COMPREHENSIVE ACCOUNTING REVIEW CENTER

Tuguegarao City, Cagayan 3502

Financial Accounting and Reporting
Constructive Accounting Part

1. Which can be classified as current liabilities even if they are due to be settled after more than
twelve months from balance sheet date?
a. Bank overdrafts
b. Dividends payable
c. Income taxes payable
d. Trade payables and accruals for employee and other operating costs

2. A long-term debt that is due to be settled within twelve months after the balance sheet date is
classified as noncurrent when
I. An agreement to refinance or reschedule payment on a long-term basis is completed
after balance sheet date and before the financial statements are authorized for issue.
II. The entity has the discretion to refinance or roll over the obligation for at least twelve
months after the balance sheet date under an existing loan facility.
a. I only b. II only c. Both I and II d. Neither I nor II

3. 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. Both I and II d. Neither I nor II

4. Which statement is incorrect?

a. 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.
b. The standard does not prescribe the order or format in which the line items are to be
presented.
c. 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.
d. When entity presents current and noncurrent captions, it shall classify deferred tax assets
and deferred tax liabilities as current.

5. Biological assets are measured at initial recognition and every balance sheet date at
a. Cost c. Replacement cost
b. Fair value d. Fair value less estimated point of sale cost

6. 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. I, II, III and IV c. II, III, IV and I
b. IV, I, II and III d. No specific order

7. Accounting policies are

a. Concepts that underlie the preparation and presentation of financial statements for external
users.
b. Attributes that make the information provided in financial statements useful to users.
c. Fundamental premises on which the accounting process is based
d. Specific principles, bases, conventions, rules and practices adopted by an enterprise in
preparing and presenting financial statements.

8. The summary of significant accounting policies shall describe

I. The measurement basis used in preparing the financial statements.
II. The accounting policies used that are relevant to an understanding of the financial
statements.
a. I only b. II only c. Both I and II d. Neither I nor II

9. Nonfinancial disclosures include all of the following, except

a. The domicile and legal form of the enterprise, its country of incorporation and the address
of the registered office.
b. A description of the nature of the enterprise’s operations and its principal activities.
c. The name of the parent and the ultimate parent of the group.
d. Contingent liabilities and unrecognized contractual commitments.

17. Related parties include all of the following, except

a. Affiliates
b. Associates
c. Two enterprises that have a common director
d. Key management personnel, directors and officers of enterprise, and close family members
of such individuals

18. Unrelated parties include all of the following, except

a. Two venturers simply because they share joint control over a joint venture.
b. Providers of finance, trade unions, public utilities and government departments and
agencies simply by virtue of their normal dealings with an entity.
c. A customer, supplier, franchisor or general agent with whom an entity transacts a
significant volume of business, merely by virtue of the resulting economic dependence.
d. Postemployment benefit plan for the benefit of employees of the entity.

19. Close family members of an individual are those who may be expected to influence or be
influenced by that individual in their dealings with the entity. Close family members include all
of the following, except
a. The individual’s spouse and children
b. Children of the individual’s spouse
c. Dependents of the individual or the individual’s spouse
d. Brothers and sisters
20. It is the method used in pricing transactions between related parties by making reference to
comparable goods sold in an economically comparable market to a buyer unrelated to the
seller.
a. No specific method c. Fixed price method
b. Cost plus 10 % mark-up method d. Uncontrolled price method

21. Which statement is incorrect concerning the presentation of the income statement?
a. The nature of expense method means that expenses are aggregated according to their
nature and are not reallocated among various functions within the enterprise.
b. The cost of sales method means that expenses are classified according to their function as
cost of sales, distribution or administrative activities.
c. PAS 1 requires the use of the cost of sales method because this presentation often provides
more relevant information to the users than the nature of expense method.
d. The choice between the functional and natural presentation depends on historical and
industry factors and the nature of the entity.

22. The statement of recognized gains and losses shall include all of the following, except
a. Net unrealized loss on available for sale securities
b. Foreign currency translation gain
c. Revaluation surplus
d. Dividend paid to stockholders