1. The overall objective of financial reporting is to d.

Earned
provide information
a. about an entity's assets, liabilities, and equity.
b. about an entity's financial performance during
a period.
c. that is useful to primary users in making
economic decisions about providing resources
to the entity.
d. that allows owners to assess management's
performance.
10. The primary objective of financial reporting is to
provide
a. information about economic resources, claims
to these resources, and changes in them.
b. information useful for investment and credit
decisions.
c. information useful in predicting future cash
flows.
d. All of these

2. According to the Conceptual Framework, physical 11. What is the basic purpose of accounting?
count of inventory is an example of a. To provide quantitative financial information
a. direct verification about economic activities.
b. indirect verification b. To provide all information that users need in
c. timeliness making economic decisions
d. relevance c. To provide qualitative financial information
about economic activities intended to be useful
3. All of the following are events considered as in making economic decisions.
exchange or reciprocal transfer, except d. To provide quantitative financial information
a. purchase of investment in equity securities about economic activities intended to be useful
b. sale of equipment for non-interest bearing in making economic decisions.
note
c. subscription of the entity’s own equity 12. Which of the following statements about
instrument (i.e., contributions by owners) materiality is not correct?
d. exchange of a note payable for an account a. An item must make a difference; otherwise, it
payable need not be reported.
e. borrowing of money from a bank b. Materiality is affected by an item’s relative size
and/or importance.
4. The assumption that a business enterprise will not c. An item is material if its inclusion or omission
be sold or liquidated in the near future is known as would influence or change the judgment of a
the reasonable person.
a. economic entity assumption d. All of these are correct statements about
b. monetary unit assumption materiality.
c. conservatism assumption
d. going concern 13. In making an economic decision, an investor needs
information on the amounts of an entity’s
5. This comprises all “non-owner changes in equity.” economic resources and claims to those resources.
It excludes owner changes in equity, such as That investor would most likely refer to which of
subscription, issuance, and reacquisition of share the following financial statements?
capital and declaration of dividends. a. Statement of financial position
a. Other comprehensive income b. Statement of comprehensive income
b. Change in equity c. Statement of cash flow
c. Total comprehensive income d. Statement of changes in equity
d. Profit or loss
14. Decision makers vary widely in the types of
6. Which of the following financial statements would decisions they make, the methods of decision
be dated as at a certain date? making they employ, the information they already
a. Statement of financial position possess or can obtain from other sources, and their
b. Statement of profit or loss and other ability to process information. Consequently, for
comprehensive income information to be useful there must be a linkage
c. Statement of cash flows between these users and the decisions they make.
d. All of these This link is
a. Relevance.
7. These are the end product of the financial reporting b. Reliability
process and the means by which information c. Understandability
gathered and processed is periodically d. Materiality
communicated to users.
a. Financial reporting 15. Who is responsible for the preparation and the fair
b. Financial Statements presentation of an entity’s financial statements in
c. Financial products accordance with the PFRSs?
d. Accounting statements a. Any accountant
b. Certified Public Accountant
8. Which of the following is not one of the general c. Auditor
features of financial statements under PAS 1? d. Management
a. Fair presentation and compliance with PFRSs
b. Going concern 16. It refers to the process of incorporating the effects
c. Cash basis of an accountable event in the statement of
d. Materiality and aggregation financial position or the statement of profit or loss
and other comprehensive income through a journal
9. When products or other assets are exchanged for entry.
cash or claims for cash, they are said to be a. Realization
a. Allocated b. Recognition
b. Realized c. Derecognition
c. Recognized d. Posting
 b. Materiality constraint
17. A Standard sometimes contains requirements that c. Consistency characteristics
depart from the Conceptual Framework. In such d. Monetary unit assumption
cases, 25. Which of the following is most likely to result in the
a. the requirements of the Conceptual recognition of a liability?
Framework will prevail over those of the a. Customers become entitled to rebates for their
Standard. past purchases.
b. the departure is explained in the ‘Basis for b. Intention to acquire inventories in a future
Conclusions’ on that Standard. period.
c. the entity’s management shall formulate its c. Entering into a purchase contract for future
own accounting policy and disregards both the delivery.
requirements of the Conceptual Framework d. Agreeing on an irrevocable future commitment
and the Standard. that is not burdensome at present.
d. A Standard should never depart from the
Conceptual Framework. 26. Which of the following is not an element that is
directly related to the measurement of an entity’s
18. A soundly developed conceptual framework of financial position?
concepts and objectives should a. Assets
a. increase financial statement users' b. Liabilities
understanding of and confidence in financial c. Equity
reporting. d. Income
b. enhance comparability among companies'
financial statements. 27. All of the following are events considered
c. allow new and emerging practical problems to nonreciprocal transfers, except
be more quickly soluble. a. declaration of cash dividends
d. All of these b. declaration of stock dividends
c. payment of accounts payable
19. Which of the following statements correctly refer to d. imposition of fines
the accounting process? e. theft

28. The two primary qualities that make accounting

information useful for decision making are
a. comparability and consistency.
b. materiality and timeliness.
c. relevance and reliability.
d. faithful representation and relevance.

a. I, II, III, IV and V 29. Asset measurements in conventional financial

b. I, II, III and IV statements
c. IV a. are confined to historical cost.
d. III and IV b. are confined to historical cost and current cost.
c. reflect several financial attributes.
20. The quality of information that gives assurance that d. do not reflect output values.
it is reasonably free of error and bias and provides
a true, correct and complete depiction of what it 30.  Information is considered relevant when it
purports to represent is a. can be depended on to represent the economic
a. Relevance conditions and events that it is intended to
b. Faithful representation represent.
c. Verifiability b. is capable of making a difference in a decision.
d. Neutrality c. is understandable by reasonably informed
users of accounting information.
21. Valuing assets at their liquidation values rather d. is verifiable and neutral.
than their cost is inconsistent with the
a. Periodicity assumption. 31. The Filipino adage “Aanhin mo pa ang damo pag
b. Matching principle patay na ang kabayo” relates to which of the
c. Materiality constraint following qualitative characteristics?
d. Historical cost principle a. Relevance
b. Timeliness
22. Accounting provides which type of information? c. Faithful representation
a. Quantitative d. Comparability
b. Financial information
c. Qualitative 32. During the lifetime of an entity, accountants
d. All of these produce financial statements at arbitrary points in
time in accordance with which basic accounting
23. Information is neutral if it concept?
a. provides benefits which are at least equal to a. Cost/benefit constraint
the costs of its preparation. b. Periodicity assumption
b. can be compared with similar information. c. Conservatism constraint
c. has no impact on a decision maker. d. Matching principle
d. is free from bias toward a predetermined
result. 33. When information about two different entities has
been prepared and presented in a similar manner,
24. What accounting concept justifies the use of the information exhibits the characteristic of
accruals and deferrals? a. Relevance
a. Going concern assumption b. Reliability
 c. Consistency
d. Comparability
34. 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.
35. Which of the following is considered a qualitative
factor in making materiality judgments?
a. The context of an item in relation to the
current economic state of the environment
where the entity operates.
b. 10% of profit or loss, in absolute terms
c. 5% of total revenues
d. 1% of total assets
36. Materiality judgment is least likely to be applied in
which of the following?
a. In determining whether an item warrants
separate presentation in the financial
statements or is to be aggregated with other
items
b. In determining whether information could
influence the decisions of users, and therefore,
must be presented in the financial statements
c. In determining whether the cost of processing
and communicating information exceeds the
benefits expected to be derived from it
d. Whether additional information needs to be
provided, including the level of detail and
conciseness of the information’s presentation
37. 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. Auditor
c. Management
d. Regulatory body
38. These are events involving an entity and another
external party.
a. External events
b. Internal events
c. Transactions
d. Life events
39. Which of the following statements is true?
a. In current practice, accounting provides only
quantitative information that is useful in
making economic decisions.
b. External users are those who do not have the
authority to demand financial reports tailored
to their specific needs.
c. 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.
d. The practice of accountancy in the Philippines
is regulated under R.A. 9892
40. 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. 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.
c. 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.
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%
41. 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.
42. Which of the following is considered a pervasive
constraint by the Conceptual Framework?
a. Cost constraint
b. Verifiability
c. Conservatism
d. Cost restraint
43. It is the accounting process of assigning numbers,
commonly in monetary terms, to the economic
transactions and events.
a. Analyzing
b. Measuring
c. Classifying
d. Interpreting
44. 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 resource has no use to the entity but it can
be exchanged for another resource with
another party.
c. The entity does not intend to sell or use the
resource but instead distribute it to the owners
as dividends.
d. The economic benefits from the resource were
already consumed by the entity.

45. The revised Conceptual Framework defines an
asset as
a. 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.
b. 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.
c. a physical object that can produce economic
benefits for the entity.
d. All of these.
46. 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 common
needs.
c. who do not have the authority to demand
financial reports tailored to their specific
needs.
d. who belong to countries other than the
domicile country of the reporting entity
47. Accounting has been given various definitions,
which of the following is not one of those
definitions?
a. 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.
b. 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.
c. Accounting is the process of identifying,
measuring, and communicating economic
information to permit informed judgment and
decisions by users of information.
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.
48. 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. General purpose financial statements are those
statements that cater to the common and
specific needs of a wide range of external
users.
c. All events and transactions of an entity are
recognized in the books of accounts.
d. The basic purpose of accounting is to provide
information about economic activities
intended to be useful in making economic
decisions.
49. The accounting standards used in the Philippines
are adapted from the standards issued by the
a. Philippine Institute of Certified Public
Accountants (PICPA).
b. Democratic People's Republic of Korea
Accounting Standards Committee (DPKRASC).
c. Federal Accounting Standards Board (FASB).
d. International Accounting Standards Board
(IASB).
50. Which of the following statements is incorrect
regarding the basic accounting concepts?
a. 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.
b. The time period concept means that financial
statements are prepared only at the end of the
life of a business.
c. Under the consistency concept, the financial
statements should be prepared on the basis of
accounting principles which are followed
consistently.
d. 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.
51. 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. Exchange
c. Investment
d. Production
52. It is the branch of accounting that focuses on the
preparation of general purpose financial
statements.
a. General Accounting
b. All-around accounting
c. All-purpose accounting
d. Financial accounting
53. These are events that do not involve an external
party.
a. External events
b. nonreciprocal
c. Internal events
d. Special events
54. 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. Historical cost
b. Stable monetary unit
c. time period or reporting period
d. accrual basis
55. 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. Faithful representation
b. Prudence
c. Consistency
d. Relevance
56. 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. Time period
 b. Consistency d. Interpretation
c. Accrual basis
d. Articulation 65. It is the official accounting standard setting body in
the Philippines. It is composed of a chairperson
57. Which of the following events is considered as an and 14 members.
internal event? a. Financial Reporting Standards Council (FRSC)
a. conversion of raw materials into finished b. Accounting Standards Committee (ASC)
goods c. Accounting Standards Council (ASC)
b. provision of capital by owners d. Financial Reporting Standards Committee
c. payment of liabilities (FRSC)
d. borrowing of money
e. sale of inventory on account 66. Financial reporting standards continuously change
primarily in response to
58. Which of the following events is considered as an a. Government regulation
external event? b. Users’ need
a. provision of capital by owners c. Changes in social environments.
b. gifts and charitable contributions d. Political influence
c. payment of taxes
d. a, b, c 67. Accounting is often called the "language of
business" because
59. Financial statements are said to be a mixture of fact a. all business owners have a good understanding
and opinion. Which of the following items is of accounting principles.
factual? b. accountants in many companies share
a. discount on capital stock financial information.
b. patent amortization expense c. it is fundamental to the communication of
c. cost of goods sold financial information.
d. retained earnings d. It is easy to understand

60. This concept defines the area of interest of the 68. You are the accountant of ABC Co. During the
accountant. It determines which transactions are period, your company purchased staplers worth
recognized in the books of accounts and which are ₱1,500. Although the staplers have an estimated
not. useful life of 10 years, you have charged their cost
a. Articulation as expense. Which of the following is most likely to
b. Full disclosure be true?
c. Separate entity a. You are just lazy to compute for the periodic
d. Matching depreciation.
b. You are applying the concepts of materiality
61. A CPA employed as an accountant in a government and cost-benefit consideration.
agency is considered to be in c. You are applying the concept of matching.
a. Academe d. You are applying the concept of verifiability
b. Service
c. Private practice 69. All of the following statements incorrectly refer to
d. Public practice the concepts in the Conceptual Framework except
a. The Conceptual Framework is concerned with
62. Which of the following statements about the all-purpose financial statements.
Norwalk Agreement is correct? b. Financial statements are prepared and
a. The Norwalk Agreement does not affect the presented at least annually and are directed
financial reporting standards in the toward both the common and specific
Philippines. information needs of a wide range of users.
b. The Norwalk Agreement requires all domestic c. The objective of general purpose financial
companies in the U.S. to prepare financial statements is similar to the objective of general
statements in accordance with the IFRSs. purpose financial reporting.
c. The Norwalk Agreement is a convergence d. The financial statements prepared by a
between the FASB and the IASB to make their reporting entity comprising a parent and its
existing financial reporting standards subsidiaries are referred to as ‘combined
compatible and coordinate their future work financial statements’.
programs to ensure that once achieved,
compatibility is maintained. 70. What is the authoritative status of the Conceptual
d. The Norwalk Agreement is a short-term Framework?
convergence between the FASB and the IASB a. The Conceptual Framework applies only to the
which has long-time been abolished. IASB when developing or amending
Standards. A reporting entity should never use
63. The process of identifying, measuring, analyzing, the Conceptual Framework.
and communicating financial information needed b. If there is a Standard that applies to a
by management to plan, evaluate, and control an transaction, that Standard overrides the
organization’s operations is called Conceptual Framework. In the absence of such
a. Managerial accounting a Standard, the entity’s management should
b. Financial accounting consider the applicability of the Conceptual
c. Auditing Framework in developing and applying an
d. Tax accounting accounting policy that will result in useful
information.
64. The PFRSs consist of all of the following except c. It has the highest level of authority. In case of a
a. PASs conflict between the Conceptual Framework
b. Conceptual framework and a Standard, the Conceptual Framework
c. PFRSs overrides that Standard.
 d. If there is a Standard that specifically applies b. Materiality
to a transaction, that Standard overrides the c. Historical
Conceptual Framework. In the absence of such d. Cost benefit
a Standard, the requirement of the Conceptual
Framework should be followed.

71. The foundation of the Conceptual Framework is

formed from
a. the objective of general purpose financial 78. The element that is related to the measurement of
reporting. an entity’s financial performance is
b. the principles and objectives of presentation a. Income
and disclosure of financial information. b. Expense
c. the concept of reporting entity. c. Both a and b
d. the qualitative characteristics that makes d. Neither a nor b
information useful to users.
79. According to the revised Conceptual Framework,
72. What is the objective of general purpose financial an item is recognized if
statements according to the Conceptual a. it meets the definition of an asset, liability,
Framework? equity, income or expense.
a. To prepare and present comparable, relevant, b. recognizing it would provide useful
reliable, and understandable information for information.
investors and creditors. c. it is probable that the item will result to an
b. To provide information about the financial inflow or outflow of economic benefits and its
position, financial performance, and changes cost can be measured reliably.
in financial position of an entity that is useful d. A and b
to primary users in making economic
decisions. 80. Which of the following may result to an expense?
c. To prepare financial statements in accordance a. Decrease in liability
with all applicable Standards and b. Distribution to holders of equity claims
Interpretations. c. Increase in liability
d. To prepare and present a balance sheet, an d. Increase in asset
income statement, a cash flow statement, and
a statement of changes in equity. 81. The Conceptual Framework uses the term
“economic resources” to refer to
73. The Conceptual Framework broadly classifies the a. Liabilities
qualitative characteristics into b. Asset
a. fundamental and enhancing qualitative c. Equity
characteristics. d. Income
b. primary and secondary qualitative
characteristics. 82. Which of the following is incorrect regarding the
c. major and minor qualitative characteristics. use of the term ‘reporting entity’ under the
d. cold and hot qualitative characteristics. Conceptual Framework?
a. A reporting entity can be a parent and its
74. Under this qualitative characteristic, users are subsidiaries viewed as a single entity.
assumed to have a reasonable knowledge of b. All of these are correct
business activities and willingness to study the c. A reporting entity one that is required, or
information with reasonable diligence. chooses, to prepare financial statements.
a. Relevance d. A reporting entity must be a legal entity.
b. Faithful representation
c. Understandability 83. The cost of inventory is recognized as expense
d. Comparability a. using the matching concept.
b. by systematic allocation.
75. Which of the following statements is incorrect c. any of these as a matter of accounting policy
concerning materiality? choice
a. Materiality can be assessed quantitatively or d. immediately.
qualitatively
b. There are no specific materiality thresholds 84. “I say red; you say green.” The information lacks
provided under the PFRSs which of the following qualitative characteristics?
c. Materiality is a matter of judgment a. Timeliness
d. Materiality is a quantitative matter. It should b. Relevance
never be assessed qualitatively. c. Verifiability
d. Colorfulness
76. The ability through consensus among measurers to
ensure that information represents what it 85. Which of the following is not one of the decisions
purports to represent is an example of the concept that primary users make?
of a. deciding on how to run the day-to-day
a. Feedback value operations of the entity
b. Relevance b. deciding on whether to hold or sell investment
c. Comparability in stocks
d. Verifiability c. deciding on whether to buy investment in
stocks
77. According to the Conceptual Framework, the d. deciding on whether to extend loan to the
pervasive constraint on the information that can be reporting entity
provided by financial reporting is
a. Going concern
86. 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. Faithful representation
b. Relevance
c. Quantitative
d. Qualitative
87. According to the Conceptual Framework, the needs
of the primary users that are met by financial
statements are
a. substantially a majority of their common and
specific needs only.
b. majority of their common needs only.
c. All of their needs
d. all of their common needs only.
88. The term ‘liquidity’, as used in relation to the
assessment of an entity’s financial position, refers
to
a. the entity’s ability to flow like water.
b. the entity’s ability to pay its long-term
obligations
c. the entity’s ability to collect its current
receivables.
d. the entity’s ability to pay its short-term
obligations.
89. The measurement bases described under the
Conceptual Framework are least applicable to the
measurement of
a. Income
b. Liabilities
c. Equity
d. Assets
90. 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. Liquidity and solvency
d. financial position and financial performance.
91. 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
92. Which of the following financial statements would
not be dated as covering a certain reporting period?
a. Statement of changes in equity
b. Statement of financial position
c. Statement of profit or loss and other
comprehensive income
d. Statement of cash flow
93. 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 a measure of the overall financial
performance of an entity.
c. To replace profit with a better measure.
d. To report changes in equity due to transactions
with owners.
94. Which of the following statements is correct when
an entity departs from a provision of a PFRS?
a. The entity’s financial statements would be
grossly incorrect; therefore, PAS 1 does not
allow such a departure.
b. PAS 1 permits such a departure if the relevant
regulatory framework requires, or otherwise
does not prohibit, such a departure.
c. PAS 1 requires certain disclosures when an
entity departs from a provision of a PFRS.
d. B and C
95.  The information provided by financial reporting
pertains to
a. individual business entities and industries,
rather than to the economy as a whole or to
members of society as consumers
b. individual reporting entities, rather than to
industries, the economy as a whole or
members of society as consumers
c. individual business entities and the economy
as a whole, rather than to industries or to
members of society as consumers
d. individual business entities, industries and the
economy as a whole, rather than to members
of society as consumers
96. 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 noncurrent liabilities if a refinancing
agreement is completed after the financial
statements are authorized for issue.
b. Currently maturing obligations are presented
as noncurrent liabilities only if their original
term is longer than one year.
c. 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.
d. 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.
97. 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. Auditor
b. Management
c. Janitor
d. Accountant
98. Which of the following is not a disclosure
requirement of PAS 1?
a. Any material uncertainties on the entity’s
ability to continue as a going concern.
b. The financial effect of a departure when an
entity departs from a PFRS requirement.
c. The recognition, measurement and disclosure
of specific transactions and other events
d. The reason for using a longer or shorter period
when an entity changes the frequency of its
reporting.
 
99. An entity’s financial position or condition refers to
which of the following?
a. The amount of return that the entity has
generated from its economic resources during
the period.
 b. The level of change in the entity’s economic b. the disclosure of additional information in the
resources and claims to those resources, also notes.
referred to as the economic phenomena. c. the separate presentation of items in the
c. The status of the entity’s assets, liabilities and financial statements.
equity. d. the level of rounding-off of amounts in the
d. All of these financial statements.

108. According to PAS 10, dividends declared after the

reporting period, but before the financial
100. Comprehensive income excludes which of the statements are authorized for issue, are
following a. recognized as liability at the end of reporting
a. Income tax expense period.
b. Revaluation surplus b. not recognized as liability at the end of
c. Distribution to owners reporting period.
d. Gains and losses from investments measured c. disclosed only as an adjusting event
at fair value through profit or loss d. any of these

101. Entity A needs guidance in accounting for its 109. These are differences that have future tax
inventories. Entity A should refer to which of the consequences.
following? a. Permanent difference
a. PAS 1 b. Temporary difference
b. PAS 7 c. Taxable difference
c. PAS 8 d. Deductible difference
d. PAS 2
110. This type of difference will give rise to deferred tax
102. Entity A needs guidance in preparing its statement liability.
of changes in equity. Entity A should refer to which a. Taxable temporary difference
of the following? b. Permanent difference
a. PAS 1 c. Deductible temporary difference
b. PAS 2 d. Deferred difference
c. PAS 7
d. PAS 8 111. Deferred tax assets and deferred tax liabilities do
not alter the tax to be paid in the current period.
103. Entity A buys and sells artifacts. Each artifact is However, they cause tax payments to either
unique and not ordinarily interchangeable. increase or decrease when they reverse in a future
According to PAS 2, the cost formula that Entity A period. The reversal of which of the following will
should use is cause an increase in tax payment?
a. FIFO a. Deferred tax liability
b. Specific identification. b. Deferred tax asset
c. Weighted average c. Deferred tax expense
d. Any of these d. Deferred tax benefit

104. Which of the following is presented in the activities 112. During the period, deferred tax assets increase by
section of the statement of cash flows? ₱400 while deferred tax liabilities increase by
a. Dividends paid this year although declared in a ₱500. The net change of ₱100 is a
prior year. a. Deferred tax expense
b. Purchase of a treasury bill three months before b. Deferred tax income
its maturity date. c. Deferred tax liability
c. Acquisition of equipment through issuance of d. Deferred tax asset
note payable.
d. Bank overdrafts that can be offset.
113. According to PAS 16, the selection of an
105. In the statement of cash flows of a non-financial appropriate depreciation method rests upon the
institution, interest income received is presented entity’s
under a. Management
a. Operating activities. b. Accountant
b. Financing activities c. Regulator
c. Investing activities d. Auditor
d. A or c
114. Which of the following is not one of the essential
106. An entity makes a change in accounting estimate. characteristics of a PPE?
How does the entity recognize the effects of the a. Tangible asset
change in profit or loss? b. Used in business
a. Prospectively in the current period c. Primarily held for sale
b. Prospectively in the current period and future d. Long-term in nature
periods
c. Retrospectively starting from the earliest 115. PAS 16 requires an entity to review the depreciation
period presented method and the estimates of useful life and residual
d. A or b value at the end of each year-end. A change in any
of these is accounted for using
107. Materiality does not make any difference with a. A specific transitional provision of PFRS
regard to b. Retrospective application
a. intentional errors. c. Prospective application
 d. Any of these
116. If plotted on a graph (X-axis: time; Y-axis: ₱), the
depreciation charges under the straight-line
method would show
a. A straight line
b. An upward line sloping to the right
c. A downward line sloping to the left
d. A curvilinear line sloping here and there
117. Which of the following instances does not preclude
an entity from recognizing depreciation during a
certain period?
a. The asset is fully depreciated.
b. The asset is being depreciated using the units
of production method and there is no
production during the period.
c. The asset is classified as held for sale under
PFRS 5.
d. The asset becomes idle or is taken out of active
use.
118. What is the law regulating the practice of
accountancy in the Philippines?
a. R.A. No. 9298
b. R.A. No. 9198
c. R.A. No. 9892
d. R.A. No. 10912
119. It is the official accounting standard setting body in
the Philippines. It is composed of a chairperson
and 14 members.
a. Financial Reporting Standards Committee
(FRSC)
b. Financial Reporting Standards Council (FRSC)
c. Accounting Standards Committee (ASC)
d. Accounting Standards Council (ASC)
120. Financial accounting is concerned with
a. General purpose reports on financial position
and financial performance.
b. Specific reports for inventory management.
c. Specific reports for income tax computation.
d. General purpose reports on changes in share
prices.
121. Generally accepted accounting principles
a. Are accounting principles based on law.
b. Derive their credibility and authority from law.
c. Derive their authority from regulatory
authority.
d. Derive their credibility and authority from
recognition and acceptance by the accountancy
profession.
122. 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. Philippine Institute of Certified Public
Accountants (PICPA).
d. Democratic People's Republic of Korea
Accounting Standards Committee (DPKRASC).
123. Which is a purpose of the Conceptual Framework?
a. To assist the IASB to develop IFRS based on
consistent concepts.
b. To assist preparers to develop consistent
accounting policy when no Standard applies
to a particular transaction.
c. To assist all parties to understand and
interpret IFRS.
d. All of these can be considered a purpose of the
Conceptual Framework
124. The Conceptual Framework is intended to
establish
a. GAAP in financial reporting
b. The meaning of “present fairly in accordance
with GAAP”
c. The objectives and concepts for use in
developing standards of financial accounting
and reporting.
d. The hierarchy of sources of GAAP
125. 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. Articulation
b.  Consistency
c. Accrual basis
d. Time period
126. Which of the following statements is correct?
Accounting provides qualitative information,
I
financial information and quantitative information.
Qualitative information is found in the notes to the
II
financial statements only.
Accounting is considered an art because it is
III
supported by an organized body of knowledge.
Accounting is considered a science because it
IV
involves the exercise of skill and judgement.
Measurement is the process of assigning numbers to
V objects such as inventories or plant assets and to
events such as purchases or sales.
All quantitative information is also financial in
VI
nature.
The accounting process of assigning peso amounts
VII or numbers to relevant objects and events is call
identification.
a. I and V only
b. I, II, VI and V
c. I, II, III, IV and V
d. II, VI and V
127. Accounting information is considered relevant
when it
a. Can be depended upon to represent the
economic conditions and events that it is
intended to represent.
b. Is capable of making a difference in a decision.
c. Is understandable by reasonably informed
users.
d. Is verifiable and neutral.
128. Which statement is true in relation to the
enhancing qualitative characteristic of
understandability?
a. Users have a reasonable knowledge of business
and economic activities and review the
information with reasonable diligence.
b. Users are expected to have significant business
knowledge.
c. Financial statements shall exclude complex
matters.
d. Financial statements shall be free from
material error.
129.  Which of the following criteria need not be
satisfied for a liability to exist?
a. The entity has an obligation.
b. The obligation is to transfer an economic
resource.
c. The obligation is a present obligation that
exists as a result of past event.
 d. The settlement is expected to result in an
outflow of economic benefit.
130. Financial information exhibits consistency when
a. Accounting procedures are adopted which
smooth net income and make results
consistent between years.
b. Gains and losses are shown separately.
c. Accounting entities give similar events the
same accounting treatment each period.
d. Expenditures are reported as expenses.
131. What is the primary distinction between revenue
and gain?
a. The likelihood that the transaction will recur
b. The nature of the activity that gives rise to the
transaction
c. The method of disclosing the transaction
d. The materiality of the amount
132. The term ‘liquidity’, as used in relation to the
assessment of an entity’s financial position, refers
to
a. The entity’s ability to pay its short-term
obligations.
b. The entity’s ability to pay its long-term
obligations.
c. The entity’s ability to collect its current
receivables.
d. The entity’s ability to flow like water.
133. Which statement indicates a going concern?
a. Management intends to liquidate the entity.
b. Management intends to cease the operations of
the entity.
c. Management has no realistic alternative but to
cease the operations of the entity.
d. None of these would indicate going concern.
134. A financial liability due within twelve months after
the reporting period shall be classified as
noncurrent
a. When it is refinanced on a long-term basis
before the issue of the financial statements.
b. When the entity has no discretion to refinance
for at least twelve months.
c. When it is refinanced on a long-term basis
after the end of reporting period.
d. When it is refinanced on a long-term basis on
or before the end of reporting period.
135. Which of the following is not a disclosure
requirement of PAS 1?
a. The financial effect of a departure when an
entity departs from a PFRS requirement.
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 reason for using a longer or shorter period
when an entity changes the frequency of its
reporting.
136. An example of direct matching would be
a. Depreciation expense
b. Office salaries expense
c. Direct labor costs incurred to produce
inventory sold
d. Advertising expense
137. If the reporting entity comprises both the parent
and its subsidiaries, the financial statements are
referred to as
a. Consolidated financial statements
b. Unconsolidated financial statements
c. Combined financial statements
d. Separate financial statements
138. Which is a purpose of the notes to financial
statements?
a. To present information about the basis of
preparation of financial statements and
accounting policies used.
b. To disclose the information required by PFRS
but not presented elsewhere in the financial
statements.
c. To provide additional information not
presented but necessary for a fair presentation.
d. All of these can be considered a purpose of the
notes to financial statements.
139. In which section of the statement of financial
position should cash that is restricted for the
settlement of a liability due 18 months after the
reporting period be presented?
a. Current asset
b. Equity
c. Noncurrent asset
d. Noncurrent liabilities
140. All of the following are components of other
comprehensive income, except
a. Unrealized gain and loss on financial asset
held for trading
b. Foreign currency translation adjustment
c. Deferred loss on derivative financial
instrument designated as cash flow hedge
d. Change in revaluation surplus.
141. How should a gain from sale of equipment for cash
be reported in a statement of cash flows using the
indirect method?
a. In investing activities as a reduction of the
cash inflow from the sale
b. In investing activities as a cash outflow.
c. In operating activities as a deduction from
income.
d. In operating activities as an addition to
income.
142. Cash advances and loans made by a financial
institution are usually classified as
a. Component of cash and cash equivalents
b. Operating activities
c. Investing activities
d. Financing activities
143. This method of presenting cash flows from (used
in) operating activities shows each major class of
gross cash receipts and gross cash payments.
a. Direct method
b. Inverse method
c. Indirect method
d. Straight method
144. In a statement of cash flows, depreciation is treated
as an adjustment to net income because
depreciation
a. Is a direct source of cash
b. Reduces income but does not involve cash
outflow
c. Reduces net income and involves an inflow of
cash
d. Is an inflow of cash for replacement of asset.
145. According to PAS 10, dividends declared after the
reporting period, but before the financial
statements are authorized for issue, are
a. recognized as liability at the end of reporting
period.
 b. not recognized as liability at the end of
reporting period.
c. disclosed only as an adjusting event.
d. Any of these
146. 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 authorization of the financial
statements
b. Date of declaration
c. Date of events after the reporting period
d. Adjustment date
147. One of Entity A’s delivery trucks had an accident on
February 14, 2022. The truck is totally wrecked and
is uninsured. Entity A’s December 31, 2021
current-period financial statements were
authorized for issue on March 31, 2022. Entity A
asked you if it can write-off the carrying amount of
the destroyed truck from its December 31, 2021
statement of financial position. What will you tell
Entity A?
a. Yes, go ahead. Write-off the truck because the
event is an adjusting event.
b. No. Don’t write-off the truck because the event
is a non-adjusting event.
c. No. Don’t write-off the truck because the event
is a non-adjusting event. You should, however,
disclose the event if you deem it to be material.
d. Yes, go ahead. I will support you.
148.  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 from the period in which the
change occurred.
b. Comprehensive income for the earliest period
presented.
c. Beginning retained earnings for the earliest
period presented.
d. Shareholder’s equity for the period in which
the change occurred.
149. Which of the following is required for a change
from straight line method of depreciation to the
double declining balance method?
a. The cumulative effect on prior years is
reported in the statement of retained earnings
b. Re-computation of depreciation for current
and future years
c. Retrospective restatement
d. All of these are required
150. Which term best describes applying a new
accounting policy to transactions as if that policy
has always been applied?
a. Retrospective application
b. Retrospective restatement
c. Prospective application
d. Prospective restatement
151. Which of the following should be taken into
account when determining the cost of inventory?
a. Storage cost of part-finished goods
b. Abnormal freight-in
c. Recoverable purchase tax
d. Interest on inventory loan
152.  Which of the following generally would not be
separately accounted for in the computation of cost
of goods sold?
a. Cash discounts taken
b. Trade discounts applicable to purchases
c. Purchase returns and allowances
d. Cost of transportation for merchandise
purchased
153. Which of the following should not be reported as
inventory?
a. Land acquired for resale by a real estate firm
b. Shares and bonds held for resale by a
brokerage firm
c. Partially completed goods held by a
manufacturing entity
d. Machinery acquired by a manufacturing entity
154. How is a significant amount of consignment
inventory reported?
a. Reported separately by the consignor
b. Combined with other inventory of the
consignor.
c. Reported separately by the consignee
d. Combined with other inventory of the
consignee.
155. An entity returned merchandise purchased on
account. Under the perpetual inventory system, the
account credited in the journal entry to record the
return is
a. Purchases
b. Inventory
c. Purchase returns and allowance
d. Account payable
156. In a periodic system, the beginning inventory is
a. Net purchases minus cost of goods sold
b. Net purchases minus ending inventory
c. Total goods available for sale minus net
purchases
d. Total goods available for sale minus cost of
goods sold
157. If an entity ended a period with a larger inventory
than what it had at the beginning of the period,
which of the following statements is true?
a.  The cost of goods sold was greater than the
net purchases
b. Net income was greater than gross profit
c. The cost of goods available for sale was smaller
than cost of goods sold
d. The cost of goods sold was smaller than net
purchases
158. Cost of goods sold is the same under a periodic
system and a perpetual system when an entity uses
a. Specific identification
b. Weighted average
c. LIFO
d. FIFO
159. Lower of cost and net realizable value of inventory
valuation is best described as the
a. Reporting of a loss when there is a decrease in
the future utility below the original cost.
b. Method of determining cost of goods sold
c. Assumption to determine inventory flow.
d. Change in inventory value to net realizable
value