Chapter 1: The Accountancy Profession
14. Which statement is incorrect in relation to the
1. accounting is a service activity and the function is
to provide quantitative information, primarily
financially nature, about economic entities, that is
intended to be useful in making economic decisions.
this accounting definition is given by
accounting standards council
2. all of the following describe accounting, except
an exact science rather than an art
3. the important points made in the definition of
accounting include all of the following, except
accounting information is both quantitative and
qualitative
4. this accounting process is the recognition or non-
recognition of business activities as accountable
events
identifying
5. what are the events that affect the entity and
which other entities participate
external events
6. which is incorrect in relation to an accountable
event
sociological and psychological matters are
quantifiable
7. what is the measuring component in the definition
of accounting
the assigning of peso amounts to the
accountable events
8. the most common financial attribute used in
measuring financial information is
historical cost
9. the communicating process of accounting
includes all of the following, except
interpreting
10. what is the overall objective of accounting
to provide quantitative financial information
about an entity that is useful in making
economic decision
11. what is the law regulating the practice of
accountancy in the philippines
r.a. no 9298
12. what is the body authorized by law to promulgate
rules and regulation affecting the practice of the
accountancy profession in the philippines
board of accountancy
13. what are the three main areas in the practice of
the accountancy profession
public accounting, private accounting, and
government accounting
practice of public accountancy
the securities and exchange commission can
register any corporation organized for the
practice of public accountancy
15. CPAs are licensed by
The PICPA
16. what is the standard-setting body in the
Philippines at the present time
financial reporting standards council
17. all of the following are represented in FRSC,
except
department of budget and management
18. the philippine financial reporting standards
collectively include
all of these are included in philippine financial
reporting standards
19. accounting standard-setting has been
characterized as
a political process
20. GAAP is an abbreviation for
generally accepted accounting principles
21. what is the primary service of CPAs in public
practice
Auditing
22. accountants employed in entities in various
capacity as accounting staff, chief accountant, or
controller are said to be engaged in
private accounting
23. it is the area of the accountancy profession that
encompasses the process of analyzing, classifying,
summarizing and communicating all transactions
involving the receipt and disposition of government
funds and property and interpreting the results
thereof
Government accounting
24. how many CPD credit units are required for
accreditation to practice the accountancy profession
120 units
25. A CPA shall be permanently exempted from
renewal of CPA license
At the age of 65 years
26. the international accounting standards board
was formed
to develop a single set of high quality IFRS
27. the international accounting standards board derive their credibility and authority from
promote the use of high-quality and general recognition and acceptance by the
understandable global accounting standards accountancy profession

42. which statement best describes GAAP

28. The IASB declared that the merits of proposed the accounting principles have been developed
standards are assessed on the basis of such factors as usage and
from a position of neutrality practical necessity

29. the standard-setting process includes in the
correct order
research, discussion paper, exposure draft,
and accounting standard
30. The IASB employs a due process system which
enables interested parties to express their views
on issues under consideration
43. proper application of accounting principles is
most dependent upon
professional judgment of the accountant
44. once an accounting standard has been
established
the standard is continually reviewed to see if
modification is necessary

31. what is due process in standard-setting by IASB 45. the primary responsibility for properly applying
all of these are part of due process in standard- GAAP lies with
setting management

32. the standard published by IASB are called

international financial reporting standards

33. what is a possible danger if politics plays too big

a role in developing IFRS
financial reporting standards are not truly
generally accepted

34. accounting standard-setting

can be described as a political process which
reflects political actions of various interested
user groups as well as a product of research and
logic

35. IFRIC interpretations issued by IASB

all of these are true about IFRIC interpretations

36. financial accounting is concerned with

general purpose reports on financial position
and financial performance

37. financial accounting can be broadly defined as

the area of accounting that prepares
general purpose financial statements to be used
by parties both internal and external to the entity

38. financial accounting emphasizes reporting to

creditors and investors

39. managerial accounting emphasizes

developing accounting information for use
within an entity

40. which statement is true regarding managerial

and financial accounting
managerial accounting is generally more
precise

41. generally accepted accounting principles

Chapter 2: Objective of Financial Reporting
1. which statement is true about the conceptual
framework for financial reporting
all of these statements are true about the
conceptual framework
2. Which is not a purpose of the revised conceptual
framework
to assist regulatory agencies in issuing rules
and regulations for a particular industry
3. the scope of the revised conceptual framework
comprises how many chapters
Eight
4. the conceptual framework provides the
foundation for standards that
all of these are the result of standards
developed based on consistent concepts
5. what is the authoritative status of the conceptual
framework
in the absence of a standard or an interpretation
that specifically applies to a transaction,
management shall Consider the applicability of
the conceptual framework in developing and
applying an accounting policy that results in
information that is relevant and faithfully
represented
6. the conceptual framework is intended to establish
The objectives and concepts for use in
developing standards of financial accounting
and reporting
7. a conceptual framework should
define the basic objectives, terms, and
concepts of accounting
8. which is not a purpose of the conceptual
framework
to provide specific guidelines for resolving
situations not covered by existing accounting
standards
9. in the conceptual framework for financial
reporting, what provides the “why” of accounting
objective of financial reporting
10. the underlying theme of the conceptual
framework is
Decision usefulness
11. the objective of financial reporting
is the foundation for the conceptual framework
12. which of the following is not a benefit associated
with the conceptual framework
business entities will need far less assistance
from accountants
13. which statement is not true concerning the
conceptual framework
the conceptual framework should be based on
fundamental truth derived from the law of nature
14. users of financial reports include which of the
following
Creditors, government agencies, and unions
15. the primary users of financial information include
existing and potential investors, lenders and
other creditors
16. which group is not among the external users for
whom financial statements are prepared
all of these are external users of financial
statements
17. which of the following is an internal user of
financial information
board of directors
18. these users require information on risk and
return provided by their investment
Investors
19. these users are interested in formation about
the profitability and stability of the entity in order to
assess the ability of an entity to provide
remuneration, retirement benefits and employment
opportunities
Employees
20. this users are interested in information that
enables them to assess whether their loans, the
related interest thereon, and other amounts owing
to them will be paid when due
lenders and other creditors
21. these users are interested in information about
the continuance of an entity, especially when they
have a long-term involvement or are dependent on
the entity
Customers
22. these users are interested in information in
order to regulate the activities of an entity,
determine taxation policies and provide a basis for
national statistics
governments and their agencies
23. these users need information on trends and
recent developments where an entity makes a
substantial contribution to the local economy
providing employment and using local suppliers
the public
24. the overall objective of financial reporting is to
provide information
that is useful for decision making
25. the primary focus of financial reporting has been particular management, financial reporting provides
on meeting the needs of which of the following information about
groups entity performance but not management
existing and potential investors, lenders and performance
other creditors

26. the primary objective of financial reporting is to

provide useful information to
capital providers

27. which is an objective of financial reporting

to provide information that is useful in making
investing and credit decisions

28. which is an objective of financial reporting

to provide information that is useful to assess
that amount, timing, and uncertainty of
prospective cash receipts

29. an objective of financial reporting is to provide

Information that is useful in assessing cash flow
prospects

30. assessing cash flow prospects is interpreted to

mean
over the long run, trends in revenue and
expenses are generally more meaningful than
trends in cash receipts and disbursements

31. in measuring financial performance, accrual

accounting is used because
it provides a better indication of ability to
generate cash flows than cash basis

32. the most useful information in predicting future

cash flows is
current earnings based on accrual accounting

33. the accrual basis of accounting is most useful

for
predicting the short-term financial performance

34. the objective of financial reporting is based on

the needs of the users of the information

35. which statement is not true about financial

reporting
financial reporting shall not provide information
useful in evaluating management stewardship

36. which of the following is not an objective of

financial reporting
to provide information about the liquidation
value of an entity

37. financial reporting pertains to information about

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

38. under the revised conceptual framework, during

a period when an entity is under the direction of a
Chapter 3: Qualitative characteristics
1. what are the attributes that make the information
provided in the financial statements useful to the
readers
qualitative characteristics of financial
information
2. qualitative characteristics
all of the choices are correct
3. the fundamental qualitative characteristics are
relevance and faithful representation
4. accounting information is considered relevant
when it
is capable of making a difference in a decision
5. the ingredients of relevant financial information
are
predictive value and confirmatory value
6. what is the quality of information that gives
assurance that it is reasonably free of error and bias
faithful representation
7. which of the following is the best description of
“faithful representation” in relation to information in
financial statements
freedom from material error
8. to achieve faithful representation, the financial
statements
must be complete, neutral, and reasonably free
from error
9. the financial accounting information is directed
toward the common needs of users and is
independent of presumptions about particular needs
and desires of specific users
Neutrality
10. in the event of conflict between the economic
substance of a transaction and the legal form, the
economic substance shall prevail
substance over form
11. the enhancing qualitative characteristics of
financial information are
compatibility, understandability, verifiability, and
timeliness
12. Financial information exhibits consistently when
accounting entities give similar events the same
accounting treatment each period
13. when information about two different entities
engage in the same industry has been prepared and
presented in similar manner, the information exhibits
the enhancing qualitative characteristic of
Comparability
14. the characteristic that is demonstrated when a
high degree of consensus can be secured among
independent measurers using the same
measurement method is
Verifiability
15. which concept of accounting holds that, to the
maximum extent possible, financial statements shall
be based on arm's length transactions
Verifiability
16. an entity issuing the annual financial reports
within one month after the end of the reporting
period is an example of which enhancing quality of
accounting information
Timeliness
17. allowing entities to estimate rather than
physically count inventory at interim periods is an
example of a trade-off between
timeliness and verifiability
18. which qualitative characteristics of financial
information requires that information should not be
biased in favor of one group users to the detriment
of others
Neutrality
19. for information to be useful, the linkage between
the users and the decision made is
Understandability
20. which statement is true in relation to the
enhancing quality of understandability
users have a reasonable knowledge of business
and economic activities and review the
information with reasonable diligence
21.the overriding qualitative characteristics of
accounting information is
decision usefulness
22. which of the following terms best describes
information that influences the economic decision of
users
Relevant
23. what is the quality of information that enables
users to better forecast future operations
Relevance
24. according to the conceptual framework,
predictive value and confirmatory value are
ingredients of
Relevance
25. which term best describes information in
financial statements that is neutral
Unbiased
26. what is meant by comparability when discussing
financial accounting information
information is measured and reported in a
similar fashion across entities
27. which of the following is not an enhancing
qualitative characteristics
Profit-oriented
28. changing the method of inventory valuation
should be reported in the financial statements under
what enhancing quality of accounting information
comparability
29. when an entity applies the same accounting
treatment to similar events from period to period, the
entity is exhibiting which of the following qualities
Consistency
30. when there is agreement between a measure or
description and the phenomenon it purports to
represent, the information possesses which
characteristic
Verifiability
31. the qualitative characteristic of financial
representation includes
Neutrality
32. enhancing qualitative characteristics of
accounting information include all of the following,
except
Materiality
33. the enhancing quality of understandability means
that information should be understood by
those who have a reasonable understanding of
business and economic activities
34. enhancing qualitative characteristics of
accounting information include
comparability and timeliness
35. when different competent accountants
independently agree on the amount and method of
reporting and economic event, what is the concept
demonstrated
Verifiability
36. according to the conceptual framework,
verifiability implies
Consensus
37. when an entity has started placing its quarterly
financial statements on its web page, thereby
reducing by 10 days the time to get information to
investors and creditors, the qualitative concept
involved is
Timeliness
38. when an entity change the inventory valuation
method, which characteristic is jeopardized by this
change
Consistency
39. Recognizing expected losses immediately but
deferring expected gains is an example of
Conservatism
40. which statement about materiality is true
all of these statements are true about
materiality
41. an item would be considered material when
omitting, misstating, or obscuring the
information would make a difference to the
primary users
42. the conceptual framework includes which
constraint
Cost
43. which best describes the cost-benefit constraints
the benefit of the information must be greater
than the cost of providing it
44. what is an enhancing quality of accounting
information
users need reasonable knowledge of business
and financial accounting matters to understand
the information contained in financial statements
45. the ability through consensus among measures
to ensure that information represents what it
purports to represent is an example of the concept of
Verifiability
46. which of the following accounting concepts
states that an accounting transaction shall be
supported by sufficient evidence to allow two or
more qualified individuals to arrive at essentially
similar conclusion
Objectivity
47. objectivity is assumed to be achieved when a
transaction
involves an arm's length transaction between
two independent parties
48. the principle of objectivity includes the concept
of
Verifiability
49. proponents of historical cost maintain that
statements prepared using historical cost are more
Objective
50. the consistency standard requires that
the effect of accounting changes of an income
should be properly disclosed
51. which of the following relates to both relevance
and faithful representation
Comparability
52. which of the following situations violates the
concept of faithful representation
financial statements included an item of
property, plant and equipment with carrying
amount increased to management estimated
market value

53. what is the underlying concept governing the

GAAP pertaining to recording gain contingencies
Conservatism

54. the usefulness of providing information in

financial statements is subject to the constraint of
Cost-benefit
Chapter 4: financial statements and reporting
entity; underlying assumptions
1. what is the general objective of financial
statements
to provide information about economic
resources of an entity, claims against the entity
and changes in the economic resources and
claims
2. a reporting entity is
An entity that is required or chooses to prepare
financial statements
3. a reporting entity
all of these can be considered a reporting entity
4. If the reporting entity comprises both parent and
its subsidiaries, the financial statements are referred
to as
Consolidated financial statements
5. combined financial statements provide financial
information about
Two or more entities without a parent-subsidiary
relationship
6. which best describes the term going concern
the ability of the entity to continue in operation
for the foreseeable future
14. which basic accounting assumption is
threatened by the existence of severe inflation in the
economy
monetary unit assumption
15. inflation is ignored in accounting due to
Monetary unit assumption
16. the concept of accounting entity is applicable
whenever accounting is involved
17. when a parent and subsidiary relationship
exists, consolidated financial statements are
prepared in recognition of
economic entity
18. the valuation of a promise to receive cash in the
future at present value is valid because of what
accounting concept
going concern
19. what is the accounting concept that justifies the
usage of accruals and deferrals
going concern
20. during the lifetime of an entity accountants
produce financial statements at arbitrary points in
time in accordance with what basic accounting
concept
Periodicity

7. which is an implication of the going concern

assumption
all of these are implication of going concern

8. the relatively stable economic, political and

social environment supports
going concern

9. which of the following is not a basic assumption

underlying financial accounting
historical cost assumption

10. which basic assumption may not be followed

when an entity in bankruptcy reports financial results
going concern assumption

11. The economic entity assumption

is applicable to all forms of business
organization

12. what is being violated if an entity provides

financial reports in connection with a new product
introduction
economic entity

13. Which underlying assumption serves as the

basis for preparing financial statements at regular
artificial points in time
accounting period
Chapter 5: Elements of financial statements
1. the elements directly related to the measurement
of financial position are
Asset, liability, and equity
2. The elements of financial position describe
amounts of resources and claims against resources
at the moment in time
3. the elements directly related to the measurement
of financial performance are
income and Expenses
4. it is a present economic resource controlled by
the entity as a result of past events
Asset
5. it is a present obligation of an entity to transfer an
economic resource as a result of past events
Liability
6. it is the residual interest in the asset of the entity
after deducting all of the liabilities
Equity
7. it is an increase in asset or a decrease in liability
that results in increase in equity other than
contribution from equity holders
Income
8. it is a decrease in asset or an increase in liability
that results in increase in equity other than
distribution to equity holders
Expense
9. this arises in the course of ordinary regular
activities of the entity and is referred to by a variety
of different names including sales, fees, interest,
dividends, royalties and rent
Revenue
10. which statement in relation to income is true
income and compasses both revenue and gain
11. which is not within the new definition of an asset
Future economic benefit is expected to flow to
the entity
12. which of the following criteria need not be
satisfied for a liability to exist
The settlement is expected to result in an
outflow of economic benefit
13. a present obligation exists as result of pass
event if
the entity has already obtained economic
benefit and must transfer economic resource
14. rights that have the potential to produce
economic benefits and correspond to an obligation
of another entity include all, except
right over property, plant, and equipment
15. an economic resource could produce economic
benefit if an entity is entitled to all, except
To exchange economic resources with another
entity on unfavorable terms
16. it is the present ability to direct the use of an
economic resource and obtain the benefit that may
flow from it
control
17. It is a duty or responsibility that an entity has no
practical ability to avoid
Obligation
18. Obligation to transfer an economic resource
include all, accept
obligation to transfer an economic resource
even if a specified future event does not occur
19. Which statement is not true about income and
expenses
income and expenses are elements that relate to
financial position
20. this new term refers to the statement of profit or
loss and a statement presenting other
comprehensive income
statement of financial performance
21. Revenue may result from
a decrease in a liability from primary operations
22. What is the primary distinction between revenue
and gain
The nature of the activity that gives rise to the
transaction
22. the term income
Includes gain resulting from the sale of an asset
in an arm's length transaction
23. a decrease in an asset arising from peripheral or
incidental transaction is called
Loss
24. an outflow of asset based on an activity that
represents the major operations is called
expense
Chapter 6: Recognition and measurement
1. it is the process of capturing for inclusion in the
financial statement an item that means the definition
of the elements of financial statements
Recognition
2. an item is recognized in the financial statements
if
It meets the definition of an asset, liability,
equity, income, and expense
3. Recognition of an element is appropriate when
information results in
both relevant and faithful representation
4. it is the removal of all or part of a recognized
asset or liability from the statement of financial
position
Derecognition
5. derecognition normally occurs when
under all of these circumstances
6. Generally, revenue is recognized
at the point of sale
7. which of the following is not an accepted basis for
recognition of revenue
upon signing of contract
8. Normally, revenue is recognized
when the title to the goods changes
9. Which of the following practices may not be an
acceptable deviation from recognizing revenue at
the point of sale
upon receipt of order
10. Which of the following represents the least
desirable choice for the recognition of revenue
recognition of revenue when cash is collected
11. Revenue recognition conventionally refers to
the process of identifying those transactions
that result in an inflow of asset to the entity
12. Which of the following in the most precise sense
means the process of converting noncash resources
and rights into cash or claims to cash
Realization
13. Gains on assets unsold are identified, in a
precise sense, by the term
Unrealized
14. The term recognized is synonymous with the
term
Recorded
15. which statement conforms to the realization
concept
equipment was sold in exchange for a notes
receivable
16. which of the following is not a theoretical basis
for the allocation of expense
profit maximization
17. Costs that can be reasonably associated with
specific revenue but not with specific product should
be
expense in the period in which the related
revenue is recognized
18. which of the following is an example of a cause
and effect association principle
sales commission
19. Which of the following is an application of the
systematic and rational allocation principle
Amortization of intangible assets
20. Which of the following would be matched with
current revenue on a basis other than association of
cause and effect
Goodwill
21. why are certain costs of doing business
capitalized when incurred and then depreciated or
amortized over subsequent accounting periods
To match the cost of production with revenue
22. which of the following principles best describes
the conceptual rationale for the method of matching
depreciation with revenue
systematic and rational allocation
23. which of the following should be expensed
under the principle of systematic and rational
allocation
insurance premiums
24. the writeoff of a worthless patent is an example
of which of the following principles
immediate recognition
25. What is an example of cost that cannot be
directly related to particular revenue but incurred to
obtain benefits that are exhausted in the period
when the cost is incurred
sales salaries
26. The matching principle is best demonstrated by
Associating effort with accomplishment
27. bad debt expense is recognized according to
which expense recognition principle
Direct matching
28. what is the general approach as to when
product costs are recognized as expenses
In the period when the related revenue is
recognized
29. when should an expenditure be recorded as an
asset rather than an expense
when there is a right that has the potential to
produce economic benefit
30. which accounting principle is being observed
when an accountant charges to expense a cost that
contributed to revenue during a period
Matching
31. Which of the following is not an acceptable basis
for the recognition of expense
cash disbursement
32. A cause-and-effect relationship is implicit in the
matching principle
33. An example of direct matching of an expense
with revenue would be
direct labor cost incurred to produce inventory
sold during a period
34. which category of expenses is subject to
immediate recognition in the income statement
the salary of the entity present
35. which principle best describes the rationale for
matching distribution costs and administrative
expenses with revenue of the current period
immediate recognition
36. which statement is true about current value
all of these statements are true about current
value
37. The measurement bases include
historical cost and current value
38. current value includes
fair value , present value, and current cost
39. which measurement attribute is not currently
used in practice
inflation adjusted cost
40. it is the amount of cash or cash equivalent that
would have to be paid if the same or an equivalent
asset was acquired currently
current cost
Chapter 7: Presentation and disclosure;
concepts of capital
1. the presentation disclosure requirement achieves
all of the following, except
financial position, financial performance, and
cash flows
2. it is the sorting of assets, liabilities, equity,
income, and expenses with similar characteristics
Classification
3. all of the following can considered appropriate
classification, except
offsetting asset and liability
4. income and expenses are classified as
profit or loss and other comprehensive income
5. what is the new term to describe the statement of
profit or loss together with the statement showing
other comprehensive income
statement of financial performance
6. financial capital is defined as
net assets in monetary terms
7. the physical capital maintenance concept requires
the adoption of which measurement basis
current cost
8. which concept is applied to net income and other
comprehensive income
Physical capital (NS)
9. which statement regarding the term profit is true
all of these statements are true about the term
profit
10. under the financial capital concept, net income
occurs when
the nominal amount of net assets at year and
increased after excluding distribution to and
contributions from owners
Chapter 8: Statement of financial position
1. the major financial statements include all, except
statement of changes in financial position
2. the major financial statements include all, except
statement of retained earnings (NS)
3. what is the objective of financial statements
To provide information about financial position,
financial performance, and changes in financial
position of an entity that is useful to a wide
range of users in making economic decisions
(NS)
4. financial statements must be prepared at least
Annually
5. when entity changed the end of reporting period
longer or shorter than one year, the entity shall
disclose all, except
the fact that similar entities have done so
6. when there is much variability, the operating
cycle is measured at
12 months
7. the operating cycle of an entity
Is the time between the acquisition of materials
entering into a process and their realization in
cash
8. an entity shall classify an asset as current under
all of the following conditions, except
the asset is cash or a cash equivalent that is
restricted to settle a liability for more than twelve
months after the reporting period
9. an entity shall classify a liability as current when
under all of the following conditions, except
the entity has an unconditional right to defer
settlement of the liability for at least 12 months
after the reporting period
10. which obligations are classified as current even
if these are due to be settled after more than 12
months from the end of the reporting period
trade payables and accruals for employees and
other operating costs
11. current and noncurrent presentation of assets
and liabilities provides useful information when the
entity
supplies goods or services within a clearly
identifiable operating cycle
12. A presentation of assets and liabilities in
increasing or decreasing order of liquidity provides
information that is reliable and more relevant than a
current and noncurrent presentation for
financial institution
13. In the philippines, the common practice is to
present in the statement of financial position
current assets before noncurrent assets, current
liabilities before noncurrent liabilities, and
equity after liabilities
14. a financial liability due within twelve months
after the reporting period shall be classified as non-
current
when it is refinance on a long term basis on or
before the end of her reporting (NS)
15. when an entity breaches under a long-term loan
agreement on or before the end of the reporting
period with the effect that the liability becomes
payable on demand, the liability is classified as
current under all circumstances (NS)
16. in presenting a statement of financial position,
an entity
must make the current and noncurrent
presentation, except when a presentation based
on liquidity provides information that is reliable
and more relevant (NS)
17. assets to be sold, consumed or realize as part
of the normal operating cycles are
current assets
18. liabilities that an entity expects to settle within
the normal operating cycle are classified as
current liabilities
19. in which section of the statement of financial
position should cash that is restricted for the
settlement of a liability due 18 month after the
reporting period be presented
noncurrent assets
20. In which section of the statement of financial
position should employment taxes that are due for
settlement in 15 months time be presented
current liabilities
21. an entity has a loan due for repayment in six
months time but the entity has the option to
refinance for repayment two years later. the entity
plans to refinance this loan. in which section of the
statement of financial position should this loan be
presented
non-current liabilities
22. which of the following must be included on the
face of the statement of financial position
investment property
23. which of the following is not required to be
presented as minimum information on the face of the
statement of financial position
contingent liabilities
24. which of the following must be included as a line
item in the statement of financial position
deferred tax liability
25. which statement about the statement of financial
position is not true
A revaluation surplus on a noncurrent asset in
the current year should be recognized in the
income statement
26. in analyzing an entity's financial statements,
which financial statement would a potential investor
primarily used to assess liquidity and financial
flexibility
statement of financial position
27. Which is an essential characteristic of an asset
an asset is a right that has the potential to
produce economic benefit
28. the essential characteristics of an asset include
all of the following, except
the asset is tangible
29. Conceptually, asset valuation accounts are
neither assets nor liabilities
30. working capital is
current assets less current liabilities
31. as generally used, the term net assets
represents
total assets less total liabilities
32. treasury shares should be reported as
reduction of shareholders’ equity
33. the term “deficit” refers to
a debit balance in retained earnings
34. when classifying assets as current and
noncurrent
assets are classified as current if reasonably
expected to be realized in cash or consumed
during the normal operating cycle
35. the basis for classifying assets as current or
noncurrent is the period of time normally required to
convert cash invested in
inventory back into cash for 12 months,
whichever is longer
36. which should be classified as current assets
Trade installment accounts receivable normally
collectible in 18 months
37. which should not be considered as current asset
cash surrender value of life insurance policy
38. current assets should never include
goodwill arising in a business combination
39. equity investment held to finance construction of
additional plant should be classified as
noncurrent investments
40. which of the following is not a noncurrent
investment
Franchise
41. for a liability to exist
There must be a past event
42. Which statement best describes the term liability
a present obligation arising from past event
43. which item is not a current liability
share dividend payable
44. non-current liabilities include
All of these are noncurrent liabilities
45. which is not within the definition of a liability
designing of a three year employment contract
at a fixed annual salary
46. the statement of financial position is useful for
analyzing all of the following, except
Profitability
47. the statement of financial position is useful for
all of the following, except
to analyze cash inflows and outflows for the
period
48. what is one criticism not normally aimed at the
statement of financial position
the extensive use of separate classifications
49. the statement of financial position
Omits many items that are of financial value
50. which is a limitation of a statement of financial
position
all of these are a limitation of the statement of
financial position
51. the amount of time that is expected to elapse
until an asset is realized or otherwise converted into
cash is referred to as
Liquidity
52. which of the following is not an acceptable major
asset classification
deferred charges
53. what is an example of an item which is not an
element of working capital
goodwill
54. Accrued revenue would normally appear in the
statement of financial position under
current assets
55. which of the following is usually classified as a
noncurrent assets
plant expansion fund

56. Notes to financial statements

are an integral part of an entity's financial
statements

57. which of the following best demonstrates the full

disclosure principle
the notes to financial statements

58. To meet the needs of whole disclosure, entities

use supplemental information including
all of these are correct

59. the recognition and measurement concepts

recognize which of the following as a principle rather
than an assumption
full disclosure

60. The full disclosure principle requires a balance

between
relevance and cost-effectiveness
Chapter 9: statement of comprehensive income 13. Separate line items in an analysis of expenses
by function include
1. it is a change in equity during a period resulting Cost of goods sold, administrative expenses,
from transactions and other events, other than and distribution expenses
those changes resulting from transactions with
owners in their capacity as owners 14. Under IFRS, the Extraordinary item
comprehensive income presentation
has been eliminated
2. comprehensive income includes
both profit or loss and other comprehensive 15. which is not generally accepted in presenting
income the income statement
including prior period error in determining
3. It is the total of income less expenses, excluding income
other comprehensive income
profit or loss 16. the income statement reveals
Net earnings for a period of time
4. It comprises items of income and expense,
including reclassification adjustments, that are not 17. Conceptually, net income is a measure of
recognized in profit or loss as required or permitted change of wealth
by PFRS
other comprehensive income 18. which term cannot be used to describe a line
item in the statement of comprehensive income
5. What is the two-statement approach of presenting extraordinary item
comprehensive income
a separate income statement and a separate 19. Items of other comprehensive income should be
statement of comprehensive income analyzed
by nature
6. Earnings
exclude certain gains and losses included in 20. all of the following are components of other
comprehensive income comprehensive income, except
unrealized gain and loss on financial asset held
7. other comprehensive income includes all, except for trading
dividend paid to shareholders
21. comprehensive income includes all of the
8. All of the following components of OCI should be following, except
reclassified to profit or loss, except preference share dividend
remeasurement of equity investment at FVOCI
22. comprehend includes all of the following, except
9. Which of the following components of OCI investment by owners
should be reclassified to retained earnings
all of these components of OCI should be 23. corrections of errors in prior period are included
reclassified to retained earnings in
retained earnings

10. total comprehensive income for the period is 24. which of the following does not appear in a
presented statement of retained earnings
showing separately profit or loss and the total of other comprehensive income
other comprehensive income
25. which of the following would appear first in a
11. an entity shall present an analysis of expenses statement of retained earnings
based on prior period error
either the nature of expense or the function of
expense 26. income determination is arrived at by
using a transaction approach (NS)
12. separate line items in an analysis of expenses
by nature include 27. net income equals
Depreciation, purchases, transport costs, revenue minus expenses
employee benefits
28. comprehensive income always
could be greater than or less than net income
29. Gains are
Increases in equity from peripheral transactions

30. change in equity from non-owner sources is

comprehensive income

31. what is the purpose of reporting comprehensive

income
to report a measure of overall entity
performance
32. Which of the following changes during a period is
not a component other comprehensive income
treasury share

33. which of the following items would cause net

income to differ from comprehensive income
unrealized loss on equity investment measured
at fair value through other comprehensive
income

34. which of the following is not an acceptable

option in presenting other comprehensive income
in the notes to financial statements

35. when a complete set of financial statements is

presented, comprehensive income and its
components should
be displayed in a statement that has the same
prominence as other financial statements

36. the limitations of the income statement include

all of the following, except
income numbers are affected by the accounting
method

37. which of the following would represent the least

likely used of an income statement
Use by investors interested in financial position

38. The income statement would help in which of the

following
estimate amount, timing and uncertainty of
future cash flows

39. Investors and creditors use the income

statement for all of the following, except
to evaluate the future performance of an entity

40. the income statement would help in which of the

following
estimate future cash flows