THEORY OF ACCOUNTS 6.

An example of a direct labor is

wages paid to
I . Factory machine operator
CHAPTER 24. COST ACCOUNTING II . Supervisor in a factory

a. Neither I nor II
1. What are primes costs? b. II only
a. The first costs incurred on a job c. Both I and II
b. Indispensable as distinguished d. I only
from avoidable costs
c. Direct materials and direct 7. Wages paid to a timekeeper on a
labor factory are
d. Cost incurred on joint products I . Prime cost
before the split off point II . Conversion cost

2. Prime cost and convenience cost a. Neither I nor II

share what common element of b. II only
total cost? c. I only
a. Direct material d. Both I and II
b. Direct labor
c. Variable overhead 8. Wages earned by machine
d. Fixed overhead operators in producing the firm’s
product should be categorized as
3. Direct materials are I . Direct labor
II . Controllable by the machine
I . Prime cost operators’ foreman
II . Conversion cost
a. Both I and II
III . Manufacturing cost b. I only
c. II only
a. I, II, and III
d. Neither I nor II
b. I and II only
c. I and III only
9. Factory overhead includes
d. II and III only
a. All manufacturing costs
b. All manufacturing costs which
4. Indirect materials are
may be variable or fixed,
a. Prime cost
except direct material and
b. Fixed cost
direct labor
c. Irrelevant cost
c. Indirect materials but not
d. Factory overhead cost
indirect labor
d. Indirect labor but not indirect
5. Indirect labor is a
materials
a. Nonmanufacturing cost
b. Conversion cost
10. Factory supplies for manufacturing
c. Prime cost
plant are generally
d. Period cost
a. Prime cost
 b. Period cost 15. In a job order cost system, the use
c. Variable cost of indirect materials would usually
be reflected in the general ledger as
11. An actual cost system may be used an increase in
in a. Stores control
a. Neither process costing nor job b. Work in process control
order costing c. Factory overhead control
b. Process costing but not job d. Factory overhead applied
order costing
c. Job order costing but not 16. Process cost accounting is the
process costing method to be used in assigning
d. Both job order costing and costs to products
process costing a. Which are manufactured on the
basis of each order received
12. A nonmanufacturing organizations b. Which are only partially
may use completed during the
a. Job order costing but not accounting period
process costing c. As an average cost per unit for
b. Process costing but not job all units in process during the
order costing accounting period
c. Either job order costing or d. When standard cost accounting
process costing is not used in continuous
d. Neither job order costing nor process
process costing
17. In computing the current period’s
13. What is the best cost accumulation manufacturing cost per equivalent
procedure to use when many unit, the FIFO method or process
batches, each differing as to costing considers current period
product specification, are costs
produced? a. Only
a. Job order b. Plus cost of beginning work in
b. Process process
c. Actual c. Less cost of beginning work in
d. Standard process
d. Plus cost of ending work in
14. In a job cost system, process
manufacturing overhead is
I . An indirect cost of jobs 18. By products
II . A necessary element of a. Have relatively more sales
production value than joint products
b. Have relatively less sales value
a. II only than scrap
b. Neither I nor II c. Occur before the split off point
c. Both I and II d. Are often subject to additional
d. I only costs beyond the split off point
 19. Normal spoilage is properly d. All expenses are recognized
classified as when incurred and all income is
a. Prime cost recognized when earned except
b. Period cost for transactions where accrual
c. Product cost basis is impractical or when
d. Deferred charge other method is required by law

20. The sale of scrap from 4. Only one fund, the General Fund,
manufacturing process usually shall be maintained. The General
would be recorded as Fund is available for all functions
a. Decrease in factory overhead or government. However, separate
control fund accounting for Special
b. Increase in factory overhead Purpose Funds shall be done
control I . When specifically required by
c. Decrease in finished goods law
control II . When specifically required by a
d. Increase in finished goods donor agency
control III . When otherwise necessitated
by circumstances subject to
CHAPTER 25. GOVERNMENT
approval by the COA
ACCOUNTING
1. The New Government Accounting a. I only
System is prescribed by b. I and II only
a. Commission on Audit c. I and III only
b. Department of Budget and d. I, II and III
Management
c. Department Of Finance 5. Under the NGAS, a new coding
d. Bureau of Treasury structure and new chart of accounts
shall be adopted with a numbering
2. What is the accounting system system of
under the NGAS? a. Three digits
a. Accrual basis b. Four digits
b. Modified accrual basis c. Five digits
c. Cash basis d. Six digits
d. Modified cash basis
6. What is the method of depreciation
3. Modified accrual basis means under NGAS?
a. All expenses are recognized a. Straight line with 10% residual
when incurred and all income is value
recognized when earned b. Straight line with 20% residual
b. All expenses are recognized value
when paid and all income is c. Accelerated method with 10%
recognized when earned residual value
c. All expenses are recognized d. Straight line without residual
when paid and all income is value
recognized when received
7. What is the legal basis of the COA
in prescribing the NGAS?
a. Presidential Decree
b. Legislative Act
c. Constitution of the Republic of
the Philippines
d. Recommendation of the
International Monetary Fund
8. The accounting books to be
maintained under the NGAS
I . Regular Agency Books – cash
receipts journal, cash
disbursements journal, check
disbursements journal, general
journal, general ledger and
subsidiary ledger
II . National Government Books –
cash journal, general journal,
general ledger and subsidiary
ledger
a. I only
b. II only
c. Both I and II
d. Neither I nor II
9. It is the basis for the preparation of
journal entry voucher for final
recording in the cash
disbursements journal.
a. Report of disbursement
b. Report of cash allocation
c. Notice of cash allocation
d. Cash book
10. It is the formal document issued by
DBM to the head of the agency
containing the authorization,
condition and amount
a. Allotment Release Order
b. Allotment and Obligation Slip
c. Notice of Cash Allocation
d. Registry of Allotment and
Obligation
11. Which constitutional provision is
incorrect?
a. All money collected on any tax
levied for a special purpose
shall be treated as a general
fund and paid out for the
special purpose only
b. No money shall be paid out of
the National Treasury except in
pursuance of an appropriation
made by law
c. A special appropriation bill
shall specify the purpose for
which it is intended and shall
be supported by funds actually
available as certified by the
National Treasurer or to be
raised by a corresponding
revenue proposal therein
d. No law shall be passed
authorizing transfer of
appropriations
12. The phase in the national budget
cycle which involves the
comparison of performance with
predetermined plan and the
evaluation of expenditures and
performance is called
a. Execution
b. Authorization
c. Preparation
d. Accountability
13. This is the notice of the allotment
transferred by Regional Office to
its operating unit
a. Letter of advice
b. Suballotment
c. Special allotment
d. Regular allotment
14. Specific income accounts of the
government include all of the
following, except
a. Taxes imposed on income
 b. Taxes imposed on properties
and use or sale of goods and
services
c. Fines and penalties
d. Foreign government grants
15. Which is not a component of the
financial statements of a
government agency?
a. Statement of Financial position
b. Statement of income and
expenses
c. Statement of cash flows
d. Statement of management
responsibility
CHAPTER 26. NONPROFIT
ORGANIZATION
1. Nonprofit organizations include all
of the following, except
a. Professional associations
b. School, colleges and
universities
c. Hospitals
d. Government-owned and
controlled corporations
2. This fund includes all the assets of
a nonprofit organization that are
available for use as authorized by
the governing board and are not
restricted for specific purposes.
a. Unrestricted fund
b. Restricted fund
c. Permanent endowment fund
d. Term endowment fund
3. It is a fund for which the principal
may be expended after the passage
of a certain period or the
occurrence of an event specified by
the donor.
a. Regular endowment
b. Term endowment
c. Quasi-endowment
d. Both regular and term
endowment
4. A nonprofit college received on
April 1, 2012 a certain amount
from a donor with the stipulation
that the contribution be used to
support to support faculty training
during the fiscal year beginning
January 1, 2013. On January 15,
2013, the administrators of the
college awarded research grants
equal to the contribution in
accordance with the instruction of
the donor. For the year ended
December 31, 2012, the college
shall report the contribution as
a. Temporarily restricted revenue
in the statement of activities
b. Unrestricted revenue in the
statement of activities
c. Temporarily restricted deferred
revenue in the statement of
activities
d. An increase in the fund balance
in the statement of financial
position
5. Save the Planet Earth, a nonprofit
research organization, received a
cash contribution from generous
donor. The donor stipulated that
the donation be used to purchase
new computers for the research
staff of the organization. The
contribution was received in the
current year, and the computers
were acquired in the next year. For
the current year, the cash
contribution shall be reported by
the organization in the
a. Statement of activities as
unrestricted revenue
b. Statement of activities as
deferred revenue
 c. Statement of activities as
temporarily restricted revenue
d. Statement of financial position
as deferred revenue
6. An alumnus donated securities to a
nonprofit college and stipulated
that the principal be held in
perpetuity and revenue be used for
faculty travel. Dividends received
from the securities shall be
recognized as revenue in
a. Endowment fund
b. Quasi-endowment fund
c. Restricted current fund
d. Unrestricted current fund
7. For a nonprofit organization, net
assets which can be expended in
accordance with the wishes of the
governing board of the
organization shall be reported as
I . Unrestricted
II . Temporarily restricted
III . Permanently restricted
a. I only
b. I and II
c. I, II and III
d. I and III
8. Which of the following conditions
is required for the recognition of
contributed services in a statement
of activities?
I . The contributed services create
or enhance nonfinancial assets
II . The contributed services
require specialized skills, are
provided by individuals possessing
those skills, and would typically
need to be purchased if not
provided by donation
a. Both I and II
b. Either I or II
c. I only
d. Neither I nor II
9. During the current year, a service
entity repaired the heating system
in the building occupied by a
nonprofit organization. An invoice
for a certain amount was received
by the nonprofit organization for
the service charge but at year-end,
the service entity notified the
nonprofit organization that the
repairs are being donated without
charge. How should the nonprofit
organization report these
contributed services during the
current year?
a. Only in the notes to financial
statements
b. No disclosure is required
c. As an increase in expenses and
increase in unrestricted revenue
in the statement of activities
d. As an increase in temporarily
restricted net assets in the
statement of activities
10. An entity is a nongovernmental
not-for-profit organization
involved in research. The statement
of functional expenses should
classify which of the following as
support services?
a. Salaries of staff researchers
involved in research
b. Salaries of fund-raisers for fund
used in research
c. Cost of equipment involved in
research
d. Cost of laboratory supplies
used in research
11. Which of the following statements
of a private nonprofit hospital
reports the changes in unrestricted,
temporarily restricted and
 permanently restricted net assets d. In a trust fund
for a period?
I . Statement of financial position 15. A nonprofit organization receives
II . Statement of operations an asset for which it has little or no
III . Statement of changes in net discretion over the use of the net
assets asset. The organization should
report the asset as
a. I and II only a. Contribution
b. I and III only b. Agency transaction
c. II and III only c. Conditional transfer
d. III only d. Either contribution or agency
transaction
12. The statement of cash flows for a
nonprofit organization shall report
cash flows according to which of CHATER 27. HYPERINFLATION
the following classifications?
I . Operating activities 1. Hyperinflation is indicated by
II . Investing activities characteristics of the economic
III . Financing activities environment of a country which
include all of the following, except
a. I, III and III a. The general population prefers
b. II and III to keep its wealth in
c. I only nonmonetary assets or in
d. I and III relatively stable foreign
currency
13. Which of the following would b. The general population regards
result to reclassification of net monetary amounts not in terms
assets of a nonprofit organization? of the local currency but in
I . Expiration of donor-imposed terms of relatively stable
condition foreign currency
II . Expiration of donor-imposed c. Interest rates, wages and prices
restriction are linked to a price index
d. The cumulative inflation rate
a. I only over three years is approaching
b. II only or exceeds 50%
c. Both I and II
d. Neither I nor II 2. Which of the following would
indicate that hyperinflation exists?
14. How are nonrefundable advance a. Sales on credit are at lower
fees representing payments for the prices than cash sales
future services accounted for by b. Inflation is approaching, or
nonprofit continuing care exceeds, 20% per year
retirement communities? c. Monetary items do not increase
a. As revenue in value
b. As a liability d. People prefer to keep their
c. As other financing source wealth in nonmonetary assets
or a stable foreign currency
3. All of the following are monetary
items, except
a. Trade payables
b. Trade receivables
c. Administration costs paid in
cash
d. Loan repayable at par value
4. When computing information on a
constant peso basis, which of the
following is classified as
nonmonetary?
a. Allowance for doubtful
accounts
b. Accumulated depreciation –
equipment
c. Unamortized premium on
bonds payable
d. Advances to unconsolidated
subsidiaries
5. During a period of deflation, an
entity would have the greatest gain
in general purchasing power by
holding
a. Cash
b. Property, plant and equipment
c. Accounts payable
d. Mortgage payable
6. An accountant who recommends
the adjustment of financial
statements for price level changes
should not support the
recommendation by stating that
a. Purchasing power gains or
losses are recognized
b. Historical pesos are not
comparable to present-day
pesos
c. The restatement of asset cost to
a common peso basis is a
useful extension of the original
cost basis of asset valuation
d. Assets are measured at current
replacement cost
7. In current cost financial statements
a. General price level gains or
losses are recognized on net
monetary items
b. Amounts are always stated in
common purchasing power unit
of measurement
c. All items in the statement of
financial position are different
from historical cost
d. Holding gains are recognized
8. An entity adjusted its historical
cost income statement by applying
specific price index to its
depreciation and cost of goods
sold. The entity’s adjusted income
statement is prepared according to
a. Fair value accounting
b. Purchasing power accounting
c. Current cost accounting
d. Nominal peso accounting
9. Which of the following methods of
reporting attempts to eliminate the
effect of the changing value of the
peso?
a. Discounted net present value of
future cash flows
b. Historical cost restated for
change in the general price
level
c. Replacement cost
d. Exit value
10. Could current cost financial
statements report holding gains for
goods sold during the period and
holding gains on inventory at the
end of the period?
I . Goods sold
II . Inventory
a. Both I and II
b. I only
c. II only
 d. Neither I nor II
CHAPTER 28. SMEs – DEFINITION
1. The IASB defines SMEs as entities
that
a. Do not have public
accountability and do not
publish general purpose
financial statements for
external users
b. Have public accountability and
publish general purpose
financial statements for
external users
c. Do not have public
accountability and publish
general purpose financial
statements for external and
internal users
d. Do not have public
accountability and publish
general purpose financial
statements for external users
2. Micro-business entities can use
which of the following base of
accounting in the preparation of
financial statements?
a. Full PFRS
b. PFRS for SMEs
c. Another acceptable basis of
accounting
d. Any one of the above
3. Which of the following SMEs is
not exempted from the mandatory
adoption of the PFRS for SMEs?
a. Subsidiary of a parent reporting
under full PFRS
b. Branch office of foreign entity
reporting under full PFRS
c. Subsidiary that is mandated to
report under full PFRS
d. An entity with concrete plans to
conduct an initial public
offering within the next five
years
4. An entity that meets the definition
of an SME shall apply the PFRS
for SMEs for annual period
beginning
a. January 1, 2010
b. January 1, 2011
c. January 1, 2012
d. July 1, 2010
5. What is a “significant” change in
the size criteria that requires
transition to or from the PFRS for
SMEs?
a. 20% or more of the total assets
or total liabilities
b. 50% or more of the total assets
or total liabilities
c. 10% or more of the total assets
or total liabilities
d. No quantitative threshold can
be made because this is
dependent on the judgment of
management
6. Which of the following statements
is true concerning application of
the size criteria for SMEs?
I . The amount of total assets and
total liabilities shall be based on
the entity’s audited financial
statements on December 31, 2009
II . If an SME is using the fiscal
year as its accounting period, the
entity shall apply the size criteria
using the audited financial
statements of the immediately
preceding fiscal year
a. I only
b. II only
c. Both I and II
d. Neither I nor II
7. This is defined as the “first annual
financial statements in which an
SME adopts Philippine Financial
Reporting Standards for SMEs and
makes an explicit and unreserved
statement of compliance with
PFRS for SMEs”
a. PFRS financial statements
b. First financial statements that
conform with PFRS for SMEs
c. Opening statement of financial
CHAPTER 29. SMEs – QUALITIES
position
AND GENERAL FEATURES
d. First audited financial
statements
8. An SME that presents its first
financial statements that conform
with PFRS for SMEs is known as
a. An originating entity
b. A provisional presenter
c. A first-time adopter
d. An initial reporter
9. The statement of financial position
at the date of transition to PFRS for
SMEs is best described as
a. Provisional statement of
financial position
b. Closing statement of financial
position
c. Opening statement of financial
position
d. Originating statement of
financial position
10. In the opening statement of
financial position, the first-time
adopter of PFRS for SMEs shall do
all of the following, except
a. Recognize all assets and
liabilities whose recognition is
required by PFRS for SMEs
b. Recognize assets and liabilities
required by full PFRS but
PFRS for SMEs does not
require such recognition
c. Reclassify an item as one type
of asset, liability or equity
under the previous accounting
framework but a different type
of asset, liability or equity
under PFRS for SMEs
d. Apply PFRS for SMEs in
measuring all recognized assets
and liabilities
1. Fair presentation in accordance
with IFRS for SMEs is presumed
to result from
a. Compliance with IFRS for SMEs
by an entity that has public
accountability.
b. Compliance with IFRS for
SMEs, with additional disclosures
where necessary, by an entity that
has public accountability.
c. Compliance with IFRS for SMEs
by an entity that does not have
public accountability.
d. Compliance with IFRS for
SMEs, with additional disclosures
where necessary, by an entity that
does not have public
accountability.
2. An entity that is not publicly
accountable must make an explicit
and unreserved statement of
compliance with the IFRS for
SMEs
a. If the entity complies with all the
requirements of IFRS for SMEs.
b. If the entity complies with the
vast majority of the requirements
of IFRS for SMEs.
c. If the entity complies with the
USA GAAP.
 d. If the entity complies with full
IFRS.
3. A publicly accountable entity that
uses the PFRS for SMEs shall not
describe its financial statements as
conforming to PFRS for SMEs,
even if its required by law to
prepare its financial statements in
accordance with PFRS for SMEs.
Which of the following entities is
not covered by this prohibition?
a. An entity that holds assets in a
fiduciary capacity for a broad
group of outsiders as its
primary business
b. An entity that operates a
supermarket and a bank and
both are primary businesses
c. An entity that operates
primarily as a supermarket
chain and enters into insurance
contracts as the insurer with its
customers
d. An entity that holds assets in a
fiduciary capacity for a broad
group of outsiders for reasons
incidental to a primary business
4. Which if the following entities is a
going concern?
a. Management intends to
liquidate the entity
b. Management intends to cease
the entity’s operations
c. Management has no realistic
alternative but to cease the
entity’s operations
d. Must reclassify the current year
amounts only
5. When the classification of items in
the financial statements is changed,
the entity
a. Must not reclassify the
comparative amounts
b. Can choose whether to
reclassify the comparative
amounts
c. Must reclassify the comparative
amounts, unless it is
impracticable to do so
d. Must reclassify the current year
amounts only
6. Items of dissimilar nature or
function
a. Must always be presented
separately in financial
statements
b. Must not be presented
separately in financial
statements
c. Must be presented separately in
financial statements if those
items are material
d. Must be presented separately in
financial statements even if
those items are immaterial
7. Materiality depends on
a. The nature of the omission or
misstatement
b. The size of the omission or
misstatement
c. The size and nature of the
omission or misstatement
judged in the surrounding
circumstances
d. The judgment of management
8. When an SME changes the end of
its reporting period and presents
financial statements for a period
longer or shorter than one year, the
SME shall disclose
I . The period covered by the
financial statements
II . The reason for using a longer or
shorter period
III . The fact that amounts
presented in the financial
 statements are not entirely CHAPTER 30. SMEs – FINANCIAL
comparable STATEMENTS
1. 1. A complete set of financial
a. I and II only
statements for SMEs
b. I and III only
a. Contains only a statement of
c. II and III only
financial position and an income
d. I, II and III
statement.
b. Contains a statement of financial
9. An SME shall disclose
position, a single statement of
comparative information for
comprehensive income, a statement
a. The previous comparable
of changes in equity and a
period for all amounts reported
statement of cash flows.
b. The previous comparable
c. Is similar to that provided for by
period for all amounts reported
full PFRS.
and for all narrative and
d. Is similar to that provided for by
descriptive information
full PFRS except notes including
c. The previous comparable
accounting policies
period for all amounts reported
and for all narrative and
2. In accordance with IFRS for
descriptive information when it
SMEs, an entity must present
is relevant to an understanding
additional line items in a statement
of the current period’s financial
of financial position when
statements
a. Such presentation is relevant to
d. The previous two comparable
an understanding of the entity's
periods for all amounts
financial position.
reported
b. Such presentation is a generally
accepted practice in the sector in
10. A change in the presentation and
which the entity operates.
classification of items in financial
c. Such presentation is required by
statements is allowed
the tax authorities of the
I . When it is required by law
jurisdiction in which the entity
II. When a change in the
operates.
presentation and classification will
d. Such presentation is relevant to
demonstrate a more appropriate
an understanding of the entity's
presentation and classification.
financial position and financial
performance.
a. I only
b. II only
3. In accordance with IFRS for
c. Both I and II
SMEs, the financial statement that
d. Neither I nor II
presents the assets, liabilities and
equity at a point
in time
a. Must be titled the statement of
financial position
b. Must be titled the balance sheet
 c. Could be titled the statement of
financial position or the balance
sheet
d. Could be titled the statement of
financial position, the balance sheet
or any other title that is not
misleading
4. All of the following are considered
line items in the statement of
financial position of an SME,
except
a. Biological assets carried at fair
value
b. Investments in joint venture
c. Investment properties carried at
cost
d. Total of assets of disposal group
classified as held for sale
5. Which of the following must not be
included in the statement of
financial position of an SME?
a. Contingent asset
b. Property, plant and equipment
c. Intangible assets
d. Investment property at fair value
through profit or loss
6. Which of the following is required
to be shown as line item for an
SME but not under full IFRS?
a. Inventory
b. Property, plant and equipment
c. Financial asset
d. Investment in joint venture
CHAPTER 31. SMEs – NOTE TO
FINANCIAL STATEMENTS
7. All of the following are considered
line items in the statement of
financial position of an SME,
except
a. Provisions
b. Non-controlling interest
c. Equity attributable to the owners
of parent.
d. Revaluation surplus related to
intangible assets
8. Which of the following should be
recognized in the comprehensive
income of an SME?
a. Gain and loss from discontinued
operation
b. Gain and loss from translation of
a foreign operation
c. Gain on remeasuring equity
investment at FVOCI
d. Extraordinary gain and loss
9. The PFRS for SMEs mentions the
following components of other
comprehensive income, except
a. Gain and loss on hedging
instrument
b. Revaluation surplus of property,
plant and equipment
c. Actuarial gain and loss of
defined benefit plan
d. All of these are SME component
of OCI
10. Which component of OCI of an
SME is reclassified to profit or
loss?
a. Change in fair value of hedging
instrument
b. Revaluation surplus of property
plant and equipment
c. Translation gain and loss
d. Actuarial gain and loss
1. The cross-reference between each
line item in the financial statements
and any related information
disclosed in the notes to financial
statements
a. Is voluntary
b. Is mandatory
c. Depends on the industry
 d. Is either voluntary or
mandatory
2. Disclosure of information about
key sources of estimation
uncertainty
a. Is voluntary
b. Is mandatory
c. Is either voluntary or
mandatory
d. Depends on the industry
3. Adjusting events are those that
a. Provide evidence of conditions
that existed at the end or
reporting period
b. Are indicative of conditions
that arose after the end of
reporting period
c. Are favorable or unfavorable
and indicative of conditions
that arose after the end of
reporting period
d. Provide evidence of conditions
that existed after the date the
financial statements were
authorized for issue
4. Which of the following is not a
related party?
a. A director of the entity
b. The parent of the entity
c. A shareholder of the entity that
holds 1% stake in the entity
d. The son of the chief executive
officer of the entity
5. Which of the following is not
among the list of categories
specifies under the PFRS for SMEs
for purposes of separate related
party disclosure?
a. Entities with joint control or
significant influence over the
entity
b. The parent of the entity
c. An entity that has a common
director with the entity
d. Joint ventures in which the
entity is a venture
6. An entity 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
a. Neither I nor II
b. I only
c. II only
d. Both I and II
7. According to PFRS for SMEs,
which of the following is not
related party of an entity?
a. A shareholder of the entity
owning 30% of the ordinary
shares
b. An entity providing banking
facilities to the entity
c. An associate of the entity
d. Key management personnel of
the entity
8. The PFRS for SMEs requires
disclosure of compensation of key-
management personnel. Which of
the following would not be
considered “compensation” for this
purpose?
a. Short-term benefits
b. Share-based payments
c. Termination benefits
d. Reimbursement of out-of-
pocket expenses
9. The presentation of the notes to
financial statements in a systematic
manner
a. Is voluntary
 b. Is mandatory
c. Is mandatory, as far as
practicable
d. Depends on the industry
10. Disclosure of information about
judgments, apart from those
involving estimations, that
management has made in the
process of applying the accounting
policies and that have the most
significant effect on the amounts
recognized in the financial
statements
a. Is voluntary
b. Is mandatory
c. Is mandatory, as far as
practicable
d. Depends on the industry
CHAPTER 32. SMEs – ACCOUNTING
CHANGES
1. Which method is required for
reporting change in accounting
policy?
a. Cumulative effect approach
b. Retrospective approach
c. Prospective approach
d. Averaging approach
2. Which of the following is not
treated as a change in accounting
policy?
a. A change from FIFO inventory
valuation to average cost
b. A change from direct writeoff
method of recognizing bad debt
expense to allowance method
c. A change from cost model to fair
value model in measuring
investment property
d. A change to a new IFRS
requirement
3. Which statement about accounting
changes is correct?
a. Changes in accounting policy are
always handled in the current or
prospective period.
b. Prior year statements should be
restated for changes in accounting
estimate.
c. A change from expensing certain
costs to capitalizing such costs due
to a change in the period benefited
should be handled as a change in
accounting estimate.
d. Correction of a prior period error
should be an adjustment to current
year net income.
4. Prior years’ statements are not
restated for
a. Changes in accounting policy
b. Changes in estimates
c. Corrections of errors
d. All of these require retrospective
restatement
5. A change in accounting policy
shall be made when
I . Required by law
II . The change will result is more
relevant and faithfully represented
information about the financial
position, financial performance and
cash flows of the entity
a. I only
b. II only
c. Both I and II
d. Neither I nor II
6. Prior period errors are omissions
from and misstatements in the
financial statements for one or
more periods arising from a failure
to use or misuse of reliable
information that
 I . Was available when financial
statements for those periods were
authorized for issue
II . Could reasonably be expected
to have obtained and taken into
account in the preparation and
presentation of those financial
statements
a. I only
b. II only
c. Either I or II
d. Both I and II
7. Which of the following statements
in relation to prior period error is
true?
a. The effect of a change in
accounting estimate is
recognized retrospectively
b. To the extent practicable, an
entity must correct a prior
period error prospectively in
the first financial statements
authorized for issue after its
discovery
c. When an entity discovers an
error in its financial statements
of a prior period, it must
immediately withdraw those
financial statements and reissue
them with the error corrected
d. To the extent practicable, an
entity must correct a prior
period error retrospectively in
the first financial statements
authorized for issue after its
discovery
8. On March 25, 2013, the entity
discovered that as a result of a
computational error, depreciation
expense for 2012 is overstated. The
entity’s December 31, 2012
financial statements were
authorized for issue on March 1,
2013. The entity must
a. Reissue the December 31, 2012
financial statements with the
correct depreciation expense
b. Reduce depreciation for the
year ended December 31,2013
c. Restate the depreciation
expense reported for the year
ended December 31,2012 in the
comparative figures of the 2013
financial statements as
retrospective restatement of a
prior period error
d. Do nothing
9. On March 15,2013, the entity
discovered that as a result of a
computational error, depreciation
expense for 2012 is overstated. The
entity’s December 31, 2012
financial statements were
authorized for issue on April 1,
2013. The entity must
a. Correct the December 31, 2012
financial statements before
issuing them
b. Reduce the depreciation for the
year ended December 31, 2013
c. Restate the depreciation
expense reported for the year
ended December 31, 2012 in
the comparative figures of the
2013 financial statements as
retrospective restatement of a
prior period error
d. Do nothing
10. Which of the following statements
is true?
a. Financial statements of
subsequent periods need not
repeat the disclosures required
for a change in accounting
policy and the correction of a
prior period error
 b. Financial statements of
subsequent periods must repeat
the disclosures required for a
change in accounting policy
and the correction of a prior
period error
c. Financial statements of
subsequent periods must repeat
the disclosures required for a
change in accounting policy
and the correction of a prior
period error unless it its
impracticable to identify
d. Financial statements of
subsequent periods need not
repeat the disclosures required
for a change in accounting
policy but must repeat the
disclosures required for a
correction of prior error
CHAPTER 33. SMEs – INVENTORIES
AND REVENUE
1. Inventories are defined as
a. Assets held for sale in the
ordinary course of business, in the
process of production for such sale,
or in the form of materials or
supplies to be constituted in the
production process or in the
rendering of services.
b. Assets held for sale, in the
process of production, or in the
form of materials or supplies to be
consumed in the production
process.
c. Tangible assets held for sale in
the ordinary course of business, in
the process of production, or in the
form of materials or supplies to be
consumed in the production
process or in the rendering of
services.
d. All of these define inventories.
2. Inventories must be measured by
an SME at
a. Cost
b. The lower of cost and estimated
selling price less cost to complete
and dispose
c. The lower of cost and fair value
less cost to complete and dispose
d. The most recent purchase price
3. Under PFRS for SMEs, if the
estimated selling price less cost to
complete and sell is lower than cost
of inventory, the write-down is
recognized
a. As an impairment loss
b. As component of cost of goods
sold
c. Either as an impairment loss or a
component of cost of goods sold
d. Directly in retained earnings
4. Consumable supplies to be
consumed in the production
process are accounted for as
a. Inventory
b. Property, plant and equipment
c. Investment property
d. Intangible asset
5. A retailer of perishable produce
seeks to avoid obsolescence by
arranging the produce in such a
way that customers are most likely
to purchase the oldest inventory
first. The cost formula that is more
appropriate for the entity is
a. FIFO
b. LIFO
c. Weighted average
d. Specific identification
6. A property developer must classify
properties that it holds for sale in
the ordinary course of business as
a. Inventory
 b. Property, plant and equipment
c. Financial asset
d. Investment property
7. An SME may use techniques for
measuring cost of inventories if the
results approximate cost. Accepted
techniques include all of the
following, except
a. Standard cost
b. Retail method
c. Most recent purchase price
d. Gross profit method
8. An entity must assign the cost of
inventories by
a. The LIFO cost formula.
b. Specific identification of
individual costs for inventories that
are not ordinarily interchangeable.
c. Specific identification of
individual costs for inventories that
are ordinarily interchangeable.
d. The FIFO cost formula
CHAPTER 34. BASIC FINANCIAL
INSTRUMENTS
1. .All of the following are considered
basic financial instruments, except
a. Cash
b. Investment in bonds
c. Accounts receivable
d. Investment in convertible
preference shares
2. All of the following are considered
basic financial instruments, except
a. Demand and fixed-term deposits
b. Option and forward contracts
c. Loans from subsidiaries that are
due on demand
d. A debt instrument that becomes
payable on demand if the issuer
defaults on interest or principal
payment.
3. For a basic financial instrument
measured at cost less impairment,
the impairment loss is
a. The difference between the
carrying amount of the asset and
the best estimate of the amount that
would be received if the asset were
sold.
b. The difference between the
carrying amount of the asset and
the present value of estimated
future cash flows at market rate.
c. The difference between the
carrying amount and fair value of
the asset.
d. The decline in fair value of the
asset.
4. It is a financial instrument that
gives the holder the right to sell the
instrument back to the issuer or is
automatically redeemed or
purchased by the issuer on the
occurrence of a future uncertain
event.
a. Puttable instrument
b. Commercial paper
c. Commitment to receive a loan
d. Debt instrument
5. Which of the following statements
is true in relation to the subsequent
measurement of basic financial
instruments?
a. Basic debt instruments shall be
measured at amortized cost using
the effective interest method.
b. Investments in nonconvertible
nonputtable preference shares that
are publicly traded shall be
measured at fair value through
profit or loss.
c. Investments in nonputtable
ordinary shares that are not
publicly traded or whose fair value
 cannot be measured reliably
without undue cost or effort shall
be measured at cost less
impairment.
d. All of these statements are true
in relation to subsequent
measurement of basic financial
instruments.
6. Which of the following in an
SME's statement of financial
position is a financial asset or
financial liability?
a. A liability for an amount due to a
supplier for a past receipt of goods
b. An asset for a prepayment made
to a supplier for the rent of a
machine for two months
c. A liability for a fine for the late
payment of income tax by the
entity
d. All of these are financial
instruments
7. All of the following financial assets
are basic financial instruments of
an SME, except
a. Cash
b. Trade receivables
CHAPTER 35. SMEs – ASSOCIATE
c. A five percent holding in
AND INVESTMENT PROPERTY
nonputtable ordinary shares of
another entity.
d. A thirty percent holding in
nonputtable ordinary shares of
another entity where the investee is
classified as an associate of the
entity
8. All of the following financial
instruments are basic financial
instruments of an SME, except
a. Investments in nonconvertible
nonputtable preference shares
b. Financial instruments that meet
the definition of an entity's own
equity
c. A fixed-interest fixed-term loan
from a bank
d. Investments in nonputtable
ordinary shares
9. All of the following are considered
basic financial instruments of an
SME, except
a. Accounts payable in foreign
currency
b. Loan from associate due on
demand
c. Investment in convertible debt
d. A debt instrument with a fixed
rate of return
10. Which of the following statements
reflects the accounting for financial
instruments under IFRS for SMEs?
a. All financial instruments must be
measured at fair value
b. Reversal of an impairment loss
is not allowed
c. All amortized cost instruments
must be tested for impairment
d. All financial instruments must
be measured at amortized cost
1. An associate is
a. An entity over which the
investor has significant
b. An entity over which the
investor has joint control
c. An entity over which the
investor has significant influence
or joint control and that is not a
subsidiary.
d. An entity over which the
investor has significant influence
and that is neither a subsidiary nor
an interest in a joint venture.
2. An SME shall account for
investments in associate after
initial recognition using
a. Cost model
b. Equity method
c. Fair value model
d. Any one of the cost model,
equity method and fair value model
and using the same accounting
policy for all investments in
associates
3. Which statement is true in relation
to the initial measurement of
investment in associate?
a. Under the cost model, the
investment in associate is initially
measured at the transaction price
plus transaction cost.
b. Under the equity method, the
investment in associate is initially
measured at the transaction price
plus transaction cost.
c. Under the fair value model, the
investment in associate is initially
measured at the transaction price
excluding transaction cost.
d. All of these statements are true.
4. Under the cost model, the
investment in associate is
subsequently measured at
a. Cost
b. Cost less accumulated
impairment loss
c. Fair value
d. Fair value less cost of disposal
5. Under the fair value model, the
investment in associate is
subsequently measured at
a. Cost less accumulated
impairment loss
b. Equity
c. Fair value less cost of disposal
d. Fair value
6. Investments in associates must be
tested for impairment if the entity
uses
a. The cost model, equity method
or fair value model
b. The cost model or the equity
method
c. The cost model or the fair value
model
d. The equity method or the fair
value model
7. An SME owns 30% of the ordinary
shares that carry voting rights at a
general meeting of shareholders. In
the absence of evidence to the
contrary, the SME
a. Has significant influence over
the investee.
b. Has significant influence over
the investee, provided that it does
not have joint control over the
investee.
c. Has significant influence over
the investee, provided that it does
not have control over the investee.
d. Has significant influence over
the investee, provided that it does
not have control or joint control
over the investee.
8. Which of the scenarios would not
lead to the presumption that an
entity has significant influence?
a. Holding directly 20% or more of
the voting power of the investee.
b. Holding indirectly, through a
subsidiary, 20% or more of the
voting power of the investee.
c. Holding indirectly, through a
joint venture, 20% or more of the
voting power of the investee.
d. Holding directly 10% of voting
power of the investee and holding
indirectly, through a subsidiary,
 10% of the voting power of the
investee.
9. Investment property is defined as
a. Land or a building, or part of a
building, or both held for sale in
the ordinary course of business.
b. Land or a building, or part of a
building, or both held to earn
rentals only.
c. Land or a building, or part of a
building, or both held for capital
appreciation only.
d. Land or a building, or part of a
building, or both held to earn
rentals or for capital appreciation
or both.
10. An SME operates a bed and
breakfast from a building it owns.
The SME also provides the guests
with other services including
housekeeping, satellite television
and broadband internet access. The
daily room rental is inclusive of
these services. Furthermore, upon
request, the entity conducts tours of
the surrounding area for the guests.
Tour services are charged for a fee
separately. The SME should
account for the building as
a. Inventory
b. Investment property
c. Property, plant and equipment
d. Basic financial instrument
11. An SME must measure tan
investment property after initial
recognition
a. At either fair value or the cost-
depreciation impairment model and
using same accounting policy for
all investment property.
b. At either fair value or the cost-
depreciation impairment model
elected item by item.
c. At fair value.
d. At fair value, for property whose
fair value can be measured reliably
without undue cost or effort on an
ongoing basis and the cost-
depreciation impairment model for
all other investment property.
12. A building is held by a subsidiary
to earn rentals under an operating
lease from the parent. The Parent
manufactures products in the
rented building. The fair value of
the building can be measured
reliably without undue cost or
effort on an ongoing basis. What is
the accounting treatment of the
building?
a. Accounted for as property, plant
and equipment by the subsidiary
and an investment property by the
group
b. Accounted for as property, plant
and equipment
c. Accounted for as investment
property
d. Accounted for as an investment
property by the subsidiary and
property, plant and equipment by
the group
13. What is the presentation of
investment property accounted for
using the cost model?
a. Property, plant and equipment
b. Separate class of property, plant
and equipment
c. Investment property with no
distinction
d. Separate line item as investment
property at cost less accumulated
depreciation and impairment
CHAPTER 36. SMEs – PROPERTY,
PLANT AND EQUIPMENT and 4. An entity shall measure
GOVERNMENT GRANT AND government grant at
BORROWING COST a. The amount of cash received
b. The amount of cash received or
1. .What is the definition of property,
receivable
plant and equipment
c. The fair value of the asset
a. Tangible assets held for sale in
received or receivable
the ordinary course of business.
d. NIL
b. Tangible assets held to earn
rentals or for capital appreciation
5. An SME must recognize a
or both.
government grant that does not
c. Tangible assets held for use in
impose specified future
the production or supply of goods
performance conditions
or services and expected to be used
a. In income when the grant
during more than one reporting
proceeds are receivable.
period.
b. In income over the periods
d. Tangible assets held for use in
necessary to match it with the
the production or supply of goods
related costs.
or services, for rental to others, or
c. By applying an approach
for administrative purposes and
depending upon the accounting
expected to be used during more
policy adopted by the entity.
than one reporting period.
d. In retained earnings.
2. An SME shall measure property,
6. An SME must recognize a
plant and equipment after initial
government grant that imposes
recognition using
specified future performance
a. Cost model
conditions
b. Revaluation model
a. In income when the grant
c. Cost model and fair value model
proceeds are receivable.
d. Cost model and revaluation
b. In income over the periods
model
necessary to match it with the
related costs.
3. What depreciation method is most
c. In income only when the
appropriate for the significant part
performance conditions are met.
of an aircraft?
d. In other comprehensive income.
a. Straight line method for all parts
of the aircraft.
7. An SME must recognize
b. Production method based on air
government grant received before
miles flown for the jet engine and
the income recognition criteria are
straight line method for all other
satisfied
parts of the aircrafts
a. In income when the grant
c. Production method based on air
proceeds are received
miles flown for all parts of the
b. In equity
aircraft.
c. As a liability
d. Diminishing balance method for
all parts of the aircraft.
 d. As component of other
comprehensive income
8. Borrowing costs do not include
a. Interest incurred on bank
overdraft
b. Incremental administrative fee
incurred in connection with loan
c. Finance charge related to finance
lease
d. Dividends declared to equity
holders
9. An SME must recognize all
borrowing costs
a. As an expense when incurred.
b. As capitalizable when directly
attributable to a qualifying asset.
c. In retained earnings.
d. In other comprehensive income.
10. An SME shall capitalize all of the
following as cost of property, plant
and equipment, except
a. Transport cost
b. Loan raising cost
c. Installation cost
d. Nonrefundable purchase tax
CHAPTER 37. SMEs – INTANGIBLE
ASSETS
1. An SME must measure intangible
assets after initial recognition
a. At fair value.
b. At fair value or at cost less any
accumulated amortization and any
accumulated impairment losses for
all items in the same class of
intangible asset.
c. At fair value or at cost less any
accumulated amortization and any
accumulated impairment losses on
an item by item basis.
d. At cost less any accumulated
amortization and any accumulated
impairment loss.
2. The useful life of the intangible
asset of an SME is considered to be
a. Either finite or indefinite
b. Finite
c. Indefinite
d. Ten years
3. An SME acquired a trademark that
has a remaining legal life of five
years but is renewable every ten
years at little cost. The useful life
of the trademark is
a. Five years
b. Based on the best estimate of
management but not exceeding 10
years
c. Fifteen years
d. Indefinite
4. Under PFRS for SMEs, the cost of
an intangible asset at initial
recognition is measured at fair
value when
a. It is internally generated.
b. It is acquired as part of business
combination.
c. It is acquired by way of
government grant.
d. It is acquired as part of business
combination or acquired by way of
government grant.
5. . What is the accounting for
research and development
a. All research and development
costs are capitalized.
b. All research and development
costs are expensed
c. All research costs are expensed
when incurred and all development
costs are capitalized when certain
criteria are met.
 d. All research costs are capitalized
when certain criteria are met and
all development costs are expensed
when incurred.
6. 6. On January 1, 2010, an SME (a
publisher) acquired a competitor's
publishing title at certain amount.
On January 1, 2013, the entity
commenced publishing using the
new title. On December 31, 2017,
the entity decided to sell the
publishing title and took actions
that make the sale within 12
months highly probable. The
publishing title was sold on
December 31, 2018. The entity
should account for the publishing
title as
a. An intangible asset from January
1, 2010 to December 31, 2017 and
as an inventory from December 31,
2017 to the date of disposal on
December 31, 2018.
b. An item of inventory from
January 1, 2010 to the date of
disposal on December 31, 2018.
c. An intangible asset from January
1, 2010 to the date of disposal on
December 31, 2018.
d. An intangible asset from January
1, 2010 to December 31, 2017 and
as noncurrent asset held for sale
from December 31, 2017 to
December 31, 2018
CHAPTER 38. SMEs – IMPAIRMENT
OF ASSETS
1. Which of the following statements
best describes the term
“impairment loss”?
a. The removal of an asset from
an entity’s statement of
financial position
b. The amount by which the
carrying amount of an asset
exceeds its recoverable amount
c. The systematic allocation of an
asset’s cost less residual value
over its useful life
d. The amount by which the
recoverable amount of an asset
exceeds its carrying amount
2. What is the recoverable amount of
an asset?
a. Fair value less cost to sell
b. Value in use
c. Fair value less cost to sell or
value in use, whichever is
higher
d. Fair value less cost to sell or
value in use, whichever is
lower
3. If the fair value less cost to sell
cannot be determined
a. The asset is not impaired
b. The recoverable amount is the
value in use
c. The net realizable value is used
d. The carrying amount of the
asset remains the same
4. If the asset is to be disposed of
a. The recoverable amount is the
fair value less cost to sell
b. The recoverable amount is the
value in use
c. The asset is not impaired
d. The recoverable amount is the
carrying amount
5. Which of the following is not
relevant in determining as asset’s
“value in use”?
a. The expected future cash flows
from the asset
b. The carrying amount of the
asset
 c. Expectation about possible
variation in the amount and
timing of future cash flows
d. The time value of money
CHAPTER 39. PROVISIONS AND
CONTINGENCIES
1. A provision is
I . A liability of uncertain timing or
amount
II . A possible obligation as a result
of past event that is of uncertain
timing or amount
III . An adjustment to the carrying
amount of an asset attributable to
impairment or uncollectibility
a. I only
b. II only
c. III only
d. I and II only
2. An SME shall be recognize a
provision only when
I . The entity has a present
obligation as a result of a past
event
II . It is probable that the entity will
be required to transfer economic
benefits in settlement
III . The amount of the obligation
can be estimated reliably
a. I only
b. I and II only
c. I and III only
d. I, II and III
3. An SME measures a provision at
the best estimate of the amount
required to settle the obligation at
the reporting date. When the
provision involves a large
population of items, the estimate of
the amount
a. Reflects the weighting of all
possible outcomes by their
associated probabilities
b. Is determined as the individual
most likely outcome
c. May be the individual most
likely outcome adjusted for the
effect of other possible
outcomes
d. Midpoint of the possible
outcomes
4. An SME measures a provision at
the best estimate of the amount
required to settle the obligation at
the reporting date. When the
provision arises from a single
obligation, the estimate of the
amount
a. Reflects the weighting of all
possible outcomes by their
associated probabilities
b. Is determined as the individual
most likely outcome
c. Is the individual most likely
outcome adjusted for the effect
of other possible outcomes
d. Midpoint of the possible
outcomes
5. Which of the following is not a
contingent liability?
a. A possible but uncertain
obligation
b. A present obligation that is not
probable but measurable
c. A present obligation that is
probable but not measurable
d. A liability of uncertain timing
or amount
CHAPTER 40. SMEs- LEASES a. I only
b. II only
1. Which of the following
c. Either I or II
arrangements is accounted for in
d. Neither I nor II
accordance with PFRS for SMEs
on leases?
4. A lessee that paid a certain amount
a. Licensing agreements for such
to a broker for arranging a finance
items as motion picture films,
lease must
video recordings, plays,
a. Account for the fee as an
manuscripts patents and
expense in the period in which the
copyrights.
fee was incurred.
b. Agreements that transfer the
b. Include the fee in the cost of the
right to use assets even though
leased asset,
substantial services by the lessor
c. Defer recognition of the expense
may be called for in connection
and recognize the fee on the
with the operation or maintenance
straight line method over the lease
of such assets.
term.
c. Leases to explore for minerals,
d. Include the fee in the principal
oil, natural gas and similar non-
lease liability.
regenerative resources.
d. Onerous operating leases.
5. An SME enters as lessee into a
two-year lease in respect of a
2. An SME entered, as lessee, into a
machine that has an economic life
five-day non-cancelable lease of a
of four years with nil residual
motor vehicle that has an economic
value. Rent per year is payable
life of five years and nil residual
yearly in advance. The lessee holds
value. Lease payments are on a
an option to acquire the machine
daily basis. At the end of the lease
for a nominal amount. The option
term, the lessee returns the motor
is exercisable at the end of the
vehicle to the lessor. The lease is
lease term when the fair value of
accounted for
the machine is expected to be very
a. As a finance lease
much higher than the nominal
b. As an operating lease
amount. At the commencement of
c. Either as a finance lease or an
the lease term, the lessor should
operating lease
d. Neither as a finance lease nor an
I. Derecognize the machine and
operating lease
recognize a lease receivable.
Il. Continue to recognize the
3. Depreciation of a leased machine is
carrying amount of the machine
I. Recognized by the lessee where
subject to the lease as an item of
the lessor and the lessee have
property, plant and equipment.
classified the lease as finance lease.
Il. Recognized by the lessor where
a. I only
the lessor and the lessee have
b. Il only
classified the lease as an operating
c. Both I and II
lease.
d. Neither I nor II
CHAPTER 41. SMEs – EMPLOYEE redundancy a lump sum equal to
BENEFITS twice their gross annual salary. The
obligation to pay employees that
1. Employee benefits are all forms of
choose voluntary redundancy is
consideration given by an entity in
a. A short-term employee benefit
exchange for service rendered by
b. A postemployment benefit
employees, including directors and
c. Other long-term employee
management and include all of the
benefit
following, except
d. A termination benefit
a. Short-term employee benefits
b. Postemployment benefits
5. An entity reimburse 50% of past
c. Termination benefits
employee’s postemployment
d. Dividend payments to
medical cost if the employee
shareholders
provides 25 years of service, or
more, to the entity. The obligation
2. An entity’s employees are each
to pay 50% of qualifying past
entitled to 20 days of paid holiday
employees postemployment
leave per calendar year. Unused
medical cost is
holiday leave cannot be carried
a. A short-term employee benefit
forward and does not vest. The
b. A defined postemployment
holiday leave is
benefit
a. A short-term employee benefit
c. A defined contribution
b. A postemployment benefit
postemployment benefit
c. Other long-term employee
d. Other long-term employee
benefit
benefit
d. A termination benefit

3. An entity’s employees are entitled CHAPTER 42. SMEs – INCOME TAX

to 10 days holiday leave per
1. Income tax consists of
calendar year. Unused holiday
I . Domestic taxes that are based on
leave may be carried forward until
taxable profits
the employee leaves the
II . Foreign taxes that are based on
employment of the entity, at which
taxable profits
time the entity will pay the
III . Taxes that are payable by a
employee for all unused holiday
subsidiary, associate or joint
leave. The holiday lease is
venture on distributions to the
a. A short-term employee benefit
reporting entity
b. A postemployment benefit
c. Other long-term employee
a. I only
benefit
b. I and II only
d. A termination benefit
c. I and III only
d. I, II and III
4. An entity made a public
announcement of its commitment
2. What is the correct treatment
to a voluntary redundancy plan.
regarding discounting of income
The entity has an obligation to pay
tax assets and liabilities?
employees that choose voluntary
 a. Current tax assets and liabilities
are discounted, Deferred tax
assets and liabilities are not
discounted
b. Current tax assets and liabilities
are not discounted, Deferred
tax assets and liabilities are
discounted
c. Current and deferred tax assets
and liabilities are discounted
d. Current and deferred tax assets
and liabilities are not
discounted
3. An SME shall offset current tax
asset and current tax liability, or
offset deferred tax asset and
deferred tax liability
I . When the entity has a legally
enforceable right to set off the
amounts
II . When the entity intends either
to settle on a net basis or to realize
the asset and settle the liability
simultaneously
a. I only
b. II only
c. Either I or II
d. Both I and II
4. If the recovery of the asset through
sale will increase taxable profit, the
asset’s tax basis is equal to which
CHAPTER 43. SMEs – EQUITY AND
of the following?
SHARE-BASED PAYMENT
a. The amount that would have
been deductible in arriving at
taxable profit if the carrying
amount of the asset had been
recovered through use at the
end of reporting period
b. The amount that would have
been deductible in arriving at
taxable profit if the carrying
amount of the asset had been
recovered through sale at the
end of reporting period
c. The amount that would have
been deductible in arriving at
the taxable profit if the carrying
amount of the asset had been
recovered through either use or
sale, or a combination of use or
sale at the end of reporting
period
d. NIL
5. Which of the following items
should be recognized by an SME?
I . A deferred tax asset or liability
for temporary differences
associated with unremitted
earnings from foreign subsidiaries,
branches, associates and joint
ventures to the extent that the
investment is essentially permanent
in duration
II . A deferred tax liability for
temporary difference associated
with the initial recognition of
goodwill
a. I only
b. II only
c. Both I and II
d. Neither I nor II
1. What is the formula in computing
equity?
a. Investments by owners plus
retained earnings minus
distributions to owners
b. Investments by owners plus
accumulated losses minus
distributions to owners
c. Investments by owners
 d. Investment by owners plus
retained earnings plus distribution
to owners
2. What is the measurement of equity
shares issued?
a. Fair value of cash or other
resources received or receivable
b. Fair value of cash or other
resources received or receivable
plus direct issue costs
c. Fair value of cash or other
resources received or receivable
less direct issue costs
d. Fair value of equity shares
issued less direct issue costs
3. An entity shall account for the
transaction cost of an equity
transaction as
a. An expense immediately
b. A deduction from equity
c. An addition to equity
d. A deduction from retained
earnings
4. An entity shall reduce equity for
a. Amount earned through
profitable operations and retained
for use in operations.
b. Share split
c. Amount of distributions to
owners.
d. Amount of bonus issue.
5. When entity distributes noncash
asset as dividend to the owners. the
entity shall
a. Not recognize liability
b. Recognize a liability equal to the
fair value of the asset to be
distributed.
c. Recognize a liability equal to the
carrying amount of the asset to be
distributed.
d. Do nothing.
6. Which statement is true in relation
to issue of shares?
a. If the equity instruments are
issued before the entity receives
cash, the entity shall present the
amount receivable as an offset to
equity and not as an asset.
b. If the entity receives cash before
the equity instruments are issued
and the entity cannot be required to
repay the cash, the entity shall
recognize an increase in equity to
the extent of the cash received.
c. To the extent that the equity
instruments have been subscribed
but not issued and the entity has
not yet received the cash, the entity
shall not recognize an increase in
equity.
d. All of these statements are true.
7. An entity shall recognize the goods
or services received in a share-
based payment transaction
a. Only when the share-based
payment is cash-settled
b. When the entity receives the
goods or services.
c. Only when the vesting period
ends.
d. Only on the date that the equity
instruments are granted.
8. If share options granted to
employees under a share-based
payment transaction vest
immediately
a. The entity should defer
recognition of the services
rendered by the employees.
b. The entity should record a
liability.
c. The employees are
unconditionally entitled to the
share-based payments.
 d. The entity should account for the
services when these are rendered
by the employees during the
vesting period
9. For equity-settled share-based
payment transactions, an entity
shall measure the goods or services
received
a. Always at the fair value of goods
and services received.
b. Always at the fair value of the
equity instruments issued.
c. At the cost of goods and services
provided by employees.
d. At the fair value of the goods or
services received unless the fair
value cannot be estimated reliably.
10. In measuring the fair value of
shares and the related goods or
services received, an entity
a. Must always use observable
market price of the entity's own
share.
b. Uses observable market price
but only for nonemployee share-
based transaction.
c. Uses price established by the
entity's directors for that type of
CHAPTER 44. SMEs – SPECIALIZED
share-based transaction.
ACTIVITIES HYPERINFLATION
d. Uses observable market price
and other measures according to a
measurement hierarchy.
11. For a cash-settled share-based
payment transaction for employee
services, the entity should
a. Recognize in profit or loss the
cash paid out to the employees in
the final year.
b. Recognize in profit or loss the
cash paid out to the employees
over the vesting period.
c. Recognize in profit or loss the
estimate of the cash to be paid out
to the employees over the vesting
period.
d. Recognize in profit or loss the
grant date fair value of the liability
over the vesting period.
12. For share-based payment
transaction offering a choice of
settling the transaction in cash or
by transfer of equity instrument,
the entity should account for the
transaction as
a. Cash-settled share-based
payment transaction.
b. Cash-settled share-based
payment transaction unless the
entity has a past practice of settling
by issuing equity instrument.
c. Cash-settled share-based
payment transaction unless the
option to settle in cash has no
commercial substance.
d. Cash-settled share-based
payment transaction unless the
entity has a past practice of settling
by issuing equity instrument or the
option to settle in cash has no
commercial substance.
1. Specialized activities of an SME
include all, except
a. Agriculture
b. Service concession
c. Exploration and evaluation of
mineral resources
d. Insurance
2. The exploration expenditure
incurred by an SME in exploration
and evaluation activities is
classified as
a. Tangible asset as an item of
property, plant and equipment
 b. Intangible asset
c. Either tangible asset or
intangible asset
d. Neither tangible asset nor
intangible asset
3. An SME shall measure
subsequently the intangible
exploration and evaluation asset
using
a. Cost model
b. Fair value model
c. Either cost model or fair value
model
d. Revaluation model
4. On the part of the private operator,
the infrastructure asset shall be
recognized as
a. Property, Plant and Equipment
b. Financial Asset
c. Intangible asset
d. Either financial asset or
intangible asset
5. The infrastructure asset in a service
concession recognized as financial
asset shall be measured at
CHAPTER 45. SMEs – ADVANCE
a. Amortized cost
ACCOUNTING
b. Fair value through profit or loss
c. Fair value through other
comprehensive income
d. Amortized cost, fair value
through profit or loss, or fair value
through other comprehensive
income
6. Which is not addressed in IFRS for
SMEs?
a. Earnings per share
b. Provisions and contingencies
c. Liabilities and equity
d. Revenue
7. Which accounting treatment is not
allowed under the IFRS for SMEs?
a. Weighted average method for
inventory
b. Equity method for associates
c. Revaluation model for intangible
assets
d. Temporary difference approach
for deferred taxation
8. Which of the following is not
simplification of an accounting
practice allowed by the IFRS for
SMEs?
a. Goodwill and other indefinite
life intangible asset are amortized
over the useful life.
b. SMEs do not have to
derecognize a financial asset when
the entity transfers to another party
substantially all of the risks and
rewards of the asset.
c. A simplified calculation is
allowed if measurement of defined
benefit obligation involves undue
cost or effort.
d. The cost model is permitted for
investment in associate.
1. It is a contractual arrangement
whereby two or more parties
undertake an economic activity
which is subject to joint control
a. Joint venture
b. Partnership
c. Joint operation
d. Joint undertaking
2. The party to a joint venture who
has a joint control over the joint
venture is technically known as
a. Investor
b. Venturer
c. Partner
d. Either investor or venture
 a. Jointly controlled operation
b. Jointly controlled asset
3. It is a joint venture that involves
c. Jointly controlled entity
the establishment of a corporation,
d. Jointly controlled undertaking
partnership or other entity in which
each venture has an interest
ANSWER KEY
CH 24.
1. C 8. A 15. C
2. B 9. B 16. C
3. C 10. C 17. A
4. D 11. D 18. D
5. B 12. C 19. C
6. D 13. A 20. A
7. B 14. C
CH 25.
1. A 6. A 11. A
2. B 7. C 12. D
3. D 8. C 13. A
4. D 9. A 14. D
5. A 10. A 15. D

CH 26.
1. D 6. C 11. D
2. A 7. A 12. A
3. B 8. B 13. B
4. A 9. C 14. D
5. C 10. B 15. B
CH 27.
1. D 5. A 9. B
2. D 6. D 10. A
3. C 7. D
4. B 8. C
CH 28.
1. D 4. A 7. B
2. D 5. A 8. C
3. D 6. C 9. C
10. B
 CH 29
1. D 5. C 9. C
2. A 6. C 10. B
3. D 7. C
4. D 8. D
CH 30.
1. C 5. A 9. D
2. A 6. D 10. A
3. D 7. D
4. D 8. B
CH 31.
1. B 4. C 7. B
2. B 5. C 8. D
3. A 6. C
CH. 32
1. B 5. B 9. A
2. B 6. D 10. A
3. C 7. D
4. B 8. C
CH. 33
1. A 4. A 7. D
2. B 5. A 8. B
3. A 6. A
CH. 34
1. D 5. D 9. C
2. B 6. A 10. C
3. A 7. D
4. A 8. B
CH. 35
1. D 5. D 9. D
2. D 6. B 10. C
3. D 7. D 11. D
4. B 8. C 12. D
13. D
CH. 36
1. D 5. A 9. A
2. D 6. C 10. B
3. B 7. C
4. C 8. D
CH. 37
1. D 3. D 5. B
2. B 4. D 6. C
CH. 38 CH. 39 CH. 40
1. B 1. A 1. B
2. C 2. D 2. B
3. B 3. A 3. C
4. A 4. C 4. B
5. B 5. D 5. A

CH. 41 CH. 42
1. D 1. D
2. A 2. D
3. C 3. D
4. D 4. B
5. B 5. D
CH. 43 12. D
1. A
2. C CH. 44
3. B
1. D
4. C
2. C
5. B
3. A
6. D
4. D
7. B
5. D
8. C
6. A
9. D
7. C
10. D
8. B
11. C

CH. 45
1. A
2. B
3. C