CFAS

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
Correct
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Question text
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.
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 3
Correct
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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
Correct
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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
Feedback
The correct answer is: subscription of the entity’s own equity instrument (i.E., contributions by owners)
Question 5
Correct
1 points out of 1
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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
Feedback
The correct answer is: recognition
Question 6
Correct
1 points out of 1
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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
Feedback
The correct answer is: The ability of the entity to continue in operation for the foreseeable future
Question 7
Correct
1 points out of 1
Question text
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;
Feedback
The correct answer is: principle based rather than rules based;
Question 8
Correct
1 points out of 1
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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
Feedback
The correct answer is: I, II and III

Question 9
Correct
1 points out of 1
Question text
OA These are events involving an entity and another external party.
a.
life events
b.
transactions
c.
external events
d.
internal events
Feedback
The correct answer is: external events
Question 10
Correct
1 points out of 1
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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.
Feedback
The correct answer is: who do not have the authority to demand financial reports tailored to their
specific needs.
Question 11
Correct
1 points out of 1
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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.
Feedback
The correct answer is: Provide information on the liquidation value of an enterprisE.
Question 12
Correct
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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
Feedback
The correct answer is: measuring
Question 13
Correct
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Question text
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
Feedback
The correct answer is: payment of accounts payable
Question 14
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Governments and their agencies
Question 15
Correct
1 points out of 1
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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
c.
individual business enterprises, rather than to industries or an economy as a whole or to members of

d.
an economy as a whole and to members of society as consumers, rather than to individual enterprises or
industries.
Feedback
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
Correct
1 points out of 1
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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.
Feedback
The correct answer is: promote uniform accounting standards among countries of the worlD.
Question 17
Correct
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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.
Feedback
The correct answer is: all of these
Question 18
Correct
1 points out of 1
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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.
Feedback
The correct answer is: Generally Accepted Accounting Principles.
Question 19
Correct
1 points out of 1
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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.
Feedback
The correct answer is: Focuses on the preparation and presentation of general-purpose reports known as
financial statements.
Question 20
Correct
1 points out of 1
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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
Correct
1 points out of 1
Question text
OA Accounting provides which type of information?
a.
all of these
b.
qualitative
c.
financial information
d.
quantitative
Feedback
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
d.
Financial statements are prepared and presented at least annually and are directed toward the specific
needs of a wide range of users.
Feedback
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: historical cost principlE.
Question 24
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: going concern.
Question 25
Correct
1 points out of 1
Question text
OA Users of financial reports include all of the following except
a.
creditors.
b.
government agencies.
c.
All of these are users.
d.
unions.
Feedback
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.
Feedback
The correct answer is: reflect several financial attributes.
Question 27
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
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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
Correct
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Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: realizeD.
Question 31
Incorrect
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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
Feedback
The correct answer is: True False
Question 2
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Economic entity assumption
Question 3
Correct
1 points out of 1

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.
Feedback
The correct answer is: faithful representation.
Question 4
Correct
1 points out of 1
Question text
CFFR According to the Conceptual Framework, physical count of inventory is an example of
a.
direct verification.
b.
relevance.
c.
indirect verification.
d.
timeliness.
Feedback
The correct answer is: direct verification.
Question 5
Correct
1 points out of 1
Question text
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
Incorrect
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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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Periodicity assumption
Question 8
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: All of these are correct statements about materiality.
Question 10
Correct
1 points out of 1
Question text
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.
Feedback
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
Incorrect
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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.
Feedback
The correct answer is: the departure is explained in the ‘Basis for Conclusions’ on that StandarD.
Question 12
Correct
1 points out of 1
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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.
Feedback
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
Correct
1 points out of 1
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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.
Feedback
The correct answer is: comparability.
Question 14
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: faithful representation and relevance.
Question 15
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: all of these.
Question 16
Correct
1 points out of 1
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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.
Feedback
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
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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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
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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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Generally accepted accounting principles
Question 25
Incorrect
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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.
Feedback
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
Correct
1 points out of 1
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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.
Feedback
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Timeliness
Question 28
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
c.
All of them
d.
Feedback
The correct answer is: Statement (1) and Statement (3) only
Question 30
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Customers become entitled to rebates for their past purchases.
Question 32
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
CFFR Which of the following is considered a pervasive constraint by the Conceptual Framework?
a.
Cost restraint
b.
Cost constraint
c.
Verifiability
d.
Conservatism
Feedback
The correct answer is: Cost constraint
Question 36
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
PE Financial reporting standards continuously change primarily in response to
a.
changes in social environments.
b.
political influencE.
c.
government regulations.
d.
users’ needs.
Feedback
The correct answer is: users’ needs.
Question 6
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
d.
Feedback
Question 9
Correct
1 points out of 1
Question text
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.
Question 10
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: a and b
Question 14
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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.
Question 17
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Question 20
Incorrect
0 points out of 1
Question text
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.
d.
Understandability
Feedback
The correct answer is: Understandability
Question 21
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
d.
Quantitative
Feedback
The correct answer is: Qualitative
Question 37
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1

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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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).
Feedback
The correct answer is: International Accounting Standards Board (IASB).
Question 47
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Intra-comparability
Question 48
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: articulation
Question 49
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: II, III, IV, V and VII
Question 50
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Materiality is a quantitative matter. It should never be assessed qualitatively.
Question 51
Correct
1 points out of 1
Question text
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
Feedback
Question 52
Incorrect
0 points out of 1
Question text
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.
Feedback
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
Question 2
Incorrect
0 points out of 1
Question text
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
Feedback
Question 3
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: using the matching concept.
Question 4
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Management
Question 5
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Unclassified presentation
Question 6
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: To make economic decisions regarding the company’s financial position, financial
performance, and cash flows
Question 7
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: management.
Question 8
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: I only
Question 9
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Total comprehensive income
Question 10
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: b and c
Question 11
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: To report a measure of the overall financial performance of an entity.
Question 12
Correct
1 points out of 1

Question text
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
Feedback
The correct answer is: Statement of financial position
Question 13
Incorrect
0 points out of 1
Question text
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.
c.
Statement of changes in equity
d.
Feedback
Question 14
Correct
1 points out of 1
Question text
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%.
Feedback
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.
Question 15
Incorrect
0 points out of 1
Question text
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.
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 16
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: I and III
Question 17
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: deciding on how to run the day-to-day operations of the entity
Question 18
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: It is expected to be realized in more than twelve months after the balance sheet
date.
Question 19
Correct
1 points out of 1
Question text
Q1P1 “I say red; you say green.” The information lacks which of the following qualitative characteristics?
a.
Timeliness
b.
Relevance
c.
Colorfulness
d.
Verifiability
Feedback
The correct answer is: Verifiability
Question 20
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: The recognition, measurement and disclosure of specific transactions and other
events.
Question 21
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Both I and II
Question 22
Incorrect
0 points out of 1
Question text
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
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 23
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
Question text
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
Feedback
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
Correct
1 points out of 1
Question text
Q1P1 Which statement is incorrect concerning financial statements?
a.
b.
Financial statements are prepared at least annually and are directed toward the common information
c.
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
Correct
1 points out of 1
Question text
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.
Feedback
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
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: General purpose financial statements to be used by parties both internal and
external to the business enterprise
Question 28
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Financial statements
Question 29
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Cash Basis
Question 30
Correct
1 points out of 1
Question text
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.
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 31
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Short-term obligations expected to be refinanced
Question 33
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: Unit of account
Question 34
Correct
1 points out of 1
Question text
Q1P1 Which of the following financial statements would be dated as at a certain date?
a.
b.
All of these
c.
Statement of profit or loss and other comprehensive income
d.
Feedback
Question 35
Incorrect
0 points out of 1
Question text
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.
Feedback
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;
Feedback
The correct answer is: excluded from a cash flow statement;
Question 2
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Not reported
Question 3
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: cash receipts and payments from contracts held for dealing or trading purposes
Question 4
Correct
1 points out of 1
Question text
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;
Feedback
The correct answer is: conversion of preference shares to ordinary shares;
Question 5
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Purchase of equipment through cash
Question 6
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: a or c
Question 7
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: The statement of cash flows shows historical changes of cash and cash equivalents
during the perioD.
Question 8
Incorrect
0 points out of 1
Question text
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.
Feedback
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
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: cash receipts and payments from contracts held for dealing or trading purposes
Question 10
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: Dividends paid this year although declared in a prior year.
Question 11
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Equity investments are included from cash equivalents.
Question 12
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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.
Feedback
The correct answer is: I and II
Question 7
Correct
1 points out of 1
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
Incorrect
0 points out of 1
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
Incorrect
0 points out of 1
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
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
Incorrect
0 points out of 1
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
Correct
1 points out of 1
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
Question 14
Incorrect
0 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Question 18
Correct
1 points out of 1
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
Incorrect
0 points out of 1
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
Correct
1 points out of 1
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
Incorrect
0 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Incorrect
0 points out of 1
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
Incorrect
0 points out of 1
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
Correct
1 points out of 1
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
Incorrect
0 points out of 1
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
Incorrect
0 points out of 1
Question text
ME Which statement is incorrect concerning financial statements?
a.
b.
Financial statements do not show the results of management’s stewardship of resources entrusted to it.
c.
economic decisions.
d.
Financial statements are prepared at least annually and are directed toward the common information
Feedback
The correct answer is: Financial statements do not show the results of management’s stewardship of
resources entrusted to it.
Question 33
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
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
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Question 42
Correct
1 points out of 1
Question text
ME Late information lacks this qualitative characteristiC.
a.
Timeliness
b.
Verifiability
c.
Comparability
d.
Tardiness
Feedback
Question 43
Correct
1 points out of 1

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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
ME Entity A deliberately overstated its liabilities from ₱1M to ₱1.2M. What qualitative characteristic is
violated?
a.
Timeliness
b.
c.
Relevance
d.
Understandability
Feedback
The correct answer is: Faithful representation
Question 52
Correct
1 points out of 1
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
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
Correct
1 points out of 1
Question text
ME How would payments for dividend be classified?
a.
Operating outflow.
b.
Investing outflow.
c.
Operating inflow.
d.
Financing outflow.
Feedback
The correct answer is: Financing outflow.
Question 56
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: two statements of financial position
Question 58
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Cash inflows from operating activities

Question 59
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: Measurement uncertainty will always cause the non-recognition of a financial
statement element.
Question 60
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Activities that result in changes in the size and composition of equity capital and
borrowings of the enterprisE.
Question 61
Correct
1 points out of 1
Question text
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
Feedback
Question 62
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: The resource causes more outflows of cash from the entity than inflows.
Question 63
Correct
1 points out of 1
Question text
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
Feedback
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Intra-comparability.
Question 65
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: The actual cash flowing in and flowing out during an accounting perioD.
Question 67
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: correction of an error in financial statements of a prior year.
Question 2
Correct
1 points out of 1
Question text
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
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.
Feedback
The correct answer is: A change in depreciation method is classified as a change in accounting policy.
Question 3
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: Beginning accumulated profits or losses of the earliest period presented.
Question 4
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: a or b
Question 5
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: a change in the specific subsidiaries included in consolidated financial statements.
Question 7
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: change in an accounting estimate.
Question 9
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: A change from eight years to five years in the useful life of a depreciable asset
Question 10
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: On a prospective basis
Question 13
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Consistency
Question 14
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: change in accounting estimate.
Question 15
Correct
1 points out of 1
Question text
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
Question 2
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: Loss on a lawsuit the outcome of which was seemed uncertain at year-end
Question 3
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Question 7
Incorrect
0 points out of 1
Question text
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
d.
The discovery of fraud or errors between the end of the reporting period and the date of issuance of
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Entering into significant commitments or contingent liabilities, for example, by
issuing guarantees.
Question 9
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Neither I nor II
Question 13
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: II only
Question 14
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
Question 18
Correct
1 points out of 1
Question text
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.
Question 19
Correct
1 points out of 1
Question text
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
Question 2
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Disclose this non-adjusting event in the notes.
Question 4
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: Treat the entire change as a change in estimate with appropriate disclosure.
Question 6
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
SE Which of the following is one of the fundamental qualitative characteristics?
a.
Comparability
b.
Reliability
c.
Relevance
d.
Feedback
The correct answer is: Faithful representation
Question 8
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Retrospective application
Question 9
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: Reporting current and future financial statements on the new basis
Question 11
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: Each change involves different method of recognition in the financial statements.
Question 12
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Concept of Articulation
Question 13
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: not income and expenses, but rather direct adjustments to equity.
Question 14
Correct
1 points out of 1
Question text
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
c.
Bankruptcy of a customer occurring between the end of the reporting period and date of issuance of
d.
The settlement of a court case after the issuance of the financial statements that confirm that the entity
has a present obligation.
Feedback
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
Incorrect
0 points out of 1

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
Feedback
The correct answer is: Classifying
Question 16
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: prevails over the PFRSs in cases of conflicts.
Question 17
Correct
1 points out of 1
Question text
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
Feedback
Question 18
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: economic phenomenA.
Question 19
Correct
1 points out of 1

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.
Feedback
The correct answer is: a or c
Question 20
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Articulation
Question 21
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: economic phenomenA.
Question 22
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: intentional errors.
Question 23
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: Cash received from customers
Question 24
Correct
1 points out of 1
Question text
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
Feedback
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
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
SE PFRSs are adopted from the standards issued by the
a.
IASCF.
b.
IASC.
c.
FASB.
d.
IASB.
Feedback
The correct answer is: IASB.
Question 27
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Relevance
Question 28
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Economic entity assumption
Question 29
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: The PFRSs apply to all of these entities.
Question 30
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Growing concern
Question 31
Incorrect
0 points out of 1

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
Feedback
The correct answer is: PAS 1
Question 32
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: Correction of prior period error.
Question 34
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: I, II and III
Question 35
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: I, II, III and IV
Question 36
Correct
1 points out of 1
Question text
SE The Conceptual Framework uses the term “economic resources” to refer to
a.
assets.
b.
income.
c.
equity.
d.
a and c
Feedback
The correct answer is: assets.
Question 37
Incorrect
0 points out of 1
Question text
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
Feedback
The correct answer is: common needs
Question 38
Correct
1 points out of 1
Question text
SE During the lifetime of an entity, accountants produce financial statements at arbitrary points in time
in accordance with which basic accounting concept?
a.
b.
Cost benefit constraint
c.
Matching principle
d.
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Question 39
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Destruction of a major production plant by a fire before the end of the reporting
period
Question 40
Correct
1 points out of 1
Question text
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
Feedback
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
Incorrect
0 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
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
Feedback
The correct answer is: reimbursements of officers’ out-of-pocket expenses
Question 2
Incorrect
0 points out of 1
Question text
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.
Feedback
The correct answer is: The name of the parent of the entity’s associate
Question 3
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Transaction II only
Question 4
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Between related parties, regardless of whether a price is charged
Question 5
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: The related party relationship between Entity A and Entity B
Question 6
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Key management personnel and close family members of such individuals
Question 7
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: True, True
Question 8
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Two entities that have a common director
Question 13
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Both subsidiary and joint venture
Question 14
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Brothers and sisters of the individual
Question 15
Correct
1 points out of 1
Question text
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
Feedback
The correct answer is: Two co-venturers of a common joint venture business
Question 16
Correct
1 points out of 1
Question text
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
Feedback
Question 2
Correct
1 points out of 1
Question text
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.
Feedback
The correct answer is: A condensed set of financial statements and selected notes.
Question 3
Correct
1 points out of 1
Question text
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.
Feedback
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Correct
1 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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
Incorrect
0 points out of 1
Question text
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

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

statement of cash flows.

statement of retained earnings.

The correct answer is: statement of retained earnings.

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OA The accrual basis means that

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

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OA IFRS are determined by the

International Accounting Standards BoarD.

Internal Accounting Standards Body.

International Auditors' Standards Body.

International Accounting Studies BoarD.

The correct answer is: International Accounting Standards BoarD.

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purchase of investment in equity securities

borrowing of money from a bank

sale of equipment for non-interest bearing note

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

exchange of a note payable for an account payable

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The correct answer is: recognition

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When current liabilities of an entity exceed current assets

The expenses of an entity exceed its income

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OA The international accounting standards are:

principle based rather than rules based;

focussed on quantitative rules.

rules based rather than principles based;

based on regulations not concepts;

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The correct answer is: I, II and III

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

The correct answer is: external events

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OA External users are those

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

Provide information on the liquidation value of an enterprisE.

Provide information that is useful in assessing cash flow prospects.

Provide information that is useful in investment and credit decisions.

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The correct answer is: measuring

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

payment of accounts payable

declaration of stock dividends

declaration of cash dividends

The correct answer is: payment of accounts payable

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Governments and their agencies

Suppliers and trade creditors

The correct answer is: Governments and their agencies

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OA The information provided by financial reporting pertains to

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

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

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OA The purpose of the International Accounting Standards Board is to

promote uniform accounting standards among countries of the worlD.

arbitrate accounting disputes between auditors and international companies.

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