprehensive income?
a. combined statement of retain earnings
b. second income statement
c. combined statement of comprehensive income
d. all of the above D
Which of the following items should not be included in cash?
a. coins and currency in the cash register
b. checks from other parties presently in the cash register
c. amounts on deposit in checking account at the bank
d. postage stamps on hand B
A cash equivalent is a short-term, highly liquid investment that is readily convertible into known
amounts of cash and;
a. is acceptable as a means to pay current liabilities
b. has current market value that is greater than original cost
c. bears an interest rate that is at least equal to the prone price rate of interest
d. is so near its maturity that it presents insignificant risk of change in interest rates D
All of the following are problems with the valuation of accounts receivable, except;
a. uncollectible accounts
b. returns
c. cash discounts under the net method
d. allowances granted D
Which of the following methods of determining bad debt expense does not properly match
expense and revenue?
a. Charging bad debts with a percentage of sales under the allowance method.
b. Charging bad debts with an amount derived from a percentage of accounts receivable under
the allowance method.
c. Charging bad debts with an amount derived from aging accounts receivable under the
allowance method.
d. Charging bad debts as accounts are written off as uncollectible. C
Which of the following statement best describe the term liability?
a. An excess of equity over current assets.
b. Resources to meet financial commitments as they fall due.
c. The residual interest in the assetsof the entity after deducting all of its liabilities.
d. A present obligation of the entity arising from past events. D
Which of the following statements best describe the term "financial position"?
a. The net income and expenses of an entity.
b. The financial assets less financial liabilities of an entity.
c. The potential to contribute to the flow of cash and cash equivalents to the entity.
d. The assets, liabilities and equity of an entity. D
Which of the following should not be taken into account when determining the cost of
a. Storage cost of part-finished goods.
b. Trade discounts.
c. Recoverable purchase taxes.
d. Import duties on shipping of inventory inward. C
Which of the following costs should be included in inventory valuation?
a. Administrative costs.
b. Abnormal material usage.
c. Storage costs relating to finished goods.
d. Fixed production overhead C
Which classification of the cash flow arising from the proceeds from an earthquake disaster
settlement would be most appropriate?
a. Cash flows from operating activities
b. Cash flows from investing activities
c. Cash flows from financing activities
d. Does not appear in the statement of cash flows B
Which of the following should be treated as a change in accounting policy?

I. A new accounting policy of capitalizing development costs as project has become eligible for
capitalization for the first time.
II. A new policy resulting from the requirements of a new PFRS.
III. To provide more relevant information, items of property, plant and equipment are now being
measured at fair value, whereas they had previously been measured at cost.
IV. An entity engaging in construction contracts for the first time needs an accounting policy to
deal with this.

a. I, II, III and IV

b. I and II only
c. II and III only
d. I and IV only C
Which of the following statement in relation to deferred tax is true?

I. Deferred tax liability are the amounts of income taxes payable in future periods in respect of
taxable temporary differences.
II. Deferred tax assets are the amounts of income taxes recoverable in future periods in respect
od deductible permanent differences.

a. I only
b. II only
c. Both I and II
d. Neither I nor II A
Which term best describes the removal of an asset from the statement of financial position?
a. Derecognition
b. Impairment
c. Writeoff
d. Depreciation A
Which of the following statement is correct?
a. Assets are depreciated even if their fair value exceeds carrying amount.
b. Land and buildings are not accounted for separately when acquired together.
c. A non-current assets acquired as the result of an exchange of asset is not recognized.
d. A gain on disposal of a non-current asset is classified as revenue. D
Which should not be capitalized as cost of property, plant and equipment?
a. Cost of excess materials from a purchasing error.
b. Cost of testing whether the asset works correctly.
c. Initial delivery and handling cost.
d. Cost of preparing the site for installation. A
Which should be included in the cost of an item of property, plant and equipment?
a. Initial operating losses while demand builds up.
b. Apportioned general overhead costs.
c. Cost of training staff on the new asset
d. Installation and assembly costs. D
Which of the following conditions does not apply to the recognition of revenue for transactions
involving the rendering of services?
a. The amount of revenue can be measured reliable.
b. It is probable that payment for the services shall be received by the entity.
c. The significant risks and rewards of ownership have been transferred to the buyer.
d. The costs incurred and the costs to complete the transaction can be measured reliable. C
Which must not be satisfied before revenue from the sale of goods should be recognized?
a. Revenue can be reliably measured.
b. Managerial control over the goods sold has been relinquished.
c. Ownership has been transferred to the buyer.
d. Significant risks and rewards of ownership have been transferred from the seller to the buyer.
Which of the following statements best describes "other long-term employee benefits"?
a. Benefits not falling due wholly within twelve months of the end of the period in which the
service is rendered.
b. Benefits which fall due within twelve months of the end of the period in which the service is
c. Benefits payable as a result of an entity's decision to end an employee's employment before the
normal retirement date.
d. Benefits which are payable after completion of employment. A
Which of the following statements is incorrect in relation to government grant?
a. Any adjustment needed when a government grant becomes repayable is accounted for as a
change in accounting estimate.
b. In respect of loans from the government at an interest rate of 0%, an imputed interest charge is
c. Where conditions apply to a government grant, it should only be recognized when there is a
reasonable assurance that the conditions will be met.
d. A government grant that becomes receivable as compensation for losses already incurred
should be recognized as income of the period in which it becomes receivable. B
Which statement about the capitalization of borrowing costs is true?
a. If funds come from general borrowing, the amount to be capitalized is based on the weighted
average cost of borrowing.
b. Capitalization always continues until the asset is brought into use.
c. Capitalization always commences as soon as expenditure of the asset is incurred.
d. Capitalization always commences as soon as interest on relevant borrowings is being incurred.
Which of the following treatments is required for borrowing costs incurred that are directly
attributable to the construction of a qualifying asset?
I. Recognize as an expense in the period incurred.
II. Capitalized as part of the cost of the asset.

a. I only
b. II only
c. Either I or II
d. Neither I nor II B
An entity completed the following transaction 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 would require disclosure in the financial statements of the entity?
a. Neither I nor II
b. I only
c. II only
d. Both I and II A
Which of the following is not a related party of an entity?
a. A shareholder of the entity owning 30% of the ordinary share capital
b. An entity providing banking facilities to the entity
c. an associate of the entity
d. Key management personnel of the entity B
Which of the following statements about dividends is true?
I. Dividends in respect of ordinary shares are debited directly in equity
II. Dividends in respect of redeemable preference shares are debited directly in equity.

a. I only
b. II only
c. Both I and II
d. Neither I nor II C
Which of the following statements with respect to interim reporting is true?
I. It is necessary to count inventories in full at the end of each interim accounting period.
II. The net realizable value is determined by reference to selling prices at the interim date.
a. I only
b. II only
c. Both I and II
d. Neither I nor II D
Which of the following terms best describes the higher of fair value less costs of disposal and
value in use?
a. Recoverable amount
b. Revalued amount
c. Decipherable amount
d. Carrying amount B
Which of the following statements in relation to a contingent liability is true?
I. An obligation as a result of the entity creating a valid expectation that it will discharge its
responsibilities as a contingent liability.
II. A present obligation that arises from past events but cannot be reliable measured is a
contingent liability.

a. I only
b. II only
c. Both I and II
d. Neither I nor II C
A provision should be recognized for which of the following?
a. Future operating losses
b. Obligations under insurance contracts
c. Reductions in fair value of financial instruments
d. Obligations from plant decommissioning costs. D
Which of the following is not relevant in determining the useful life on an intangible asset?
a. Obsolescence
b. Expected action of competitor
c. The expected usage of the asset
d. The residual value of the asset D
A brand name that was acquired separately should initially be recognized at;
a. Recoverable amount
b. Either cost or fair value at the choice of the acquirer
c. Fair value
d. Cost D
Which of the following statements is true?
I. Intangible assets cannot be treated as having an indefinite useful life.
II. Intangible assets with a finite useful life should be measured at cost and tested annually for

a. I only
b. II only
c. Both I and II
d. Neither I nor II D
Which of the following additional disclosures must be made when an entity chooses the cost
model as its accounting policy for investment property?
a. The fair value of the property
b. The present value of the property
c. The value in use of the property
d. The net realizable value of the property A
Which of the following disclosures should be made when the fair value model has been adopted
for investment property?
a. Depreciation method used
b. The amount of impairment loss recognized
c. Useful life or depreciation rate used
d. Net gains and losses from fair value adjustments D
Where should changes in the fair value of a herd of cattle be recognized in the financial
a. In the profit or loss
b. In other comprehensive income
c. In profit or loss or other comprehensive income
d. In the statement of cash flows. A
Which of the following reports is not a component of the financial statements?
a. Statement of financial position
b. Statement of changes in equity
c. Director's report
d. Notes to financial statements C
Which of the following information is not specifically a required disclosure?
a. Name of the reporting entity or other means of identification, and any change in that
information from the previous year.
b. Names of major shareholders of the entity.
c. Level of rounding used in presenting the financial statements.
d. Whether the financial statements cover the individual entity or a group of entities. B
Which one of the following is not required to be presented as a minimum information on the face
of statement of financial position?
a. Investment property
b. Investment accounted under the equity method
c. Biological assets
d. Contingent liability D
Inventories are defined by all of the following, except;
a. Used in the production or supply of goods and services for administrative purposes.
b. Held for sale in the ordinary course of the business.
c. In the process of production for such sale
d. In the form of materials or supplies to be consumed in the production process or the rendering
of services. A
How should an entity disclose the dividends received in the statement of cash flows?
a. Operating cash inflow
b. Either as operating cash inflow or as investing cash inflow
c. Either as operating cash inflow or as financing cash inflow
d. As an adjustment in the "operating activities" section B
At the end of the current reporting period, an entity carried a receivable from a major customer.
The customer declared bankruptcy after the end of reporting period but prior to authorization of
financial statements. How should the entity account for this event?
a. Disclose in the notes the fact that the customer declared bankruptcy.
b. Make a provision for this post-reporting period event
c. Ignore the event
d. Reverse the sale pertaining to the receivable and treat it as an error. A
The initial operating losses should be
a. Deferred and amortized over a reasonable period of time.
b. Expensed and charged to the income statement
c. Capitalized as part of the cost of plant as directly attributable cost.
d. Charged to retained earnings. B
An entity owns a fleet of cars and ships. The entity decided to revalue its property, plant and
equipment. Which option should be selected in relation to the revaluation?
a. Revalue only one-half of each class of property, plant and equipment.
b. Revalue an entire class of property, plant and equipment.
c. Revalue one ship at a time as it is easier than revaluing all ships together.
d. Since assets are being revalued regularly, there is no need to depreciate. B
The classification of a lease as either an operating or finance lease is based on:
a. The length of the lease.
b. The transfer of the risks and rewards of ownership
c. The minimum lease payments being at least 50% of the fair value.
d. The economic life of the asset. B
The accounting concept that is principally used to classify leases into operating and finance is;
a. Substance over form
b. Prudence
c. Neutrality
d. Completeness A
Which situation would prima facie lead to a lease being classified as an operating lease?
a. Transfer of ownership to the lessee at the end of the lease term.
b. Option to purchase at a value below the fair value of the asset
c. The lease term is for a major part of the asset's life
d. The present value of the minimum lease payments is 50% of the fair value of the asset. D
Revenue from an artistic performance is recognized once;
a. The audience register for the event online
b. The tickets for the concert are sold
c. Cash has been received from the ticket sales
d. The event takes place D
In the case of a non monetary grant, which of the following is prescribed?
a. Record the asset at replacement cost and the grant at a nominal value.
b. Record the grant at a value estimated by the management.
c. Record both the grant and the asset at fair value of the non monetary asset.
d. Record only the asset at fair value and not recognize the fair value of the grant. C
Which of the following should not be considered a "qualifying asset" in relation to capitalization
of borrowing cost?
a. A power generation plant that normally takes two years to construct.
b. An expensive private jet that can be purchased from a local vendor.
c. A toll bridge that usually makes more than a year to build.
d. A ship that normally takes one to two years to complete. B
The equity method is not required to be applied when the associate has been acquired and held
with a view to its disposal within what time period?
a. Six months
b. Twelve months
c. Two years
d. In the near future B
How is goodwill arising on the acquisition of an associate dealt with in the financial statements?
a. It is amortized
b. It is impairment tested annually
c. It is written off against profit or loss
d. Goodwill is not recognized separately within the carrying amount of the investment. B
Which of the following assets or liabilities should be considered non monetary?
a. Trade receivables
b. Deferred tax liabilities
c. Accrued expense and other payables
d. Taxes payable A
Which of the following assets is not a financial asset?
a. Cash
b. An equity instrument of another entity
c. A contract that may or will be settled in the entity's own instrument and is not classified as an
equity instrument of the entity
d. Prepaid expenses D
Earnings per share is calculated before accounting for which of the following items?
a. Preference dividend for the period
b. Ordinary dividend
c. Taxation
d. Minority interest B
If a bonus issue occurs between the year-end and the date that the financial statements are
a. EPS both for the current and the previous year are adjusted
b. EPS for the current year only is adjusted
c. No adjustment is made to EPS
d. Diluted EPS only is adjusted A
Publicly traded entities are encourage to provide interim financial reports
a. At least at the end of half year and within 60 days of the end of interim period
b. Within a month of the half year-end
c. On a quarterly basis
c. Whenever the entity wishes A
If an entity does not prepare interim financial reports;
a. The year-end financial statements are deemed not to comply with PFRS.
b. The year-end financial statements compliance with PFRS is not affected.
c. The year-end financial statements will not be acceptable under local legislation.
d. Interim financial reports should be included in the year-end financial statements. B
Value in use is;
a. The market value.
b. The discounted present value of future cash flows arising from use of the asset and from its
c. The higher of fair value less cost of disposal and market value.
d. The amount at which the asset is recognized in the statement of financial position. B
Estimates of future cash flows in determining value in use normally would cover projections of
over maximum of;
a. Five years
b. Ten years
c. Fifteen years
d. Twenty years A
Which of the following cash flows should not be included in calculating value in use?
a. Cash flows from disposal
b. Income tax payments
c. Cash flows from the sale of assets produced by the asset
d. Cash outflows incurred to generate the cash inflows from the continuing use of the asset
A cash-generating unit is;
a. The smallest business segment;
b. Any grouping of assets that generates cash flows;
c. Any group of assets that is reported separately to management;
d. The smallest group of assets that generates independent cash flows from continuing use.
When allocating an impairment loss, such a loss should reduce the carrying amount of which
asset first?
a. Property, plant and equipment
b. Intangible assets
c. Goodwill
d. Current assets C
An investment property should be measured initially at;
a. Cost
b. Cost less accumulated impairment losses.
c. Depreciable cost less accumulated impairment losses.
d. Fair value less accumulated impairment losses. A
A gain arising from change in fair value of an investment property for which an entity has opted
to use the fair value model is recognized in;
a. Net profit for the year
b. General reserve in the shareholders' equity
c. Valuation reserve in the shareholder's equity
d. Retained Earnings A
Generally speaking, biological assets relating to agricultural activity should be measured using;
a. Historical cost
b. Historical cost less depreciation less impairment
c. A fair value approach
d. Net realizable valueC
Where there is a production cycle of more than one year for a biological asset, separate
disclosure is encouraged for;
a. Physical change only
b. Price change only
c. Total change in value
d. Physical change and price change D
How should the income from discontinued operations be presented in the income statement?
a. The entity should disclose a single amount on the face of the income statement below the
income from continuing operations.
b. The amounts from discontinued operation should be broken down over each category of
revenue and expense.
c. Discontinued operation should be shown as a movement on the retained earnings.
d. Discontinued operation should be shown as a line item after gross profit. A
Which of the following criteria does not have to be met in order for an operation to be classified
as discontinued?
a. The operation should represent a separate major line of business or geographical area.
b. The operation is part of a single plan to dispose of a separate major line of business or
geographical area.
c. The operation is a subsidiary acquired exclusively with a view to resale.
d. The operation must be sold within three months of the year-end. D
How should the assets and liabilities of a disposal group classified as held for sale be shown in
the statement of financial position?
a. The assets and liabilities should be offset and presented as a single amount.
b. The asset of the disposal group should be shown separately from other assets and the liabilities
should be shown separately from other liabilities.
c. The assets and liabilities of the disposal group should not be presented.
d. There should be no separate disclosure of assets and liabilities that form part of a disposal
group. A
Which is not a characteristic of the "full cost" method of accounting in the oil and gas industry?
a. All costs incurred in acquiring, exploring and developing within a defined cost center are
capitalized and amortized.
b. Costs are capitalized even if a specific project in a cost center was a failure.
c. Costs of unsuccessful acquisition and exploration activities are charged to expense.
d. Exploration and evaluation asset is classified either as tangible asset or an intangible asset
according to the nature of the asset. C
Which expenditures would never qualify as an exploration and evaluation asset?
a. Expenditures for acquisition of rights to explore.
b. Expenditures for exploratory drilling
c. Expenditures related to the development of mineral resources
d. Expenditure for activities in relation to evaluating the technical feasibility and commercial
viability of extracting the mineral resources. A
The accounting for a fair value hedge records the derivative at
a. Amortized cost
b. Carrying amount
c. Fair value
d. Historical cost C
Which of the following represents the total number of shares that a corporation may issue under
the terms of its charter?
a. Authorized shares
b. Issued shares
c. Unissued shares
d. Outstanding shares A
Shares that have a fixed per-share amount printed on each share certificate are called;
a. Stated value shares
b. Fixed value
c. Uniform value shares
d. Par value shares D
Cash dividends are paid on the basis of the number of shares;
a. Authorized
b. Issued
c. Outstanding
d. Outstanding less the number of treasury shares C